Offshore Mexico: the EPC perspective

April 9, 2015

OE’s Audrey Leon spoke with Scott Cummins, Senior Vice President, Commercial, McDermott about the opening of Mexico’s oil and gas industry and what effects it will have on both McDermott and the industry at large.

Welder training programs at Altamira help maintain the quality and integrity of McDermott’s construction. Photos from McDermott International. 

 

For a company that has an established presence in Mexico, with the Altamira yard and Mexico City engineering office, what has the opening of the country’s energy industry meant for McDermott?

If you carry out work for Pemex, you need to be in Mexico. We anticipated the market would open up, and we are already firmly positioned with established facilities in the country. Recently, we have seen Pemex move to contract with us on an EPC, EPCI basis for several projects. Large EPCI contracts is really where our strength lies, as this allows us to execute projects across all phases of engineering - concept to commissioning, so that we can integrate our assets, to allow us more scheduling flexibility, higher quality and safety, and change management efficiency. As we see the specific results of the reform emerge, we expect to adjust our strategy and pace accordingly. We believe that the outcome could bring very interesting market opportunities for us, as well as opportunities for jobs in the country and growth for the local economy to accelerate domestic wealth. It seems like a win-win opportunity.

Can you tell me more about how the Altamira yard came to be? How easy was it to enter the country as a foreign company and set up?

Our Altamira yard is strategically located within the sheltered Port of Altamira in the state of Tamaulipas. Finding the right location for the facility was based on several criteria: available acreage with expansion opportunities, deepwater quayside access, no transport or infrastructure restrictions to the Gulf of Mexico, proximity to a good transportation network, within a few hours flight of Houston, and local supply of a highly skilled workforce. Altamira met all those criteria, which we believe sets us apart from our domestic competition.

Established in 2007-2008, the yard itself occupies 119-acres, including a 3.1-acre enclosed assembly area with protective covered bays that allows work to be performed during inclement weather for improved conditions and productivity. The 40ft deepwater protected quayside, enables topsides integration capabilities for TLP and semi hulls at its 1640ft long quayside, and can also support FPSO module fabrication and integration. The yard was designed by leveraging best practices and lessons learned from long established McDermott fabrication facilities worldwide, to ensure an efficient, first class operation that is part of a unique global fabrication solution, serving both local Mexican and international clients.

The Mexican authorities and the Port of Altamira, have been very easy to work with and have supported our efforts in developing the facility, which initially had very different requirements to existing companies at the port – such as the container terminal. We worked closely with the authorities to explain some of our unique requirements, such as the development of the water front area of the quayside to enable the load out of heavy structures. This meant we had to reinforce the dock and raise its height. Getting the appropriate approvals took some time, but the authorities were very cooperative and supportive.

Similarly, when we applied for our free trade zone license, and our import and export permits for Altamira, the customs authority, Port and our agents were all aligned to ensure the process went smoothly. Now, Altamira operates as a free trade zone and we have the ability to import components, construction materials and equipment cost-effectively and to provide a competitive alternative to US and other fabrication facilities. This improved construction environment supports the execution of larger and more complex projects from within Mexico.

McDermott floated the Ayatsil-B jacket in May 2014. 

 

McDermott has won various contracts with Pemex including Ayatsil-B, the delivery of which was completed back in July. What can you tell us about the project’s challenges and how were the solutions derived?

The Ayatsil-B facility is the first, largest and deepest platform in the Pemex Ayatsil Tekel field, in the Bay of Campeche. Weighing approximately 12,000 tonnes in water 115.6m deep, the platform is now producing oil. It is one of four planned platforms to be used, along with an FPSO, to develop heavy oil from the Ayatsil field. This heavy oil field is expected to take Pemex towards deeper water and a new frontier.

McDermott successfully carried out the engineering, procurement, construction, pre-commissioning, load-out and sea fastening of the 8-legged jacket, with skirt piles, a two-level deck and piles. Engineering was carried out in Houston and locally in Altamira, and during the project, more than 520 personnel at our Altamira yard worked safely to complete the structure, achieving more than 1.5 million man-hours without a lost time incident.

This project was the first time McDermott proposed an EPC solution to Pemex. Our engineering design incorporated several unique benefits for Pemex that enabled time and cost savings. Our platform design incorporated a special steel to reduce the overall weight of the facility, resulting in reductions of approximately 10-15% compared to our competitors’ solutions. This improved efficiencies in construction, transportation and time during installation.

McDermott’s unique platform design enabled time and cost savings for Pemex.

 

We also designed a special skirt pile sleeve on the bottom of the jacket so that the piles could be installed through the sleeves underwater using subsea hammers, rather than the more traditional installation solution of pile driving from top of the jacket legs above that water line. This was the first time Pemex had used this method for this dimension of jacket.

The project was not without its challenges. Market conditions at the time, meant it was difficult to find enough appropriately skilled welders. We solved this by implementing special training programs at our onsite training facility, to teach and qualify welding helpers to our procedures and methods. This worked very well and we successfully maintained the quality and integrity of our construction.

Equipment challenges, including access to lifting equipment were successfully overcome by mobilizing cranes from elsewhere in the McDermott organization and renting locally. And then there was the added challenge of managing additional scope from Pemex, which presented a schedule change. We responded quickly to implement a special plan to accommodate the change order separately so it wouldn’t affect the ongoing project execution plan. A dedicated team of people and equipment, combined with overtime and double shifts meant that this was successfully managed enabling us to deliver the project on time per the agreed schedule with Pemex.

The keys to this project’s success were our:

  1. Efficiency of platform design – high strength steel, 8-pile design
  2. Strong team approach and commitment to safety at Altamira, which meant that we had zero safety lost time incidents
  3. Effective communication across the project team and engineering groups in Houston and local engineering center in Altamira
  4. Creative management of the change order.

Continuing our work with Pemex within the Ayatsil field, in January 2015 we successfully launched and installed the 8400-ton jacket. During the first days of February the 3400-ton deck and piles were installed for the Ayatsil-A drilling platform. The award was a direct result of our substantial local capabilities and operations in Mexico, and demonstrated track record of safe and reliable platform installations in the Bay of Campeche. Our unique ability to mobilize our versatile marine resources including the heavy-lift vessel DB50, and the Intermac 600 transportation and launch barge, was a critical component of the successful award for this fast-track installation project.

What are some solutions McDermott can currently provide and deploy in Mexico?

We have the expertise, capabilities and established resources and presence in Mexico. Our proven construction experience at Altamira is backed by a global network of procurement specialists and engineering offices, for both fixed and floating platforms, as well as subsea infrastructure with deepwater experts based worldwide. This includes our technology partner for floating production systems, FloaTEC; our recent venture, io oil and gas consulting, with GE Oil & Gas, that aims to deliver “a better blueprint” for operators’ field developments when they go out into the contracting market; as well as our fleet of global vessels that offers a full suite of installation services from subsea rigid-reel and flexible pipelay, to precision lowering in waters greater than 10,000ft deep, and heavy lift and float-over installation capabilities for topsides.

McDermott personnel and equipment operate to the same standards and procedures across the globe, be they based in Altamira, Indonesia or Saudi Arabia. What are some of the challenges McDermott sees in Mexico in terms of workforce, available materials and equipment? What will it take to solve them?

Since it opened, Altamira has steadily built backlog, infrastructure, a highly-skilled local workforce, and the proven project experience necessary to demonstrate it can offer economical and safe construction solutions for projects.

Cummings.

 

Most recently we were licensed as a free trade zone, making us the first fabrication yard that his a free trade zone in Mexico. This means we have the ability to import components, construction materials and equipment cost-effectively and can provide a competitive alternative to US and other fabrication facilities. This improved construction environment supports the execution of larger and more complex projects from within Mexico.

To ensure the supply of qualified workforce, we have proved that by initiating in-house training programs we can qualify skilled craftsmen to McDermott’s international operating standards.

Through our dedicated training facility at the yard, we teach an established range of competency programs to keep our employees appraised of the latest technology and McDermott procedures, to ensure we maintain a high level of skilled and qualified experts, as well as basic orientation training for new hire employees.

Finally, after the reforms, what is the long-term outlook for Mexico’s oil and gas industry from your perspective?

Oil prices have weakened considerably recently and this has been a topic of concern for energy companies and investors alike. Clearly, this is leading to uncertainty on client capital spending and timing of project sanctions.

However, for national oil companies, such as Pemex, who have a production schedule to meet, their drivers are clear, and they have financial strength and incentive to withstand the market volatility. Bidding activity with Pemex is active, so we see this as a strong signal that the market will remain steady in Mexico.



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