Pipeline design: exporting the Gulf of Mexico approach

Over the years, various industry experts as well as operating company executives have observed that installation of offshore pipelines and facilities in the US Gulf of Mexico has been dramatically more cost effective than identical system installations in other parts of the world. New fields in the US Gulf consistently are developed in less time and changes to existing facilities are completed at lower cost. With erosion of oil and gas prices, capital improvement costs and operating costs play

Why US Gulf pipelines cost less to install, operate

Sandor A. Karpathy,
P.E. Mustang Engineering
Over the years, various industry experts as well as operating company executives have observed that installation of offshore pipelines and facilities in the US Gulf of Mexico has been dramatically more cost effective than identical system installations in other parts of the world.

New fields in the US Gulf consistently are developed in less time and changes to existing facilities are completed at lower cost. With erosion of oil and gas prices, capital improvement costs and operating costs play an ever-increasing role in the commercial viability of new field development.

This perception of cost effectiveness has been coined the "Gulf of Mexico advantage." Is this advantage imagined or is it real? What items contribute to this advantage? Can this advantage be applied to ongoing or future work in Australia and other parts of the world?

Philosophy development

To understand the Gulf of Mexico advantage, as it relates to marine pipeline design, it is first necessary to understand the developments and contributing factors which led up to, and which today influence, the present-day US Gulf work ethic. It is also necessary to look at the history of hydrocarbon exploration and understand the evolution of its guiding philosophy and how that philosophy differs at various locations around the world.

In the US Gulf, successful development of offshore discoveries has been ongoing for 50 years. From the first shallow water discoveries just south of Morgan City, Louisiana, to the present developments in 5,000-ft water depths, pipelines have been used to bring hydrocarbons to shore. Today, the bottom of the Gulf of Mexico is a virtual network of interconnecting and branching pipelines, resembling a giant spaghetti bowl. Pipelines range in size from 2-in, diameter up to 52-in. diameter have been installed and presently operate in a safe and efficient manner.

Since 1955, there have been more than 33,500 wells drilled in federal waters of the US Gulf. There are a great many more wells located in state waters of Texas, Louisiana, Mississippi, and Alabama.

There have been more than 3,800 offshore platforms installed in varying water depths. Today, there exists over 23,000 miles of pipelines on the bottom of the Gulf of Mexico that connect these platforms. All of these pipelines have proven to be economically attractive in their design and installation. Over the last 50 years, an industry has developed along the Gulf coast which supports this phenomenal offshore growth. Where did all of this begin?

The first producing wells in the Gulf of Mexico were drilled from frail wooden structures, which were located relatively close to shore and virtually within sight of land. From these first shallow water wells, drilled in water depths of less than 25 ft, a new industry was born which today is rapidly moving to water depths of 5,000 ft and is looking at spudding wells beyond 7,000-ft water depths. Just five years ago, the term "deepwater" described work just beyond the 300-ft water depth. Today, the offshore industry looks at "deepwater" as 1,000 ft and beyond.

In the beginning, conventional land based drilling technology was used on these above water structures. These early platforms were small and drilling depths were limited by the structural capacity of the platform. Since early finds were located in relatively shallow pay zones, there was really no need to go into deeper water. Specific offshore technology was not required.

When the land-based technology no longer met the requirements of the offshore conditions, new technology and techniques were developed specifically suited for the harsh marine environment. Each new challenge brought forth new technology, and with the new technology, new milestones were set. During these early exploratory years, the rest of the world looked at the successes of the US Gulf and began their own search for offshore hydrocarbons.

On the heels of the successful discoveries in the Gulf of Mexico, operators began developing the North Sea area in a similar manner. Building on the experiences of the US Gulf, modified land based drilling facilities were moved into the harsh waters of the North Atlantic. The North Sea arena soon became the second major area of the world achieving phenomenal growth in the exploration and production of hydrocarbons from the sea. Today, exploration for hydrocarbons is conducted in virtually every ocean of the world. Drilling rigs and offshore platforms are common sights. Helicopters, supply boats, and construction vessels abound, and today both men and women travel to these once remote locations on a regular basis.

However, while information and technology were freely exchanged between these two major areas, the US Gulf and North Sea developments, and their respective design philosophies, soon took different but parallel paths. These paths primarily centered on three conditions:

  • Environmental conditions specific to each locale
  • Location and size of the of the hydrocarbon deposits
  • Existing infrastructure along the coastline.
The environmental conditions in the US Gulf were found to be relatively mild, compared to the very harsh conditions experienced in the North Sea. While the Gulf of Mexico might experience periodic hurricanes during the summer months, which can be devastating to the offshore facilities, these violent storm ridden periods are infrequent. Several years might go by without a single major hurricane in the Gulf of Mexico.

However, in the North Sea, storms continually affect the offshore facilities and the weather plays a major role in the design and operation of the offshore systems. As a result, North Sea operators developed more stringent design requirements, more conservative safety factors, and mandated more documentation and tracking of procedures. Safety and operability were determined paramount; cost and schedule were considered secondary.

As a result, the engineering community developed detailed procedures to analyze each and every possible occurrence. Safety factors were set high anticipating harsh environmental loads, and the resultant designs contained a large measure of conservatism. Numerous and greater detailed studies were conducted, and engineering emphasis was placed on the orderly and systematic development of the systems. Therefore, more emphasis was placed on long-term operation and the development of procedures, which insured that the systems operated continuously under even the most severe environment anticipated.

The second factor governing the parallel development of the design methods between the Gulf of Mexico and the North Sea was the actual location and size of the hydrocarbon deposits. In the Gulf of Mexico, the initial hydrocarbon deposits were relatively small, located close to shore, and relatively close to each other. The pipelines required to bringing the production to shore from the platforms did not have to be long and did not have to traverse very deep water.

Often, a number of close fields could be connected to a single trunkline, forming a pipeline network jumping from platform to platform, or between subsea connections. Many terminated in a central transportation system which carried all of the production to shore.

In the North Sea, however, the hydrocarbon deposits were further from shore and further from one other. The pipeline network connecting these deposits to shore necessitated longer and larger diameter trunklines. Concern over loss of production from a single long distance pipeline dictated a more stringent design consideration.

The third factor influencing the different pipeline design philosophies was the presence of an existing land-based transportation and refining infrastructure. Along the Gulf coast, within the states of Texas, Louisiana, Alabama, and Mississippi, numerous hydrocarbon deposits have been found. The onshore transporting, refining and distribution systems were already in place before the offshore discoveries were made.

Therefore, production from new offshore systems could come on shore in nearly any location along the Gulf coast and tie into an existing transportation system without requiring a long pipeline. Today the Gulf coast has numerous trunklines coming on shore at various locations.

The North Sea area developed in a different manner. Onshore discoveries were sporadic and for most part virtually non-existent, compared to the Gulf coast. A ready-made pipeline transportation system was not available. Offshore pipeline systems could only be brought to shore at very specific locations connecting to an existing pipeline infrastructure system. In addition, since the coastline adjacent to the North Sea was relatively rugged, stringent design considerations were adopted for the onshore pipeline systems as well.

Today, the North Sea pipeline design philosophy has been adopted in many parts of the world, including Australia. The Det Norske Veritas rules for submarine pipeline systems are used virtually everywhere other than the Gulf of Mexico. In each respective country the design philosophy is customized, to an extent, by the specific requirements of the area, the availability of equipment and work force, and by the specific governmental and regulatory requirements defined by each country. Western Australia basically adheres to the North Sea design philosophy as well, and has "Australianized" the philosophy to accommodate its specific requirements.

US Gulf advantage

The pipeline design philosophy presently used in the US Gulf is not appropriate for the harsh environment of the North Sea. It takes into account the milder weather conditions experienced in the Gulf of Mexico and defines wave, wind and current induced loads accordingly. The philosophy does not dictate an overly conservative design. It does, however, ensure safe operation of offshore pipeline systems with a calculated tradeoff- cost.

While safety and reliability of the systems is paramount, cost and schedule are very carefully considered as part of the design process. The time involved with bringing the development on line, and the start of production, are carefully weighed during the field development process. Only those items which are deemed necessary are included. Design items which add little practical value are discarded. The US Gulf advantage can be characterized by three basic principles: can-de attitude; fit-for-purpose design; cost/schedule targeting.

These principles are intrinsic to US Gulf industry-accepted practices, basic design philosophies, and regulations which have evolved over the years. The can-do attitude, to which most Gulf coast businesses subscribe, is the driving force behind success in the Gulf of Mexico. However, for this to happen, a number of factors must be in place.

Infrastructure

One of the key points contributing to the advantage is that a ready-made infrastructure has evolved along the Gulf coast and is in place. This infrastructure provides a variety of choices for the operator, whether it is for engineering services, fabrication, or procurement of products. Virtually any product or service can be obtained in relatively short order from a local Gulf coast vendor. Often, there is no need to go out of the country, or for that matter, out of the city.

Vender offices are around the corner and the products are available in local warehouses. Transportation costs are kept to a minimum. Therefore, procurement and delivery times are also minimized. The overall effect is a shorter project development time, which directly equates to the third principle - cost and schedule targeting.

In addition to the local vendors, international vendors have established local sales offices along the Gulf coast and are part of the infrastructure. Their sales people make numerous sales calls and distribute information on their products daily. With frequent personal contact, a clear understanding of the product capabilities and their application is possible. While internationally produced products may require extended transportation time, the operators are aware of the delivery schedules and can integrate the extended delivery into their overall development schedules. In many instances, international goods can be very competitive with domestic goods, if delivery schedules are carefully considered.

The available infrastructure applies to construction contractors as well. Numerous domestic and international pipeline construction companies have conventional and dynamically positioned lay vessels, diving equipment, ROV's, and other marine equipment in the US Gulf. There is essentially no need to bring special installation equipment to the Gulf of Mexico theater. With plenty of work, installation vessels are constantly utilized and remain profitable. Because a large number of installation contractors operate profitably in the Gulf of Mexico, prices remain competitive.

Often small projects can be completed very economically, with minimal mob/demob cost, because the installation contractor can complete small projects enroute to large project sites. There is virtually no downtime between projects. On the contrary, there is very little set-up time available between projects.

An example of contractor availability is the recent incident where damage to a major oil trunkline resulted from an anchor snag. The pipeline is about 100 miles long and the break occurred about 75 miles from the nearest landfall. The anchor ruptured the line and oil was spilled. The pipeline system control and leak detection equipment immediately shut the system down, minimizing pollution. The time of the break was 2100 in the evening. By 0400 the next morning, a diving vessel was on the scene, had identified the location of the leak in about 120 ft water depth, and divers had jumped on the site to appraise the extent of the damage.

The primary reason such a quick response was possible was because of the activity level and the number of available vessels in the area. This rapid response was feasible partly because of the great number of workboats and service vessels in the area that could respond in an emergency. While the location was 75 miles from shore, the existence of numerous shore bases along the Gulf coast insured that an emergency response could be had in very short time. The existing work support infrastructure greatly contributed to the availability of the vessel.

Another contributing aspect of this existing infrastructure is that the numerous suppliers and vendors provide a very competitive marketplace. For instance, materials, engineering services, construction, inspection and construction management capabilities abound. While centered mainly in Houston and New Orleans, many companies are located in the small towns along the coast.

The companies that provide these services range from relatively small, one to five man outfits, to large international organizations. Their services are in demand. The key is that many companies provide these services for both the offshore as well as the onshore pipeline industry. Competition between these companies keeps the price of products and services in check. Operators look to these companies for assistance and utilize their services regularly. Since there is plenty of work, all companies prosper.

Government cooperation

Along the Gulf coast, there are no government mandates defining the cost of services, and unions are virtually non-existent. There is no need to unionize since there is plenty of work and dissatisfied workers can easily find work at another company. Companies who are unionized have a very difficult time keeping up with the non-union shops. There are no artificial prices. Prices for products and services are set by the going rate. The amount of work that each supplier has is dependent entirely on his ability to bid the work.

The government regulatory service also plays another important role in cost effective offshore development, and contributes directly to the US Gulf advantage. While the Minerals Management Service sets minimum rules and regulations for all Federal water pipeline design, the rules are simply that - minimum required for safety. The Code of Federal Regulations, Title 49, Subpart 192 and 195 directly relate to pipelines. These codes do not mandate how every aspect of the work should be analyzed, calculated or documented. The codes basically state that a minimum level of safety must be maintained in the design.

With this approach, a "fit-for-purpose" design is possible. Many safely installed pipeline systems operate in the US Gulf, based on this design philosophy. Only design work which is required is completed. Cost savings associated with eliminating extraneous, non-essential work are realized on the project bottom line. Design work is simplified and schedules are reduced.

Take a very simplified case as an example. The DnV rules carefully, and in detail, determine the boundaries of the riser splash zone. This definition specifically relates to the splash zone wave- related height, the splash zone upper limit and the splash zone lower limit. Calculations are specifically described in the document for this area of the riser.

In the Gulf of Mexico, there is no specific designation for the riser splash zone. Each operator defines the splash zone area for itself. In many cases, the pipeline design engineering company defines the extent of the splash zone for the operator, especially if the operator is one of the small independents. The uniformity of design rests with the pipeline engineering company that works for numerous operators. In many cases, the designation of the splash zone is adopted based on the practices of one major operator and is used for all of the work that the pipeline design engineer completes for others.

The MMS also contributes to the US Gulf advantage by arranging periodic meetings with operators. At these public meetings, the operators are asked to discuss problems they may have with the government mandated regulations. The operators are asked to identify rules or regulations which they feel contribute to excessive cost and overly conservative design. The MMS is open to suggestions and recommendations which maintain safety, yet result in lower capital or operation cost expenditures.

An offshoot of this fit-for-purpose design approach is the recent interest in limit state design. Major oil and gas operators, in conjunction with regulatory personnel, are presently evaluating the viability of this approach. The fit-for-purpose design fosters an understanding of the actual safety factor incorporated in the design, and allows the determination if that specific amount of safety (conservatism) is warranted.

Documentation

Another area contributing to the Gulf of Mexico advantage is the requirement, or lack thereof, for pipeline design documentation. Considerable time and cost can be saved from the design-engineering budget if the operator does not require bound documentation. Here again, the government regulations only specify the minimum documentation required for permit application, not volumes of stylishly bound and sometimes irrelevant paper.

Often, the permit application is the only documentation which summarizes the design analysis. It must be emphasized that this does not mean that the analysis is not complete, or that the analysis is non existent. All pertinent analysis is complete, and files are kept with the pipeline design engineering company.

The operator, in many cases, has only the same summary information which was submitted to the government. There are no short cuts around the safety issue. Rather, cost savings result from the fact that the calculations are not assembled and delivered to the operator. The cost and effort involved with "prettying up" the analysis is not paid for. The analysis results are summarized, and only the summary is presented. The fit-for-purpose design principle extends to documentation, and results in cost and time savings.

Capabilities diversity

Diversification of capabilities is a key factor in contributing to the Gulf of Mexico advantage. Most design engineering companies along the Gulf coast are not specialized; but provide a wide range of capabilities. There are very few "just structural engineering" companies or "just pipeline design" companies. Everyone does both - and much more.

Facility design, civil structural design, pipeline design, instrumentation, communication, inspection, project management and construction management can all be obtained from a single engineering entity. Diversification at the engineering service level is the rule.

Engineering companies attempt to provide all services required for a project. This total capability approach allows the engineering company to better control its resources, provide the exact personnel required for the job, and control man-hour expenditures. In the same manner, the operator can contract with a single source and have all of the work completed by the same company.

This insures that a single project management team, consisting of operator and engineering company personnel, completes the work. Project control is centralized with minimal management redundancy. The project is completed in a more efficient manner, in less time, at less cost.

Small, specialty service companies do exist. Their services are used by both the engineering companies and by the operators. Often, the cost of the specialty company is integrated into the total project cost through the design engineering company, who directs the work progress, is responsible for the schedule, and bills the operator with a single invoice.

One example of this process is the Neptune project, which was recently completed by Oryx. The project consisted of the design, fabrication and installation of a 72-ft diameter spar in 1,950-ft water depth. The total project cost exceeded US$172 million dollars. The fabrication work was completed in two countries, Finland and the US. However, only four Oryx company personnel were required to direct and manage the project.

Engineering, fabrication, construction and installation personnel worked together as a team to make the project happen. With short communication lines, information was distributed quickly and accurately. A large management structure was not required. Savings were realized.

Team approach

In the last few years, the "team approach" to project development has gained recognition as a major contributor to the Gulf of Mexico advantage. The operator, the design engineering company, and all subcontractors are pulled into a single unified team.

This team takes ownership of the project. Each team member becomes responsible for a share of the work. The team approach is sometimes difficult to achieve. In the past, there has often been an adversarial relationship between operator and service provider. This has been specifically true of engineering design firms, who have been accused of padding extraneous man-hours, and construction contractors who specifically utilize loopholes in the contract to demand extras at the end of the project.

With the team approach, all members of the team are working for a common goal - the successful completion of the project. To insure that the project does realize savings, bonuses are distributed to the team members at the completion of the project, based on the success of project.

The team approach is a viable cost savings tool if, and only if, the participants completely buy into the method. The expectation is a "win - win" situation, where all participants share in the total cost savings and the glory of a successfully completed project. In many instances, the well- integrated team is directed onto a second project immediately after the successful completion of the first.

Summary

The basic result of the Gulf of Mexico advantage is a reduced cost and shorter development schedule. In every aspect of the pipeline design, fabrication of components, installation, cost and schedule are continually reviewed. Work processes are regularly evaluated for improvement opportunities. If a criteria does not effect the outcome of the design on the macro level, it is discarded. Attention is paid only to significant controlling factors. "Out of the box" thinking is encouraged to reduce the complexity of a work process and only "fit for purpose" work is completed.

Can the Gulf of Mexico advantage be exported to other parts of the world? It is presently being done. The same operators who have been successful in the Gulf of Mexico are moving to other international exploration sites. They have seen that the cost savings are real, with no degradation to overall work quality. They intend to make it work elsewhere.

However, for the Gulf of Mexico advantage to work, local governments must get involved. Rules and regulations which do not add to the safety or operability of a project should be curtailed. Artificial prices must not be demanded from an industry which is already experiencing a continual decline in the price of hydrocarbons.

Representatives from oil and gas producing companies, engineering design companies, manufacturing and construction companies need to dialog with government regulatory agencies to define only those requirements which result in safe and economically efficient pipeline and production systems.

References

Det Norske Veritas. Rules for Submarine Pipeline Systems, December, 1996, Sec. 1, p. 6.
U.S. Department of Transportation. Code of Federal Regulations, Transportation, Title 49, Pt.192. "Transportation of Natural and Other Gas by Pipeline: Minimum Federal Safety Standards," Rev. Oct.1,1996.
U.S. Department of Transportation. Code of Federal Regulations, Transportation, Title 49, Pt. 195. "Transportation of Hazardous Liquids by Pipeline," Rev. Oct.1,1996.
U.S. Minerals Management Service (MMS). General Information. Internet Site, http://www.mms.gov.

Copyright 1998 Oil & Gas Journal. All Rights Reserved.

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