FPSOs for marginal deepwater GoM fields deemed economically viable for independents
Mitch Provost, Provost Management
Deepwater has long been the frontier for oil exploration and development in the Gulf of Mexico. Many of the world’s most innovative technologies have been developed to exploit these natural resources. However, development of deepwater is challenged by the understanding and management of associated risks, especially for developments requiring a processing host platform. Major oil has the capital to institute highly structured risk management systems, such as stage-gated decision making processes, to mitigate risk and to improve success. Most independents thrive on their ability to make quick decisions without a complicated, resource intensive procedure and to accept greater risk. Among the independents that have ventured into deepwater host development, some unfortunately have met with failure and ultimate dissolution.
Until now, only permanently moored host platforms have been available for deepwater GoM. Disconnectable FPSOs allow the entire platform to move away from its well location under its own power without restriction and later return to resume production. In addition to virtually eliminating the risk of destruction from hurricanes, it offers a short field life solution that can reduce the risk of long-term capital commitments for operators of marginal fields. The opportunity to improve safety and capital risks can allow smaller independents to develop more of these deepwater prospects often passed over by major oil companies.
Marginal fields
It is estimated that deepwater GoM has more than 100 proven reserves. Among these, more than 68% are less than 50 MMboe recoverable. These reserves typically are too small for major operators to devote resources to develop, especially considering that the amount recoverable is at risk. However, 50 MMboe (even at risk) is a very large number for many independent operators.
Reservoir risk continues to improve with time and technology, but always will exist when estimating the amount recoverable. Risk of environmental conditions and capital cost uncertainty supplement reservoir risk, limiting these developments. The smaller reservoirs usually are passed over by larger operators as a result.
A popular method of developing these reserves in the past has been the hub and spoke model. The concept is to build one hosting platform (hub) that can support several subsea tie backs (spokes) in a given area. The idea is that once the original wells die out, others will develop that can keep the platform operating economically. Among the challenges of this concept, the operator typically has to market the real estate of the hub to maintain capacity and economic limits.
Hub platforms usually are designed to take on more payload and capacity in anticipation of future production from tiebacks, and anything added on a platform has high cost associated with it. This cost will not be monetized until some future time, and there is high uncertainty that future capacity will be used. Since existing GoM deepwater platforms are permanently moored, the facility must typically have an expected life on location of 15 years or more to be economical. Add the uncertainty of the future and this solution is too much risk for many independents.
Some deepwater fields are not candidates for the hub and spoke concept. These fields are isolated with minimal infrastructure nearby. In some cases, economic returns are unacceptable for a conventional tie-back to a distant existing platform or to build a permanent host facility.
All platforms that exist in deepwater GoM today have mooring systems that do not allow economic platform removal until the field is abandoned. The permanent nature of these platforms requires that they be designed to withstand all weather and sea conditions it may encounter at that location. This includes the 100-year return period or 100-year hurricane and 100-year loop current. These forces are formidable and 117 platforms were unable to survive during hurricanes Katrina and Rita. An additional 163 platforms and 542 pipeline segments sustained major damage. As a result of this devastation, API and the industry set out to establish new design criteria for hurricanes.
API Bulletin 2INT-MET (expected to become a Recommended Practice early in 2008) outlines hurricane driven metocean conditions that are now required by the MMS for new platform design. The new conditions are in some cases up to 28% higher than previous conditions. It has been estimated that the cost of building a platform designed to these requirements will increase up to 20-40% as a result. These new design conditions are not applicable to disconnectable FPSOs.
Disconnectable FPSOs
Disconnectable FPSOs maintain their station by mooring or controlled thruster dynamic positioning. The difference from existing GoM platforms is that the mooring and riser system (all components attached to the seafloor) are routed and disconnected through one common buoy. A buoy is used to keep the terminated mooring and risers from falling to the ocean floor during the disconnected stage. The depth of the buoy when disconnected typically is just below the depth of influence from hurricane current/wave action (150-250 ft [46-76 m] deep) and below much of the influence of loop currents. In addition to the ability to disconnect, the buoy is designed to rotate or swivel while connected. This allows the ship-shaped FPSO to turn into oncoming weather to minimize the wind and wave loads.
Since these FPSOs will disconnect in the face of hurricanes, they do not fall under the same design requirement as existing platforms. The buoy is designed to disconnect and reconnect within hours or shorter. The lower threshold environment experienced by the FPSO and the lower wind and wave loads result in a lower cost unit when compared with the permanently moored platform that now must withstand even higher hurricane design criteria.
The disconnectable buoy designed for the GoM will include shutdown valve redundancy as required by the MMS for safety. The riser system typically will have feedback for assisting the process of disconnection. Once the FPSO is disconnected, it will be able to navigate unrestricted anywhere in the ocean. Accordingly, these FPSOs will fall under two main design criteria; one during the connected mode of operation and one during the disconnected mode of operation.
All technology used for disconnectable FPSOs and ships exist somewhere in the world and will soon exist in the GoM with oncoming projects announced for 2008-2009. Most commonly, FPSOs are built out of existing crude oil tankers that are converted to accommodate processing facilities. A crude oil tanker inherently has storage and offloading capabilities, minimizing the conversion. Conversion typically includes strengthening the top deck to take the additional weight of the process facilities, addition of a moon pool to accommodate the disconnectable buoy, and any life extension steel required depending on the age and life history of the tanker.
The choices in station keeping for the FPSO are mooring or dynamic positioning. Mooring the disconnectable FPSO requires a buoy that must transfer the loads from the anchors to keep the FPSO in place during the threshold environment before disconnection. Dynamic positioning requires substantial onboard power to maintain station during higher threshold environments. Design for lower threshold environments will result in lower costs at the expense of disconnecting the buoy earlier and potentially reducing the uptime of the processing facility. Design for higher environments could allow more uptime; however, at additional cost. These options provide additional flexibility for developing a host solution.
An FPSO for marginal deepwater GoM can provide the capability to store produced oil for offloading to a shuttle tanker or export through a pipeline routed through the disconnectable buoy. At this time, the only solution readily available for produced gas is exporting through pipelines since continuous flaring is illegal. However, new opportunities for gas-to-liquids onboard and other technologies are seen for the future. Shuttling oil may be the preferred option, even with a gas pipeline and especially for fields with low gas to oil ratios. The economic value of distribution will be determined by comparing tanker shuttling versus pipeline export.
Oil shuttling from a U.S. deepwater lease must be delivered to a US port by a Jones Act tanker. However, the FPSO used for production does not need to be a Jones Act vessel. A Jones Act vessel is one that is built, owned, operated, and manned by US citizens and registered under the US flag. Two Jones Act tankers are pending delivery in 2010 and 2011 for the first FPSO deployments in the GoM. The size of these tankers allow commerce to many of the GoM ports and are not dependent on a deepwater offloading port, providing an attractive option to market produced oil.
Managing risk
Independent oil companies, along with most small to mid-size companies, take advantage of their smaller size to make quick decisions and to develop low-cost solutions. The burden of this ability is the exposure to higher risks. As FPSOs generally are leased, the cost of up front capital to develop a field can be mitigated. In addition to high capital cost associated with deepwater development, deepwater host platforms come with a long expected life on location. The cost to move permanent structures before the expected service life of 15-20 years is mostly uneconomical. The disconnectable FPSO can be moved to a new field quickly without suffering abandonment cost.
The lower risk of startup capital required and short lease terms with no abandonment liabilities of the surface structure greatly improve the risk profile for an independent operator in deepwater.
About the author
Mitch Provost is a professional engineer, project management professional, and founder of Provost Management, a deepwater consulting firm. He has assisted Helix Energy Solutions Group as a project manager on the Helix Producer I, the first ship-shaped disconnectable FPU (floating production unit) for the GoM. He is also a member of the API RP 2FPS revision task group and is developing the new section on disconnectable floating production systems.