Driving cost down on a sustainable basis

Tore Halvorsen

December 1, 2015

Even before the drastic drop in oil prices, deepwater extraction costs were under examination, as costs had nearly quadrupled in the past 10 years. The price collapse has created a greater urgency for rethinking how the industry does business and operators and suppliers are more receptive to collaborating in new ways.

Halvorsen.

More than 40 years of subsea developments have provided a wealth of experience that must be leveraged to create common, standard specifications to propel efficiency in the subsea industry. Supplier-based standards have the potential to lower costs, shorten lead times and improve quality and reliability for multiple operators.

Cost reduction through volume

In order to leverage economies of scale, suppliers need to buy in volume. However, buying in volume requires alignment in specifications. Today, operators typically put their own technical requirements on top of the industry standards such as ISO, API or NORSOK, effectively undermining any possibility to leverage volume. As mentioned before, decades of experience can inform suppliers’ standards and provide the required level of confidence to operators, especially on critical areas, such as risk mitigation and equipment reliability.

Configuration versus customization

A significant amount of application engineering hours can be saved if we move from the current “engineered to order” model to a model of “configured to order.” When operators order based on functional requirements rather than technical requirements, suppliers can produce a proven solution that will meet or exceed performance expectations. Pre-engineered, modular solutions can economically accommodate a wide variety of requirements. These solutions can then be configured to meet customers’ project-specific needs.

A “configured to order” model allows suppliers to leverage the purchase of raw materials in bulk and provides a more economical way to stock parts, saving time and money. In a recent internal study, we found that we were able to reduce lead time by 30-50% when our customers accepted our design rather than requiring us to create a customer-specific solution. In addition, a cost reduction of 20-40% was realized.

For example, a choke module made to a customer’s specifications had almost 460 components – almost all of them unique pieces requiring specific documentation and control. Our standard choke module has 300 components with only 30 unique pieces for which standard documentation and controls were used. Hardware costs were reduced 33%.

Improved flexibility and interchangeability

While a good portion of the cost and time saving benefits of standardization are realized during the manufacturing of the project, the payoff continues throughout the life of the field. Standard equipment systems allow for intervention tooling to be shared from project to project and can be installed using the same processes and procedures. And it stands to reason that the more times the same procedure is performed, efficiencies are found and safety and reliability improves.

Five operators, one standard

An example of the industry embracing the idea of standardization is the HPHT joint industry program (JIP) formed by FMC Technologies and five operators: Anadarko, BP, Chevron, ConocoPhillips, and Shell. The partners have agreed to jointly develop a new generation of standardized subsea production equipment and systems designed to meet the technical challenges of producing oil and gas from deepwater reservoirs with pressures of up to 20,000psi and temperatures of 350°F at the mudline. Standardization of materials, processes, and interfaces, as well as the enhancement of reliability and operability will improve overall deepwater development, while significantly reducing cost to the partners.

Downturns are difficult, but they often lead to positive change. Converging to vendor-based standardization is a positive change I hope the industry continues to embrace.

Tore Halvorsen is Senior Vice President of Subsea Technologies at FMC Technologies, a position held since 2011. He was previously senior vice president of global subsea production systems and has also served as vice president of subsea production systems with oversight of Europe, Africa, Canada, and Asia Pacific. 

Halvorsen was managing director of FMC Kongsberg Subsea in 1994 following his promotion to director of subsea systems when FMC Technologies acquired Kongsberg Offshore in 1993. He joined Kongsberg Offshore in 1980 as technical manager for subsea systems.

Halvorsen has a master’s degree in mechanical engineering from the Norwegian Institute of Technology in Trondheim, Norway.