FPSOs becoming Asia's choice for marginal fields, lack of infrastructure

Rick Von Flatern
Technology Editor

Floating production, storage, and offloading (FPSO) vessels have been in use since the mid-1970s, though until just recently they have gone mostly unappreciated. As their sophistication has grown in the past two-three years, and their viability has been proven through use, they are suddenly in great demand. Their versatility, relative low cost, and mobility have resulted in more than 80 orders for FPSOs for offshore West Africa alone.

They are especially (though not exclusively) attractive in emerging oil and gas producing areas that are isolated from pipeline and processing facility infrastructures. Such is often the case in Australasia where hydrocarbon discoveries have been uneven in size and, in some cases, disappointingly insufficient to justify the massive expense required by infrastructure construction.

Their mobility and self-contained nature provides them advantages in two ways particularly suited to the economics of the Australasia. They can be removed to other projects, enhancing the return on their original capital outlay and reducing financial exposure in marginal areas. And, when endangered by politics or nature, they can easily be removed from harm's way.

In the South China Sea and Bohai Bay, offshore China, where discoveries have been less prolific than hoped for but commercial, FPSOs have provided an economical way to recapture investment and allow the country and outside investors to maintain an aggressive hunt for elephants.

FPSOs finding a place in Australian promise

In the 1970s and early 1980s, the expectation of continually rising oil prices gave a sputtering start to an offshore Australia oil and gas industry. But with the worldwide collapse of oil prices and some internal and labor-related problems, the Australian offshore oil and gas industry temporarily faltered. Today, with a stable oil industry, essentially resolved union problems, and demand for petroleum exploding throughout Asia and other developing areas of the world, the promise of offshore West Australia is invoking comparisons throughout the world to such hot spots as the Gulf of Mexico and the North Sea. In 1995 the area saw record production with about 300,000 b/d of oil equivalent, or 1.8 billion cf/d of production.

The veteran FPSO offshore Australia is BHP's Jabiru Venture, moored in the 396-ft waters of the Jabiru Field. Since that 1986 installation, offshore Australia has been the site of four more FPSOs, three for BHP and one for Woodside.

The latest, the Cossack Pioneer is moored in the Woodside Group's Wanea/Cossack Field in 262 ft of water. Woodside partner, Chevron, provided engineers to plan and implement the six subsea wells served by the FPSO as well as the instrumentation of the total topside of the FPSO. It is a converted Chevron Very Large Crude Carrier (VLCC) capable of offloading 115,000 b/d of oil plus about 100 MMcfd of gas. With decks and sides about twice the thickness of standard new builds, and both oil and gas processing capabilities, it is one of the largest FPSOs in the world. Within two weeks of the 1995 startup the Cossack Pioneer had offloaded more than 650,000 bbl of oil.

Other FPSOs currently on line in Australia, all operated by BHP, are the Griffin Venture in 427-ft Griffin Field waters since 1993, the Skua Venture, placed in the Skua Field in 1991 in 283-ft waters and the Challis Venture in the 348-ft waters of the Challis Field.

FPSOs helping solve offshore China economics

China's growth, termed by observers an economic miracle since its decision to relax the dogmatic communism that has ruled it in the latter half of the 20th century, has brought with it a new dependence on imported oil. Unsatisfied with that state of affairs the nation has been moving aggressively to engage the expertise and finances of international oil companies in a mission to grow an energy industry at a pace to match the growth of its industrial sector.

But the quest for energy independence, pinned most prominently on the South China Sea, the East China Sea, and the Bohai Gulf, has been illusive. While offshore oil production has steadily climbed since 1992, there has been no sign of the kind of elephants the nation needs to feed its 8-10% annual economic growth.

FPSOs are particularly suited to the waters off China. Up to a dozen typhoons pass through the area annually and their mobility allows operators the option to move a field's production and processing unit out of harm's way in a matter of hours. And, as is the case with many emerging oil and gas producing nations, FPSOs allow fields to commence production where they ordinarily would not be able to do so due to insufficient pipeline grids and processing facilities.

Of the five fields currently on production in the South China Sea, at least portions of four are produced through FPSOs. A sixth field, to be operated by Statoil, will produce through an FPSO beginning December 1997.

The first FPSO in the area, the Nan Hai XI Wang, operated by Nan Hai West, arrived in the Weizhou Field in 1986. It was followed in 1990 by the Nan Hai Fa Xian FPSO, operated by the Act Group in the Huizhou Field.

The Nan Hai Kai Tuo entered the Xijiang Field in 1994. Located in 328 ft of water, it is operated by Phillips Petroleum International Asian Corp. for joint venture partners China National Offshore Oil Corp. (CNOOC) Nanhai East, and Pecten Orient Co. Production began in late 1995 and is expected to reach 81,000 b/d of oil.

But it is the latest FPSO to come on line that will process China's best hopes for eventual energy independence. The Nan Hai Sheng Li FPSO is operated by Amoco in the Liuhua Field about 125 miles southwest of Hong Kong in 1,000 ft of water. Production came on line in 1996 and is expected to eventually reach 65,000 b/d. Joint venture partners CNOOC and Amoco allowed Kerr-McGee a 24.5% farm-in late in 1995 in the field whose recoverable reserves are estimated by Amoco to exceed 1.5 billion boe.

As a consequence of its size, a typhoon-zone location, and adverse geological factors, Liuhua has required more technical and financial resources than other fields in the area. It will be developed through 20 horizontal wells to be drilled and completed by 1997 and beside the FPSO will use a modified semisubmersible as an auxiliary floating production storage vessel. Total development costs are expected to reach $650 million.

On the other end of the South China Sea success scale is the Lufeng 22-1. In September 1996, Statoil announced a joint venture project with CNOOC to develop the field despite the separate conclusions of two previous operators that the field could not be developed economically. In an effort to prove the earlier conclusions wrong about the 30-35 million bbl reserves field discovered in 1986, Statoil formed, with Advanced Production Systems and Stolt Comex, the Lufeng Development Group.

According to Statoil the group can make the field commercially viable by a combination of technical and business practices innovation centered around an FPSO, a multipurpose shuttle vessel, and a short term lease on the FPSO that can then be used for other business purposes upon the field's demise. Among the discouraging technical realities of the Lufeng 22-1 Field is the crude oil's low pour point temperature, meaning the Statoil FPSO must be fitted with heating coils throughout the storage tanks and the oil stored hot. The wax content of the crude is also high enough to create startup and shut down problems. Nonetheless, Statoil expects first production through the FPSO from five horizontal wells in December 1997. Peak production is estimated at 60,000 b/d.

In China's Bohai Gulf three FPSOs are helping China to realize some of the estimated 700 million bbl of recoverable reserves. The areas first oil fields, the Bozhong 28-1 and Bozhong 32-2/4E was brought in by Bohai Oil and JV-partner Japan-China Oil Development Corp. Both are flowing through FPSOs brought into the fields in 1989 and 1990 and are in shallow (less than 100 ft) of water.

The third FPSO-served Bohai Gulf Field is part of the area jewel, the giant Suizhong 36-1. Discovered in 1993, the Suizhong 36-1 Field is estimated to hold 1.8 billion bbl of oil. Production is currently 11,700 b/d from 11 wells.

Indonesia FPSO world's oldest, New Zealand and Philippines

Indonesia is home to four FPSOs in waters ranging from 141 ft to 300 ft, including, according to records published by International Maritime Associates in Washington, DC, the oldest active FPSO. Arco's Ardjuna Field has hosted an FPSO since 1974.

Another FPSO did not enter Indonesian waters again until 1986 when Marathon brought the Kakap Natuna into the Field. Then in 1990 Amoseas installed the Anga Natuna in Anoa Field and in 1994 Conoco installed the San Jacinto in the Sembbilang Field in 300 ft of water.

Elsewhere in Asia, the Philippines are home to two FPSOs. FPSO II is operated by Alcorn in the West Linapacan Field in 1,181 ft of water. The J. Ed Warren is operated by Occidental in 260 ft of water. The Warren has been on location since 1984 and the FPSO I I since 1992.

New Zealand has committed itself to reform of decades of legislation and labor regulations that have served in the past to discourage oil and gas investment in New Zealand. Whether its efforts will lure new investment is yet to be determined. But in 1996 the country gained its first and only FPSO in its second-oldest and most important field when Maui B Field operator, Shell, brought the Whakaaropai into the field's 360-ft waters. Maui B recoverable reserves, discovered in 1969, are estimated at 3 tcf with about 127 million bbl of condensate.

As Australia, China, and the other countries of Australasia continue their offshore searches for oil and gas independence, the demand for FPSOs will grow. Not every field can be an elephant, and as exploration continues to move further from shore and infrastructures, FPSOs will continue to be an attractive alternative to the massive effort and cost required for permanent production and processing facilities installation. And as a nation's oil and gas industry moves from infancy to maturity, FPSOs can often be the perfect intermediate growing pain remedy.