Statoil looks to cut Johan Castberg costs

November 4, 2014

Statoil aims to shed a further 15% on the capital cost for the Johan Castberg development, offshore Norway, before it can move forward, its project manager said.

The up to 600MMboe Barents Sea Johan Castberg project has been delayed twice, most recently this summer when the provisional investment decision was set back due to disappointing exploration results in the Johan Castberg area and high CAPEX costs, even after cuts were made on the project earlier in the year.

Project manager Benedicte Nordang said Statoil wants to optimize the project concept using a "design to cost approach."

The cost cutting on Johan Castberg comes as the Norwegian oil firm is looking to shed 25% on CAPEX costs overall and has set targets to reduce drilling/well construction time and cost by 30% and 15%, respectively.

Subsea production system costs have tripled since 2003, and subsea costs overall have almost doubled, Nordang said. The high costs, combined with soft oil prices, have meant projects are not going ahead.

Several Norwegian oil and gas projects with development plans due next year will be delayed because of high costs and technological challenges, while several will also go ahead, Norway’s oil minister Tord Lien said.

The projects that will be delayed will eventually get developed over the long term, but the oil industry needs to get a grip on costs and the solution must come from the private sector, not the government, Lien added.

Nordang was speaking during a conference session in Aberdeen looking at how costs could be reduced on deepwater developments.

She discussed Statoil’s STEP (Statoil technical efficiency program), which is being used across the value chain on Johan Castberg, including strengthening early phase cost reduction and standardization and industrialization, Nordang said.

She said Statoil would be optimizing the development concept, using a design to cost approach and choosing a lean concept, "where before we might have added in flexibility. We will also look at work processes, how much documentation do we need, and if we can reuse documents or analysis."

Statoil has another project, TRIP (technical requirement improvement project), which aims to simplify and take out excessive requirements, "applying standardized packages where ever we can, or packages suppliers can deliver," Nordang said, especially on subsea production system standardization.

As an example of a lean concept, she said Statoil had looked at whether it always needed subsea isolation valves (SSIVs), particularly on FPSOs.

"We tend to put SSIVs on all gas injection lines for safety," Nordang said. "They're expensive and need controlling etc. On an FPSO, there's not really a requirement from a risk assessment view. So we took out SSIVs and simplified the system. This meant a £12 million saving.” She added: "We did this soberly."

Statoil is also addressing technical requirements. Nordang said the firm has 240 documents per disciple giving detailed requirements. "We started a project taking out all excessive requirements which are already included in ISO and other standards and working are also working on TRs. The project should be complete in December. The next step will be, can we combine into a package specifications and can we go further into functional requirements," she asked.

Other initiatives are putting all subsea production system contracts in Statoil into waves, combining all procurement over four years, and looking at a new 7in. Xmas tree, to save on drilling costs and reduce the number of operations required as well as being able to install it Xmas tree from a vessel instead of a drilling rig.

Statoil is also aims to standardize the work over system, so that licenses which had owned their own work over systems will be able to use them from a central pool, potentially savings billions (NOK), Nordang said. The standardization work follows a standardized umbilical Statoil has already agreed and developed with the supply chain.

Image: Johan Castberg development concept / Statoil



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