The traditionally risk-averse offshore oil & gas industry has long relied on not just following regulations set out by governments but also requirements outlined by classification societies to ensure their operations are safe. As water depths and business pressures increase alongside evolving technologies, offshore operators are looking to the class societies for more help than ever. Jennifer Pallanich talks to class leaders about the trends in this sector and the recent string of purchases these organizations have made.
Historically, classification societies have certified assets based on their own rules and guidelines as well as those of an international body, such as International Maritime Organization. As Paulo Biasotto, Bureau Veritas marine and offshore technical manager for North America, puts it, the two together are the classic and typical classification society scope of work. That scope is becoming more complex and also has come to cover a growing trend toward risk-based approaches, he says. We're using more and more in risk assessment and reliability tools in our verification process.
Tim Protheroe, president of Lloyd's Register North America, Lloyd's Register Energy Americas and Americas regional marine manager, agrees.
The kind of question we get asked these days . . . the input that we're required to provide, whether tailored or bespoke, has changed substantially over the years, Protheroe says. He notes the move toward providing third party verification and validation in addition to classing assets. Lloyd's is helping clients navigate through all that complexity and provide a level of assurance that their assets are going to perform in accordance with their specifications.
New technologies, additional uses of existing technologies, and emerging frontier regions all help create a dynamic and complex market.
Matt Tremblay, VP of engineering at ABS Americas, says keeping up with technology and keeping up with the needs of our clients is the biggest change he's seen in his 16 years with ABS. We had to develop a lot of services that didn't exist 10 years ago to meet the needs of the marine industry. ABS has opened up five centers that work with local experts around the world to help keep the classification society on the cutting edge of technology advances. Tremblay says ABS finds great value in working through its technology centers to facilitate technology development in the industry.
ABS established the Singapore Offshore Technology Center in Singapore in 2006. Projects to date include jackup design work, ice loading analysis, and applying computational fluid dynamics as a design tool. The Harsh Environment Technology Center, which is pursuing arctic research, opened in 2009 in St Johns, Newfoundland. The Brazil Offshore Technology Center, which has carried out research on mooring and position keeping systems, was founded in Rio de Janeiro in 2010. The China Offshore Technology Center set up in Shanghai in 2011 has focused on R&D for subsea systems. The Korea Energy Technology Center in South Korea opened in 2012 is working on developing offshore E&P, subsea equipment, renewable energy and LNG/FLNG technologies.
DNV, too, has focused on new technologies over the last decade. We have put a lot of effort into developing quite sophisticated procedures for new technology qualification, Tor Svensen COO of DNV Maritime and oil & gas, says. This is especially important for deepwater operations where so much happens subsea and risk is high. You have to make sure you qualify the technology in the proper way before you start manufacturing and installing it, he says, so you can be 100% certain as you can be that it is functional and maintainable.
DNV's R&D focus has been with an aim of finding new ways to apply old technologies and developing new technologies as well. The technologies are meant to make offshore structures more efficient and to improve performance, Svensen says.
Risk-based rules or performance-based standards are actually allowing you to undertake more innovation, Svensen says. In a prescriptive environment, you have a rule and you follow that rule. If you look at performance-based, you look at what you want to achieve. You are more free to innovate. A prescriptive environment may stipulate something must be a certain width, often based on experience. A performance-based environment says the structure must be able to withstand a certain amount of load for a certain period of time, allowing the designer to use whatever approach is deemed appropriate to reach that goal.
It's clear in my mind that regulators have certain objectives, expectations to risk and how you manage outcomes and things like that. And then the operator will need to demonstrate to themselves and to the authorities that they can achieve these performance levels, not only in design but in service. They will use organizations like us to help them achieve it and demonstrate to the authorities that they can achieve these levels, says Svensen, a naval architect who has been with DNV for 19 years.
A performance-based environment makes the operator more responsible. At the end of the day, there are various ways of achieving each outcome. The operator is responsible for that, Svensen says. It's easy to hide behind the fact that I followed the rule and therefore I am OK, but if you have performance-based standards, you have to demonstrate you can achieve these in a proper way.
Because prescriptive rules tend to be based on experience, it is difficult to specify rules for new technology. With new technology and new designs, you have to be performance based, Svensen says.
Biasotto, who is in charge of BV's design review and integrity management activities for floating offshore installations, notes the drive in the US has largely been is prescriptive requirements. They may not be sufficient as facilities are becoming more complex and new challenges will arise from new development frontiers such as ultradeepwater and arctic projects. We need more and more to drive to a risk-based approach. In order to ensure we have complete overview and we understand the behavior of these assets and we understand their condition in such a way we can perform appropriately our work. That's the key thing, he says.
Protheroe says: Prescriptive guidelines have served their purpose, but look what still happened, citing the Macondo disaster of 2010. He sees the risk-based focus much more on the regulatory side, although clients are also moving that direction, he notes. The IMO, he notes, is using a more risk-based approach to creating regulations, he notes, which â€˜creates a more preventative environment. The understanding of the risk-based approach has matured and has a track record from other industries. It is way more reliable and more scientific than it used to be, says Protheroe. The risk-based approach is finding supporters in another growing area that of asset integrity management.
Asset integrity management
Demand for asset integrity management products and services has mushroomed. Asset integrity management provides assurance to the people who are spending millions of dollars that everything is coming out right and that everything is as it should be, that it meets the regulations that are in place, Protheroe says.
Lloyd's Register's Risk-Based Mechanical Integrity (RBMI) system â€˜manages assets through risk-based approach to understand all the individual components and the likelihood of their failure and their maintainability and how you can maximize the return on the investment in your assets in the context of maintenance strategy moving forward, Protheroe says. When it comes to turnarounds and things like that, rather than taking everything apart and looking at it, you can take the risk-based approach, rather than the time-based approach, where time's up and you take it apart whether it needs it or not.
According to Svensen, there are several reasons asset integrity management has become so significant. The main reason is that a lot of installation, whether it's pipelines, whether it's jackets, various types of structures are actually ending up exceeding its expected lifetime, Svensen says. Ekofisk is the ultimate example of lifetime extension. ConocoPhillips Ekofisk field in 70m of water in the Norwegian sector of the North Sea began production in 1971 and was initially expected to have a 25-year production life. It is now expected to produce through 2050. The new information platform, called Structural Integrity Management System (SIMS), is intended to enable the structural integrity of all the platforms in the Greater Ekofisk field to be monitored by the efficient management of changes to design premises and control of work processes and data, DNV says.
These longer-than-expected lifetimes in the salty marine environment translate to a host of issues. You have more corrosion than you actually have planned for, Svensen says. Upgrades and maintenance must be done without jeopardizing safety and with zero or minimal downtime.
DNV provides software and services for asset integrity management analysis, inspections, and maintenance planning, and often provides these through contracts that last up to 15 years.
Biasotto, who has been with BV for 16 years, says the integrity management approach has evolved over the last decade. Initially, integrity management had more of a prescriptive approach, such as running through a general checklist and noting the issues. We had the findings and we addressed the findings, he says. The present mindset calls for a program that allows continuous monitoring and understanding of asset conditions.
Inspections, surveys, testing, they try really to put in place a kind of inspection program where there is a review of the results of the inspection, an assessment of the condition of the assets and this is fed back into the system and they can plan the future activities. Everything is focused, Biasotto notes.
BV offers a host of tools for asset integrity management. One such tool is VeriSTAR HLC (Hull Life Cycle), a database that stores comprehensive information about the hull during its service life and assists the assessment of current structural condition as well in forecasts, allowing operators to anticipate the needed maintenance measures for the assets structural integrity during the intended service life. A related tool, VeriSTAR AIMS (Asset Integrity Management System), helps clients track their inspection activity and record findings. The whole idea is to be able to record and track down detailed inspection, maintenance and repair activities of these assets during their life, to help us and our clients to have an overall view of this structure, Biasotto says. Doing so, he adds, helps with planning inspection and maintenance activities.
This is not a static condition. [The structures] will be changing along their lives. It is important that we follow them very closely. It's important to anticipate how they will degrade and will be aging. The database, which has been commercially available for five years, can be used in the fight against problems associated with aging, such as corrosion and fatigue, as well as damage resulting from operating conditions and the environment. These systems are very much needed to follow up closely with the integrity management of these assets and take necessary actions.â€™ BV also has data tracking tools for other pieces associated with the structure, such as marine and production systems.
Asset integrity management requires an integrated approach, in Tremblays view. ABSs NS5 Nautical Systems software is an integrated management tool that offers multiple modules for monitoring everything from hull maintenance to procurement to personnel management.
Integrated Software Quality Management (ISQM) is one service ABS has had on the market for a little under two years, and Rowan Companies has been an early adopter of the service. Tremblay says products like ISQM are important because of the new controlbased and integrated systems on the large floaters. These control systems handle many functions, but they also bring up a big shift in how one can verify that they are doing their job. 30, 35 years ago, it was switches on a switchboard. Now its clicks on a keyboard. How do you verify that it works correctly? Tremblay asks.
The Hull Integrity Management Program (HIMP) allows an owner to manage, monitor, and maintain the condition of hulls on ships, drilling rigs and production facilities. What we've found is different owners, operators had different ways to manage the integrity or the life of their vessels, Tremblay, a marine engineer, says.
Classification societies originated with the maritime industry. Underwriters needed to have a clear idea of the type of vessel and its condition before they could price the insurance. Classification societies classed the condition of the vessel and rated its condition as well as that of the equipment onboard. The services evolved with the shipping industry, and now a vessel either meets criteria or it doesn't. The services were eventually extended to the offshore industry, with the various classification societies providing class services for floating and fixed offshore installations.
Now, Tremblay says, clients need more than just a class notation on their vessel.
Classification societies have started becoming involved in projects early in the process. For instance, with a floating production system, regulations, environmental conditions and local content requirements vary around the world. Classification societies are involved with reviewing the concept for a project, the detailed design, certifying material and equipment onboard during fabrication, surveying and inspecting during the platforms construction, and being present for the integration and installation, Biasotto notes.
Biasotto finds being involved in different phases of the process interesting. As an engineer, thats fantastic, exciting, putting these things together and being sure they're safe and that they operate as expected, he says.
Classification societies also develop recommended practices and guidelines. To do so, they groups often work through joint industry projects. Its not something we cook up ourselves. Its something we do with industry partners, Svensen says.
DNV applied its ship work to the growing oil & gas industry beginning in the late 1960s. The organization began looking internationally and throughout its history has used acquisitions to grow faster and gain market position and expertise. One purchase was CCT, a pipeline and corrosion research company based in Columbus, Ohio. That added quite a lot of competence to us in the US, particularly in the materials side, Svensen says about the 2006 acquisition. The material competence was also very important when we got the job to do the forensic investigation on the blowout preventer for Macondo.
In addition to building up its materials expertise, DNV has focused on supplying software systems for engineering applications. To that end, Svensen notes, DNV bought Norwegian company Synergi Solutions last year. We are becoming quite a large supplier of software, he says.
Managing risk and damage mitigation in the Arctic is another focus. The consequences there are so much more significant, so you have to address risk in a different way, Svensen says. To that end, DNV bought Norwegian Petro Services (NPS) earlier this year. This is one step in that direction, Svensen says. We are already very much into emergency response preparedness. DNV is combining its environmental risk and oil spill preparedness analyses with NPSs specialist expertise in planning and organizing oil-spill preparedness.
DNV is active in the Russian-Norwegian Barents 2020 initiative to assess and recommend standards to safeguard people, the environment and assets in the Barents Sea. The regulatory framework for the Arctic regions in general will differ from other regions of the world, Svensen says.
Outright acquisitions aren't the only way DNV gains access to expertise. Earlier this year, DNV bought up 22.6% of Norway-based StormGeo. We believe the kind of services that they provide can be coupled very well with the services DNV provides, Svensen says. DNV and StormGeo will cooperate to develop risk assessment and efficiency programs for operations in rough climates.
BV has also been complementing its existing portfolio with engineering expertise gained via acquisitions, such as the TH Hill purchase, completed in April. Houston-based TH Hill, founded in 1980, specialized in oil & gas drilling failure prevention and analysis services and developed standards like DS-1 for drill string design, manufacture, operation and inspection. â€˜We might not have enough expertise in-house so the acquisition helps us to complete our portfolio of services, Biasotto says.
Last year, ABS bought Safetec Nordic, a Norway-based risk management consultancy. In February, ABS bought maintenance and asset management solutions company Genesis Solutions. Tremblay says smaller companies like Safetec and Genesis tend to provide services to a smaller region, and with ABSs global breadth, they can reach the industry at large.
Protheroe, who joined Lloyds Register in the early 1990s, says he's noted a substantial diversification of the organization over the years. Previously, he says, the marine side made up about 80% of the classification activities whereas now it accounts for about 50% of the classification work. The change, he said, is not through shrinkage in marine, but growth in other areas. The marines revenue contribution continues to grow although other divisions are growing faster, he says, not least of which is growth in the oil & gas sector.
That growth has had a profound effect on the industry, particularly in terms of the nearly exponential increase in the need for experienced engineers, Protheroe says.
You can grow your expertise in certain areas and new markets organically, but with the pace of change in these markets, it sometimes make sense to take on a large piece of expertise or capability in one hit, and that is where you see class societies making their acquisitions, Protheroe says. Acquisitions, he says, help the classification societies meet that market need at a pace they wouldn't be able to otherwise, but we're not aggressively in the market, snapping up every company we can find.
He highlights purchases Lloyd's Register has made in the US in the last handful of years: ModuSpec, Scandpower and West Engineering Services. To be credible in the oil & gas market on the floating side of the business where historically we had not been as strong as we would like to be, we thought, How can we make a step change in that area? Protheroe recalls. The answer turned out to be purchasing ModuSpec in 2008, Scandpower for nuclear expertise in 2009, and West Engineering in 2012. ModuSpec brought a strong thread of drilling knowledge to Lloyd's Register, while West Engineering fleshed out the subsea engineering offering.
West was one of the key competitors for ModuSpec, and we saw that as a natural fit, Protheroe says of the latest acquisition, which closed in late April 2012 and was the largest single acquisition in the company's 251-year history. The integration was in progress as of early July. As with most organizations, Lloyd's Register is keeping itself open to opportunities that will keep it competitive, so future acquisitions may be forthcoming.
We only want to bite off as much as we can chew at any one time, Protheroe says. OE