TechnipFMC addressing costs, interface issues with integrated contracting model

June 13, 2017
Of the various subsea alliances formed over the past two years, TechnipFMC's was the first to evolve into a full-scale merger. The two companies had already secured two subsea study contracts for projects offshore northwest Europe under their joint venture Forsys Subsea, and since announcing their union this January have secured further work in the Norwegian Sea and the Gulf of Mexico.

Jeremy Beckman

Editor, Europe

Of the various subsea alliances formed over the past two years, TechnipFMC’s was the first to evolve into a full-scale merger. The two companies had already secured two subsea study contracts for projects offshore northwest Europe under their joint venture Forsys Subsea, and since announcing their union this January have secured further work in the Norwegian Sea and the Gulf of Mexico.

Statoil’s Trestakk tieback in the Norwegian Sea is the first to apply the new company’s integrated EPCI, or iEPCI, (engineering, procurement, construction, and installation) approach. In this case, TechnipFMC is supplying a flexible riser, production flowline, gas injection line, flexible jumpers, and the subsea production system, comprising the trees and associated completions, manifold, wellheads, and subsea/topsides control systems.

The other three projects are:

  • Front-end engineering and design (FEED) for the subsea equipment for Hurricane Energy’s Lancaster early production system west of Shetland, with a focus on system design optimization and risk reduction during project execution. The EPCI scope covers supply and installation of the SPS (subsea production system) and SURF (subsea, umbilical, riser, and flowline) equipment and installation of the FPSO turret mooring buoy
  • Separate FEED studies for the SURF and SPS requirements for VNG Norge’s Pil/Bue tieback to the redeveloped Njord complex in the Norwegian Sea
  • An EPCI contract for the SPS and SURF facilities for Shell’s first-phase deepwater Kaikias development, involving a tieback to the Ursa production hub, 210 km (130 mi) from the Louisiana coast. The goals here are to improve the project’s economics by optimizing field production and minimizing lead times. The project will also involve the first application of TechnipFMC’s compact pipeline end manifold and horizontal connection system with flexible jumpers in the deepwater sector of the GoM.

Offshore spoke to Hallvard Hasselknippe, TechnipFMC’s President, Subsea Projects, and Christophe Bélorgeot, VP Corporate Communications, about the rationale for the merger and the company’s plans going forward.

Offshore: When did the two companies first consider joining forces?

Bélorgeot: Everything started three years ago in 2014 when the oil price was still $100-110, with initial discussions held at OTC. Costs of subsea development, both in shallow and deepwater, were growing, and the two companies suggested working together to find ways of standardizing and simplifying subsea equipment. In mid-2014, they started by examining various mid- to large-size projects which they had both worked on separately, and considered what might have been achieved if they had worked together. The conclusion was that they could have cut the prices by 20-30% - and this was the trigger for the collaboration that followed.

Subsea layout for the Trestakk field development. (Illustration courtesy Statoil/TechnipFMC)

In March 2015, they entered into an exclusive alliance and joint venture named Forsys Subsea. As a joint venture, the idea was to focus exclusively on early conceptual studies, i.e. pre-FEED) and FEED, and when the FEED was sufficiently advanced, to bid for project work as an EPCI alliance.

Hasselknippe: Our goal was to combine the companies’ capabilities into an integrated SPS and SURF package, and Forsys Subsea was the stepping stone to this. That joint venture went on to perform 17 studies, one of which led to the award of the alliance’s first integrated EPCI contract for the tieback of Statoil’s Trestakk field to the Kristin semisubmersible platform in the Norwegian Sea. This was followed shortly afterwards by a contract for Hurricane Energy’s Lancaster oilfield production system west of Shetland. These developments led to discussions on taking the next step - a full merger between the two companies - announced in May last year.

Bélorgeot: We realized that there were certain issues that needed to be resolved as an alliance, such as who would own the intellectual property rights to the subsea solutions? And our clients were saying, this is a nice arrangement, but who is the boss? This is what pushed the boards of the two companies to propose the merger.

Hasselknippe: An alliance places limits on the extent of the collaboration in terms of R&D and developing technological solutions for the long term. Both sides had to think in terms of ownership and how much they were prepared to put into this venture, as these were issues that in time could break up the partnership.

The rationale for the merger that followed was that the two companies were very complimentary in their skills and solutions, with virtually no overlap, and therefore with no need for either side to ‘protect its own turf.’ And they shared many of the same values and had a similar business culture. These were two international companies working worldwide, with a wide footprint, and changing market conditions dictated that there was a lot going for a fully integrated collaboration.

Offshore: How has the industry reacted to the merger and the integrated subsea EPCI approach?

Hasselknippe: Globally, the reaction has been very positive, with everyone we have spoken to seeing the value. We are working widely with big clients, including national oil companies, to address their changing priorities. Petrobras, for instance, has decided to go the EPCI route for the phased deepwater Libra field development in the Santos basin, while ONGC decided to stop its traditional tender process for the deepwater KG basin D5 project off eastern India, opting instead for its first ever EPCI tender.

Using the momentum built up as a result of the merger, everything at all levels of the organization is now geared up to this model. Having said that, the company is still flexible in that way that it approaches business, acknowledging that some clients will still favor bidding SURF and SPS separately.

Offshore: What are the benefits of the integrated contracting model?

Hasselknippe: We engage early with clients to discuss their field architecture then take the process forward in an integrated manner. During a project’s early conceptual/FEED phases, there are a lot of things that can be done to cut costs and to simplify field architecture by reducing the number of components traditionally specified. New, smarter technologies can be added to monitor the facilities in order to avoid too much redundancy. When the project then proceeds to planning and execution, a different model can be implemented that involves developing the full-field facilities without the traditional split between SURF and SPS, which has acted as a buffer between installation and delivery.

Through this approach, we expect to be able to manage the various interfaces better so that, for example, when it comes to installing an umbilical, we can look at the optimum way of solving the related SPS interface issues. Over time, this approach should lead to improved quality and reliability of our offering.

Offshore: How has the integrated model worked in practice?

Hasselknippe: For the first four subsea projects that TechnipFMC has undertaken, in all cases we sat down early with the client to work on a value proposition. Then, either the client agreed to work with us exclusively - we are assigned a target and work toward it - or, there has been early engagement followed by a design competition, which then rolls into the FEED and EPCI phases. But otherwise, the foundation of our model remains to engage early, then optimize the field layout by bundling the SURF and SPS together.

Offshore: How is work on the initial subsea projects progressing?

Hasselknippe: The Trestakk contract, awarded last November, is our first integrated EPCI contract. Statoil had shelved development of the field after originally going out to the market for solutions, none of which achieved an economic price. The newly formed Forsys Subsea then approached the company, saying ‘let us look again at the project, see what value we can bring via an integrated solution.’ We met Statoil’s target for the conceptual phase, were given a FEED contract in February 2016 to further optimize the design, and then Statoil obtained permission from partners Eni and ExxonMobil to approve a single-source supplier for the subsea facilities. At the time of the EPCI award, Statoil said the costs of the Trestakk development had come down by 50%.

For Lancaster, we have completed FEED studies for the early production system. This project will benefit from a fully integrated approach - we have all the necessary technologies and competencies. Some of the equipment deployed for the FPS, such as the flexibles, will continue to be used for the full-field Greater Lancaster Area development that follows.

As for Pil/Bue, VNG Norge decided to award us two FEED study contracts for the SURF and SPS under a design competition with Aker Solutions and Subsea 7. VNG did not want to pursue an integrated approach for the first development phase, but maybe this will change in the longer run.

Offshore: How has the merger impacted Technip and FMC Technologies’ R&D programs?

Bélorgeot: Since the merger was completed on Jan. 17, we have obtained all necessary approvals from all the relevant authorities around the world. Our main R&D center will be in Rueil Malmaison, west of Paris, headed up by Brad Beitler who has relocated from legacy FMC Technologies in Houston. Our philosophy, however, is to maintain research centers in all the major offshore areas, the main ones being at Kongsberg, Norway, in Aberdeen, Scotland, and in Rio and Vitoria, Brazil (for flexibles). We also plan to operate enhancement services in Le Trait, France, which involves testing products with clients locally.

Hasselknippe: Increasingly we are combining our R&D programs - some of the initiatives are about enhancing compatibility of our components, for instance, the connections to flexible pipes. Typically, these pipes are terminated onto an end fitting and the SPS supplier has to provide the connectors for integration with the wellhead assembly. Under our new model, the termination and connector are delivered to the client already integrated. We will do the same with our steel tube umbilicals: previously Technip had to adapt the termination, a large structure, to fit the connection. As an integrated company, we can now work on simplifying this arrangement.

We are also looking to improve the installability of our subsea hardware. Designing more compact manifolds, substantially reducing the size of traditional manifold structures, brings major reductions of weight which also leads to fewer technical pitfalls during installation and a lessened risk of failure. Also, we don’t have to install the manifold as before, with the traditional difficulty of tying it to a big spool or pipeline end termination: now we can install all the equipment with the same vessels.

In terms of flow assurance, there are various technologies the newly merged company is working on to improve regularity for clients. One mid-term goal is to replace dual flowlines with one integrated flowline, optimized to suit the needs of both the SPS and umbilical. We also see hope for innovation in monitoring of field operations - i.e. more intelligent sensors to monitor flow throughout the lifetime of the subsea system. The resultant data can be used to advise the operator on, for instance, implementing early mitigation measures, or building in improved redundancy to address any unforeseen issues that may arise over the lifetime of the subsea system.

Other areas of focus include new materials, subsea processing, all-electric subsea systems, robotics, visualization, and remote monitoring.

Offshore: Does the merger affect the various alliances Technip and FMC Technologies engaged in with other companies?

Hasselknippe: We continue to look at working with reliable and trusted partners in complimentary activities. One example is Heerema Marine Contractors, which provides the high tension capacity needed to install our large-diameter risers and flowlines [the two companies are collaborating on Total’s ultra-deepwater Kaombo development offshore Angola]. We also have a partnership with Vallourec subsidiary Serimax for all welding of our rigid pipelines at our spoolbases and onboard our S-lay vessels, which extends to joint R&D of new welding materials and pipe welding procedures.

Offshore: Do you see the current era of cooperation between clients and contractors continuing over the longer term? And is the scope for further cost cuts limited?

Hasselknippe: Where we can, we are developing lower-cost systems, although in the ultra-deepwater arena there will always be an element of stretching the technological envelope. But hopefully, the lessons of the past few years will be learned and field development costs will come down, particularly in more mature offshore areas where we don’t have to be so ‘fancy.’ In other industries such as aerospace and automotive, clients are pushing for more functional equipment specs, and we’ll see more of that in oil and gas too in the years ahead.

The focus should be not on stretching the boundaries of technologies, as it was in the past, but in being more cost efficient.

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