The demand for standardization

May 5, 2015

In the first installment of a two part series, Elaine Maslin takes a look at what all the clamor is about on standardization, what the industry is planning to do about it and what the results have been to date. 

Image from Statoil.

If I got £1 for every time someone said “standardization,” I’d be a rich woman. The word has become part of the offshore industry common parlance in Europe, not least in Norway and particularly within the subsea industry.

It’s easy to think the push for standardization was created in response to the oil price collapse. But it wasn’t. A need for greater standardization, be it around interfaces, components, documentation, tenders, has been discussed at industry events for some time.

Standardization was debated in 2013 at the Underwater Technology Conference in (UTC) Bergen, where questions were asked about what was standardization, what should be standardized and was industrialization a better goal.

It was also on the agenda at last year’s UTC, then ONS 2014 in Stavanger and again at Subsea Valley in Oslo earlier this year. Visit Norwegian companies and each has its own spin on standardization.

Slowly, some results are starting to be seen. But, those with experience in other sectors which have gone through the same process, such as shipping, warn that for the full impact to be felt, initiatives will need to be adopted across the industry and will take time.

  • Why standardization?

Subsea industry costs offshore Norway have risen to such a level that projects were becoming no longer economic. Costs have been driven by increased specifications, long lead times, duplication and high wages.

Over the years, field specific driven challenges have resulted in field-specific specifications, which are layered on top of internal operator specification tool boxes, which in turn have been built up based on previous deployments and learnings, Michael Sequeira, principal consultant, deepwater practice lead, OTM Consulting told the Subsea Valley conference.

Frequently now cited are examples of components, which in any other industry cost a few thousand dollars, cost hundreds of thousands in the subsea sector because of the documentation required, increasing man-hour requirements, costs and lead times.

Image from Statoil.

Tom Wideroe, project manager, Lundin, told Subsea Valley: "Look at a valve through the years. Total is telling the supplier how to do it, Statoil is telling them their way, etc., each with their own standards. They have been doing that 10-15 years. If we can get these guys to agree how to do this then the Italian valve producer can produce 150 of the same valve, not two or five or 10." Preben Strøm, managing director of Subsea Valley, says he heard a firm say a part cost NOk1000 (US$133) but the documentation for it cost a staggering NOK20,000 ($2672).

Jarl Magnusson, JIP project manager for DNV GL, has been overseeing a project around subsea documentation standardization. He says: "The worst example I have heard is that the same document was approved 17 times. That requires a lot of engineering hours. If you have inconsistency between the contractor and supplier and the same document is in three or more places, it is going to be very difficult to keep that information consistent." Rune Mode Ramberg, chief engineering subsea technology and operations, Statoil, told Subsea Valley: "We are producing documentation in different forms to subsea suppliers and other operators. We are designing new manuals every time.

Anders Husby, Head of Department for Well, Subsea and Risers, DNV GL, told OE that another strong driver for standardization has been to increase quality and reliability, which has been seen to suffer. "In this area, there needs to be improvement,” he says. “We have talked about standardization in the industry for the last 20 years. The difference now is that the industry really needs it.”

Ramberg adds: “I think it is about going from a tailor-made industry to an industry based on known solutions and standardized solutions. We need to be smarter and more efficient. Even at $110/bbl we needed to look at how we are working.”

  • Impact on costs, lead times

"It is important we understand the impact lack of standardization has on cost, lead time and even HSE,” says OTM’s Sequeira. “These [layers of specifications] all dictate how supply chain sub-suppliers go about completing the project and the acceptance criteria, quality and system testing," and hinder standardization, which could enable industrialization. This, in turn, means projects are bespoke, costly and less likely to meet economic hurdles, even more so in today’s lower oil price environment. While on the surface, this just means some projects don’t make the cut, on a higher level, it can hinder technology development and adoption.

For example, subsea processing solutions, including subsea boosting, separation and compression, have been around for some time. But, due to their one-off high-cost nature, to date, the costs are not coming down, which means they remain one-off, few and far between projects.

There are only about 40 fields globally which currently have subsea boosting technologies deployed, totalling about 100 systems. For a technology the industry has been talking about for 15-20 years, these are small numbers, he says. 

For subsea separation, the numbers are lower, with only about 15 units deployed across about seven fields, as at 2013. 

"These numbers are minuscule compared to other industries - and as a result nuts and bolts costs are far more than they should," says Sequiera. "The numbers are low, costs are high and they are custom built - each deployment required a different approach, had different drivers, different specifications, different acceptance criteria. In some cases, this is necessary, such as pilot systems. The rest, we need to manage better.

“The pie is a certain size and it is being squabbled over. We need to increase the size of the pie. The fundamental problems are that the volumes are low, which means there is a monopolized market as well. With these low numbers we are sitting in low volume service sector squabbling."

OTM worked with the International Oil & Gas Producers association (IOGP) to assess standardization in the subsea industry. The project's aim was to look at where standardization efforts were being made in order to see where the gaps are. The results were that there was limited activity. "Most operators and vendors say they are doing standardization but it's based on contracts and framework agreements," says Sequeira.

"The question is, can the industry afford to continue like this? It is our differences that add time, costs and the duplication of effort. Look at other industries that are making high reliability equipment, such as the aviation industry. You do not see Airbus going to the steel mill wanting to see what goes in to the turbine blade. Standardization is a necessary evil to enable system level inter-compatibility of multi-vendor components, interoperability, and repeatability," Sequeira says.

Vendors, working with operators, have been doing just this as part of the Subsea Wireless Group, or SWIG. Here, different vendors of sometimes nascent subsea wireless communication solutions have been working together to create common interfaces, so that no one supplier misses out and enable interoperability and cost reduction.

Another spin off from the push to standardize, and reduce costs and lead times, is that use of big data is now being taken seriously in Norway’s offshore industry.

Read part II here: The demand for standardization part II.

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