Editor's Note: In a special session at the 2000 Offshore Technology Conference last May, industry leaders discussed the value of "Combining North Sea and Gulf of Mexico Learnings" for frontier developments. The following was developed from views expressed in that forum.
As operators venture into new frontier regions, industry leaders are calling for a collaborative approach to field develop-ment that combines the strengths and best practices of both North Sea and Gulf of Mexico experiences. The opportunities for cost savings are significant, with one Gulf of Mexico producer already reporting success in a deep-water project due to "creative tension" between the two regions' design practices.
Will Roach, Group Head of Projects with British-Borneo and a panelist on the forum, cited the low-cost installation of "Morpeth," the world's first mono-column tension leg platform, located in the Ewing Bank Area of the Gulf of Mexico in 1,670 ft water depth, as an industry example.
Roach, who brought North Sea experience with floaters to America, says the Morpeth project was completed (first oil) within 21 months of project sanction and six months earlier than first projected during conceptual engineering. He said application of Gulf of Mexico fit-for-purpose design practices and effective management of risk contributed to the project's success.
A recent report, titled "Leading Oil & Gas Industry Competitiveness," issued by the UK Department of Trade and Industry (DTI) underscores the economic value of capturing lessons learned. The report reveals that North Sea producers could save at least 40% on project costs for the development of a typical mid-sized North Sea platform with an estimated 100,000 boe/d if Gulf of Mexico practices are adopted.
Ken Arnold, President of Paragon Engineering Services and co-chair of the special session, explained that industry has a lot to gain through collaboration: "We need to combine North Sea experience in designing, building, and operating large, complex facilities in harsh environments with Gulf of Mexico experience in executing projects efficiently and cost-effectively."
The DTI study used a typical UK North Sea project costing $300 million against an equiv-alent project in the Gulf of Mexico costing $100 million. Of the $200 million difference, the study identified a potential savings of $120 million relating to how a project is undertaken and delivered in the two regions. This savings is considered "achievable." The remaining $80 million mainly consisted of unavoidable costs related to market differences, fundamental differences in climate, and operational avail-ability requirements.
Paragon, says Arnold, presented a similar study as early as 1985 at OTC, revealing that a North Sea project can cost twice as much as a Gulf of Mexico project. Both studies indicate that about half of the cost difference between the two regions relates to environment, resulting in more complex systems for life-support and hazard mitigation. The balance is attributed to differences in culture and project execution philosophy.
This non-environmental project cost or savings remains difficult to understand, especially in terms of discerning which cultural activity contributes to the cost, said Arnold. "Industry is seeking to qualify the specific action that leads to this cost difference."
Of the 40% potential cost savings claimed by the UK study, the majority of the savings or "prize" relates to the different ways project/engineering is carried out, said Pat O'Connor, Upstream Technology-Facilities Development with BP Amoco and a panelist on the forum.
"To date, industry has not achieved this 'prize,' largely because benefits are not well-defined and are often disguised behind gray areas of 'culture'; that is, how we think and behave, and 'work process'; how we go about our business. Certainly, the pursuit of the 'prize' will require change for both cultures, with a resolution and commitment to using best practices resident within both regions," said O'Connor.
The challenge here, he adds, is finding and demonstrating a way to integrate key findings into future projects in the UK and worldwide. Arnold explained that the industry requires open discussion and technology transfer between the two regions to effectively compete on the world market and to address environmental and safety issues.
In evaluating the diversity of environments, Cyril Arney, technical consultant with Marathon Oil Company, said industry needs to consider issues such as wave-loading and site-specific situations, including water depth and available infrastructure. "We need to evaluate an acceptable level of risk while understanding the chance for failure against the traditional 100-year design event," said Arney, who addressed safety and life issues in the special session. Frontier developments, such as in the Gulf of Mexico deepwater, says Arney, will provide industry with opportunities to prove new technology using risk-based standards.
Arney added that "a collaborative approach to developing risk-based standards will improve field performance, reduce life-cycle costs, and ensure safe operations and environmental protection as we expand to new regions."
Roach suggested that "a collaborative app-roach" includes an inherent understanding of project team roles. In the case of Morpeth, British-Borneo focused on the function and operation goals of systems, with contractors relied upon for their areas of expertise. "It's important that all participants understand each other's roles, strengths, and weaknesses," said Roach. He added that selection of the right contracting strategy and an effective management of interfaces are necessary for a successful frontier project.
Jeff Brubaker, Focus Area Leader for Upstream Technology Engineering & Construction Man-agement for Texaco, concurred, urging a search for the right business solution to achieve better results than before. "That means looking beyond traditional experiences to place management of risk with the appropriate player," said Brubaker. He added that new technology necessary for frontier developments inherently carries risk, making it necessary for project participants to understand how best to manage this risk.
Jay Smith, Topsides Process Manager with Shell International Exploration and Production Inc. (SIEP), Deepwater Services, says Shell is pushing the frontier of technology and integrating design and work processes as it considers deepwater offshore developments in 3,000 ft of water and beyond. "We have a unique opportunity to integrate Gulf of Mexico and North Sea experiences and leverage the best of both worlds," said Smith.
He related that topsides design teams are working to identify key differing design practices and issues. While these efforts are still in the early design stage, team leaders are adopting appropriate Gulf of Mexico practices, North Sea practices, and "hybrid" designs to achieve a more standardized approach.
"Cultural differences in production facility design are largely determined by our experience and operating preferences," said Arnold. The US industry has been heavily driven by oil company initiatives, with oil companies traditionally acting as prime contractors for field development projects, executing in-house conceptual engineering, preliminary engineering and procurement, and then awarding detailed engineering, fabrication and installation contracts in a segmented fashion.
"Infrastructure developed in the Gulf of Mexico is based on this type of segmented business approach. This infrastructure allows a direct relationship between the operator and supplier, furnishing such specialized equipment as generators, cranes, pressure vessels, and other essential equipment. Gulf of Mexico infrastructure has engendered an inherent knowledge of how a facility will operate and an improved understanding among suppliers of an operator's expectations," said Arnold.
In contrast, the UK industry "grew up in a hurry," attempting to expedite field development activities through integrated engineering, procurement, installation, and construction (EPIC) contracts awarded to consortiums. "Oil companies then trained staff to manage EPIC contracts, creating a lot of oversight and checking systems that impact cost and schedule," said Arnold.
Reservoir distinctions between the two regions also have significantly shaped the development activities within the two regions. Until recent developments in deepwater, a large Gulf of Mexico platform was designed to produce some 20,000-30,000 b/d of oil, compared to typical North Sea platforms, which until recently produced 200,000-300,000 b/d.
Reservoir characteristics for the Gulf of Mexico are generally consistent, whereas North Sea reservoirs are quite diverse, with varying crude properties and producing temperatures impacting facilities design. The complexity of North Sea facilities caused topside technology to evolve from skids to modules, resulting in large, integrated decks that weigh 10,000-20,000 tons, creating the need for heavy lifts.
The use of these large modules, therefore, limits competition for offshore installation, requiring a closer relationship between engineering and installation, thus encouraging the trend toward integrated EPIC contracts.
Environmental differences have dramatically molded the two cultures and how they pursue offshore developments and approaches to health, safety, and life support systems. Gulf of Mexico experiences includes mostly benign temperatures, winds, and sea states, compared with the North Sea's cold hostile environment. In the event of a Gulf of Mexico hurricane, operations personnel have advance notice to evacuate. In the North Sea, however, inclement weather is more common and can deteriorate with little warning.
In the event of an emergency, Gulf of Mexico personnel can escape to the sea as an alternative or often contact nearby facilities for assistance. North Sea conditions and long distances from shore and other facilities make this option more hazardous. These distinc-tions have effected an aggregate level of firefighting equipment on board a North Sea platform.
Extensive life-support systems impact all areas of design, specification, inspection, and documentation, says Malcolm Dorricott, Div-isional Vice President for Brown & Root Energy Services.
The Cullen Report issued by the UK Department of Energy in 1990 has had a significant impact on recent design practice in the North Sea. The report encourages a rational risk-based approach to safety, matching physical and procedural safeguards to the specific risks on an installation. This process can lead to requirements for segregated areas, blast walls, complex instrumentation, alarm systems, and automatic systems.
Environmental conditions in the North Sea require the UK industry to design "human-friendly" operating facilities with closed modules, versus the Gulf of Mexico tradition of providing more open, naturally ventilated facilities, says Smith. "Closed modules provide protection from wind and hostile weather conditions but significantly impact design, construction, and installation costs," said Smith, a special session panelist focused on design practices.
This design approach also dictates more complex incident control systems and more extensive safety and shutdown systems and necessitates additional process handling equipment, adding cost and weight to the facility, explains Smith.
Dorricott, who addressed supply and fabri-cation issues in the special session, adds that these design and safety issues increase project man-hours and impact the amount of post-engineering necessary during the fabrication phase.
Degree of oversight
The regulatory regimes of the two regions further distinguish work practices. The UK regulatory arena typically has a higher degree of oversight and more stringent inspection practices, which can prove costly to operations due to requirements for scheduled shutdowns. Smith says routine shutdowns do not translate well into deepwater Gulf of Mexico operations.
"Shutdown of high-rate deepwater wells, particularly subsea wells, can cause mechanical problems, damage sand control, and require extensive flow assurance and hydrate avoidance procedures, which could cost millions of dollars," said Smith.
Dorricott explained that structural failures in the early years of North Sea development contributed to increased specification and extensive regulatory documentation for traceability of any eventual problems.
Gulf of Mexico design practice, in contrast, said Arnold, follows a more prescriptive, simplified approach, based on operating experiences, hazards analysis, and incident investigations of the thousands of installations which have been installed over the past 50 years. This experience minimizes documentation and makes regulatory compliance more efficient and purposeful.
John Millar, an inspector with the UK Health and Safety Executive (HSE) and a forum panelist, says the Cullen Report recommended safety cases for North Sea installations and that goal-setting legislation replaced prescriptive requirements in an effort to enable optimum health and safety planning and design activities.
Millar advises that UK operators are now charged with evaluating possible hazards and determining how best to manage the associated risk. "Goal-setting represents an explicit consid-eration of risks for the prevention of major accidents," said Millar.
A collaborative approach to developing risk-based standards will improve field performance, reduce life-cycle costs, and ensure safe operations and environmental protection as the industry expands to new regions. Industry leaders agreed that safety case reviews and goal-setting as a regulatory practice can be viable components of a global, integrated development strategy.
However, there is disagreement as to whether detailed safety cases, including calculations of risk rates, are really needed or beneficial for the types of installations common on the Gulf of Mexico shelf, said Arnold. "In more benign environments, such as the Gulf of Mexico, the effort expended to write a costly safety case and to calculate risk rates may actually detract from efforts to assure compliance with accepted design practice and may reduce the overall level of safety."
The OTC special session panelists con-curred on other issues:
- More Gulf of Mexico fit-for-purpose design practices need to be employed where possible and repetition of work should be avoided. North Sea project management technology, such as database-driven 3D computer aided design programs, human factors reviews, increased project document control, and other factors should be incorporated in large facilities, no matter where they are located.
- Regardless of contracting strategy selected, operators need to trust main contractors and rely upon well-informed, experienced suppliers to deliver necessary equipment. Small, integrated teams for project leadership are preferred, with project reporting regularly, openly, and on a high-level, to effectively manage cost and performance.
- Project leaders need to be precise about their objectives, goals, and implementation process, while being deliberate in working relationships and defining the culture.
- For projects in new regions and emerging countries, industry needs to work with governments and communities in a constructive way, seeking to understand the impact a project may have on an environment. Local manufacturers should be relied upon as much as possible and local work practices respected.
- Many sovereignties among emerging mar-kets require lump sum EPC (engineering, procurement and construction) contracts, which mirror North Sea contracting exper-ience, versus the traditional Gulf of Mexico experience of segmented contracts.
- Industry needs to examine project successes and failures to learn from experience while looking beyond personal experience to better manage project risk.