FEEDing recovery in Asia Pacific

Angeline Elias, EIC

June 1, 2016

The downturn is forcing operators to go back to the drawing board in order to advance projects. EIC Analyst Angeline Elias provides an overview of activity in Asia Pacific.

Dockwise loading out the SHWE platform.Photo from Dockwise.

As oil prices continue to languish, many offshore projects have been delayed or canceled in the Asia Pacific region. This has pushed many operators to pursue alternative activities in order to stay buoyant during the economic turmoil, and be well placed once the market recovers.

During this bumpy industry cycle, it is evident that many operators have taken the opportunity to continue to progress development concepts and initial engineering on stalled projects. Operators such as Chevron, CNOOC, Petronas, Shell and Woodside, to name a few, have gone back to the drawing board, to redesign offshore structures for better economies of scale while also ensuring effective operational productivity and cost optimization through technological innovations.

Going back to the drawing board

Engineering activities in Asia Pacific region

Chevron has taken this approach with the Ubon gas field development in the Gulf of Thailand, undertaking a design re-evaluation of its proposed central processing platform, and is expected to return with a much downsized project. At the same time, the operator has also put engineers to work on optimal conceptual design of a large deepwater semisubmersible that is expected to provide gas compression at the Jansz gas field, offshore Australia. While Aker Solutions is working on the conceptual design for the semisubmersible hull, Chevron is also considering an alternative design concept for the spar platform design. The front-end engineering design (FEED) contract is expected to kick in by 1H 2017.

Notably, CNOOC is working on its FEED to develop the Liuhua 16-2 oil complex, in the South China Sea, which involves multiple tension leg platforms as well as an alternative design concept based on a circular semisubmersible unit, with a decision on the final design concept expected by 2H 2016. Meanwhile, Petronas has revitalized its plan to proceed with the development of a central processing platform for the Bokor Phase III field development involving the application of water-alternate-gas enhanced oil recovery with a final investment decision expected by Q3 2016.

Other key projects in the region in potential conceptual design and FEED stage are listed in the table.

 

Learning from past market recoveries

As seen during past market recoveries, lead times for delivery decrease and oil prices typically increase as activity picks up. Being the “first in line” as a result of implementing a strategy to continue with conceptual design and FEED work through the current down cycle may be crucial to maximizing the net present value operators are able to achieve from future field developments.

While activity is set to increase in 2016 and 2017 for some projects, 2018 seems rather bleak at the moment with the market still facing many uncertainties, not least of which is the “wait and see” approach currently being adopted by the industry.


Angeline Elias
is regional analyst for Asia Pacific at the EIC. She previously worked for Southeast Asian major oil and gas fabricator Malaysia Marine and Heavy Engineering.