Chevron and its partners on the multi-billion dollar Rosebank development in the UK North Sea have revealed they are going back to the drawing board on the project.
Partner OMV said, at its annual media summit today in Vienna, that it had “been vocal” to Chevron, operator of Rosebank, about what it saw as shortcomings on the project.
“We think there is cost in there that could be driven out,” said Jaap Huijskes, board member at OMV, with responsibility for E&P. "There are also accumulations around Rosebank that are currently not part of the development, and we think should be. We think there is room for improvement." He mentioned Rosebank South, which he said OMV thought should be part of the development.
OMV recently acquired an additional 30% stake in Rosebank, from Statoil, taking its total stake to 50%. Chevron holds 40%, and DONG E&P holds the remaining 10%.
A statement from Chevron, today said: “Chevron’s view is that the project does not currently offer an economic value proposition that justifies proceeding with an investment of this magnitude. Chevron will continue to work with all joint venture participants to further improve the project value.’
Earlier this year, Chevron submitted its Environmental Statement and Field Development Plan for Rosebank to the UK government for approval.
It would be Chevron’s first deep water development in UK waters. The Rosebank field was discovered in 2004, in blocks 213/26 and 213/27, in 3600ft water depth, about 130km north-west of the Shetland Islands, close to Faroese waters.
Development is currently planned via a 292m–long floating production, storage and offloading vessel, which Hyundai Heavy Industries won a contract to build under a contract worth about USD$1.9 billion.
The 99,750-tonne turret-moored FPSO is scheduled to be handed over by the end of November 2016, said HHI in April. It will be able to produce 100,000 bbl crude and 190MM cu ft of natural gas per day. It will also have storage capacity for 1.05MM bbl.
David Davies, CFO and deputy chairman, OMV, told journalists at today’s summit: "The expectation was total project cost would be €7.5bn (US$10 billion). Clearly, it is appropriate we get the engineering right. It is important to get the investment cost right.”
Huijskes said discussions over the project had been ongoing for months, but that it was only in recent weeks that the partnership had discussed
"We have been telling Chevron we think this can be better. Chevron has been managing this out of Houston, probably not the best decision." He said Chevron was focused on big projects, like Wheatstone and Gorgon, in Australia, and that for them Rosebank was less material. However, for OMV, it is an important project.
Gerhard Roiss, OMV’s CEO and chairman, said: "Rosebank is very important for us. We have been in it for a while already. We have 50% [interest] now." However, he also emphasised: "This decision was a joint decision. We see additional volume and resources in the project and at a lower cost."
Chevron added: “The Rosebank joint venture participants continue to work the front end engineering and design work and are focusing their efforts on developing an optimum development solution for Rosebank. Rosebank represents a large, undeveloped resource base in the UKCS, requiring significant investment to unlock its potential. The Rosebank team is working diligently to ensure that this investment fully optimizes the value of Rosebank for all stakeholders.”
Rosebank is still in the front end engineering and design phase. Chevron said the final investment decision is still planned for 2014, but that the JV’s focus is on making the right decisions, not on schedules and timelines.
A number of contracts have already been awarded on the Rosebank development, in addition to the supply of an FPSO. OneSubsea, a joint venture between Schlumberger and Cameron, was awarded a US$500million contract to provide the subsea equipment on the 240MM boe recoverable project.
The package includes the engineering, supply, and manufacturing of subsea manifolds, subsea trees and subsea control systems. These are to be manufactured in various locations in the UK, including OneSubsea’s facility in Leeds.