April 1, 2017

Tackling costs head on with fresh no-nonsense thinking could prove a boon for struggling subsea developments. Elaine Maslin reports on a project that hopes to achieve just that.

The Paragon B391 jackup during the drill-stem test at Pegasus West in 2014. Photo from Centrica.

What happens when you get a dozen UK North Sea-based companies, including operators and the supply chain, to work together to find ways to make subsea projects more efficient – and therefore viable?

In short, it’s more than 60% cost savings and 120% schedule reduction in certain segments of the subsea scope, and a ~25% cost reduction overall. Furthermore, these are results that could be applied, and were (as a desktop exercise), to two actual North Sea fields with similar savings achieved.

These were the results of the Subsea Standardization Project (SSP) in 2015, which presented its results late 2016. The aim was to find tangible subsea development project efficiencies to make developments more viable at oil prices less than US$50.

The project, launched under Oil & Gas UK’s Efficiency Task Force, has helped both open eyes to different ways of “doing things” and offer operators realistic benchmarking for their subsea projects, says Carla Riddell, asset manager, southern North Sea, for operator Centrica. Indeed, the project has had tangible results, Centrica supplied a subsea tieback development for the SSP to trial its ideas. The results showed nearly 25% potential cost savings.

The Efficiency Task Force’s themes.

“As an operator, and for industry, the benefits of an exercise like this are getting that input from outside the business and seeing a fresh way of doing things,” Riddell says. What was great about the project was how many people were involved, leading to different ways of doing things, so many view points and not being confined to ‘this is how we’ve always done it.’”

“Capturing the ideas and perspectives from such a diverse group, which included more than 70 people from 31 individual companies, shows what can be achieved when all are working together to drive change and add value,” says Richard Hinkley, general manager of projects and future growth, Chevron Upstream Europe. “Having operators, design consultants, manufacturers, fabricators and installation contractors, involved from the start brings added rigor and credibility to the output of the project.”

Furthermore, having realistic cost benchmarking, “realizing what the costs are for others and where savings can be made and where you can work the work scope harder,” was another benefit, Riddell says.

For Steve Duthie, who took the best part of a year out of his job at Technip to lead the project: “We needed tangible results to make a difference, or it is just another talking shop.”

Putting heads together

The core SSP group comprised of 12 representatives from 10 companies (out of 31, which had offered support, and a total 70 people involved), including operators (from major to North Sea independent), contractors and manufacturers. They formed 12 subgroups, each looking at different facets of the subsea system, such as flexibles or trees, to find cost efficiencies across four areas: codes and standards; processes; alternative methods and technology; and hardware standardization.

Free hanging risers, schematic. Images from Efficiency Task Force.

The project has sought efficiencies and then developed and tested them through four theoretical subsea projects, a “straw man” exercise, involving a reference case subsea project being benchmarked by operators, and two actual field development projects. The first project, the four theoretical subsea projects (one dynamic riser project, two tiebacks and one bundle project) indicated 15-28% potential savings.

The exercise saw similar potential savings, but highlighted the difference between global and local operator costs. Nine operators (three UKCS-focused) marked-up the reference (base) case, which was broken down into the various subsea system elements, with their preferences, i.e. additional testing or exotic material requirements.

The results were predictable. Global operators added far more specifications and preferences than North Sea-focused players. As an example, the flexibles reference case (for 400m-long and 1000m-long, 8in flexibles, for 200m water depth, and an 80°C / 5000psi operating regime) was £1.6 million, with a 52-week schedule. That cost rose to £2.232 million (a 40% increase) with an 84-week schedule (a 62% increase) for the highest scoring global operator. Meanwhile, the highest cost UKCS operator had put prices up to just £1.712 million.

It was a consistent theme across the various reference case scopes, with pipeline and valve schedules standing out with <120% added, on average, to the schedules on both by the global operators. For UKCS firms, the schedule increase was <14% on pipelines and <40% on valves. Costs for the same products were higher by <22% (pipelines) and <59% (valves) for the global operators, compared to <4% and <17%, respectively for the North Sea-focused operators.

The examples go on. Global operators added <69% cost to the reference case for subsea trees, and <41% in terms of schedule (<15% and <16% for UKCS-focused firms, respectively). For control systems, global operators added <65% to the cost and <47% to the schedule, while UKCS firms added <29% to the cost and <23% to the schedule. “The marking showed how much their own specifications pushed forward schedules,” Duthie says.

When all the individual scopes were brought together as a whole, the UKCS operators had added <17% in cost to the reference case, while global operators added <38%. UKCS firms added <26% to the schedule, while global operators added <57%.

Global operators could shave 30% off of the costs if they dropped the likes of sacrificial testing and their own testing regimes, prescription qualification regimes, using exotic materials and demanding full traceability, and issuing project specific specifications (with conflicting information), the SSP project suggests. For UKCS operators to move closer to the reference case cost, they would need to work to industry standards and drop minor modifications, drop defined specification sheets and have functional specifications instead, use readily available materials, drop the requirement for full traceability, use existing qualified procedures and solutions, and accept contractors’ standard testing procedures.

West Pegasus umbilical.

Going further

Next, the subgroups went through their respective elements of the system to see where additional efficiencies could be made. Ideas to identify areas of conservatism around flexibles standards ranged from overhauling subsea tree supply scopes (from materials to inspection processes) to adapting industry standards (e.g. API 17J). The subsea tree supply scope project identified 13% cost and 18% schedule savings through changing inspection and test plan regimes, allowing contractors to control their own supplier process and reducing documentation by providing only functional requirements. The API 17J work identified 15% cost and 7% schedule savings, mostly achieved by clients accepting a type-approval certification as pre-qualification, removing the need for third party design reviews.

“API 17J took eight years to revise and it became a very high-requirement document and the feedback was that it was higher than what was needed for the UK North Sea,” Duthie says. “Reducing its requirements could result in 15% cost saving.”

One of the biggest potential cost reduction areas was in using alternative methods, however, followed by simplifying or making more fit-for-purpose the codes and standards, then processes.

West Wick, close to Captain. 

Into the real world

The final project was seeing what efficiencies could be made on two real projects: Centrica’s Pegasus West, a potential three-well gas tieback in the southern North Sea, and Chevron’s West Wick, a potential 2.7km heavy oil tieback to the Captain platform in the Moray Firth.

“For Pegasus West, a lot of options were looked at and a lot of screening done,” Duthie says. “The results were efficiencies and areas that could be simplified, such as co-mingling at the manifold, simplifying the umbilical, reducing the amount of documentation, and having a standard manufacturing approach.”

While actual figures weren’t revealed for the project, savings were given as a percentage, which were 20.4-24.7% in total. The biggest impact came from introducing alternative methods and technologies (65.7%), then codes, standards and practices (18.9%).

Riddell says that the SSP project was good timing for Pegasus West, which is in concept select (pre-FEED) phase. “We are fortunate having many options on Pegasus West,” Riddell says. “But for discoveries like this, it is about working it as hard as possible. We have reworked the subsurface data to give us a more accurate view of what is possible. The SSP came at a perfect time and has allowed us to move ahead on the concept select without having to drill more wells and appraise for more gas.” Centrica will now test the results of the SSP project to increase their confidence in the project.

Efficiencies on West Wick were also based on taking an alternative approach, i.e. using free hanging risers instead of a caisson riser. “This gave a big saving,” Duthie says, at 34.14%, and also meant the flexibles scope could be reduced, using pre-qualified designs and not having third party deign reviews, etc. The subsea manifold and umbilicals were also simplified, as at Pegasus West, and some 38.1% savings were made on the project’s valve scope by using materials supplied on standard material data sheets, using standard contractor sealing arrangements, cast bodies for gate valves, limiting the number of valve types, using contractor standard sizing factors, using pre-qualified designs, having no welding or material qualification and reducing documentation and inspection requirements.

Savings of 26.27% were made in pipelines through material selection, inspection, qualification and installation efficiencies and the concrete mattress, trenching and rock dumping scopes were also made more fit-for-purpose.

Overall, the saving on West Wick was 24.77% (or £8.19 million) from a £33.9 million scope, mostly through using alternative methods and technologies, accounting for 47.2% saving, followed by efficiencies in codes, standards and specifications at 29.4%, then processes, at 20.4%.

“The review of West Wick suggested savings of up to 25% on the subsea system – about half related to design choices, and the rest from sustainable process improvements,” Hinkley says. “We are now in the process of understanding the results and learnings.

“Our project is at a very early stage,” Hinkley continues. “We are currently focused on verifying and validating the results from the Subsea Standardization Project against our own internal engineering standards to fully analyze the findings and potential savings. In addition, we are continuing to analyze the subsurface which, alongside a number of other important work scopes, will be critical to determining the economic viability of this small pool development.”

Moving forward

The real test will be if this work now enables these projects – and others – to move forward. Duthie notes that smaller operators will be able to do more, with global players less able to reduce codes and specification requirements, etc. “In real life, we would have more time to go into more detail,” Duthie adds. “It will also be pick and mix,” i.e. it doesn’t have to be all or nothing.

How the benefits of this project can be captured also remains to be seen. It would be nice to have so much input into every project, admits Riddell, but this isn’t feasible. “What we need to do is pick the most difficult challenges and get industry together and try to solve these challenges as a group,” she says. “We need to use that wider knowledge to try and collectively solve the problems.”

“Since we did this work they [the operators] are taking this approach seriously and revisiting everything,” Duthie says. But, it takes more than just seeing numbers. “Getting through to development is another matter. There is still a permafrost among the technical authorities.”

Future goals

While hardware standardization was a part of the project – and its title – it was felt that this was a longer-term goal. “We need solutions here and now,” Duthie says. “A lot of small pools are within tieback range. We don’t need (new) technology to develop those, we need to be efficient so investors get a return. Here and now is about simplification and fit-for-purpose. True standardization is modular, plug and play. That’s the long-term goal. But in the short-term, commercial sensitivity, IP, etc. make it difficult.”

In time, Duthie thinks that subsea equipment for small pools – with more than five-year production lives – will be more like drilling equipment, i.e. hired on a project by project bases and refurbished each time.

Meanwhile, the industry has the results of the SSP – a 18-page set of guidelines available from Oil & Gas UK – with which to play. All involved hope that it helps unlock some of those small pools and bring some much-needed development activity into the basin.

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