Subsea realities

Elaine Maslin

August 1, 2014

Rising subsea development costs have led Statoil to set a target for 20-30% cost reduction on projects. Elaine Maslin reports from the Underwater Technology Conference.

Subsea – facing new realities” was the slogan for this year’s Underwater Technology Conference (UTC) in Norway.

Anders Opedal, senior vice president project management and control, Statoil.

The new realities discussed at the event, held in Bergen during mid-June, were often sobering. Rising costs are hurting the industry to the extent that Statoil has set a 20-30% capex reduction target. It also suggested using minimal facilities platforms with dry trees as an alternative to full subsea developments.

Manufacturers are tempering their focus on future technology breakthroughs, such as using HVDC for long distance step-outs, and subsea qualified variable speed drives, and focusing on how existing technology can, instead, be optimized.

The sober tones should not be a surprise. Operators have already been cutting back, and new technology has been one of the victims. Earlier this year, Shell and its partners on the Ormen Lange field announced they were shelving, at least for now, plans for subsea compression on the development, after years and millions spent on a pilot project. Shell cited costs and updated reservoir analysis.

Part-state owned Statoil is feeling the pain. Subsea production is a large part of the firm’s business.

Statoil introduced its subsea factory concept in 2012, with an aim to have a complete subsea factory by 2020. It is looking to take subsea developments longer, deeper and colder, opening areas otherwise impossible to work in. The firm’s Åsgard subsea compression project is a step towards this goal. System integration testing is underway by Aker Solutions and a pilot compressor is running at full speed underwater at Statoil’s K-Lab.

“Subsea is increasingly important to Statoil. It is 50% of our equity production. We are the second largest subsea operator worldwide with more than 520 subsea wells and a significant yearly subsea spend,” Anders Opedal, senior vice president project management and control, Statoil, told delegates in the opening session at Bergen’s Underwater Technology Conference.

“But between 2003 and today, costs for subsea projects have in general doubled,” he said. “Costs on subsea production systems have tripled over the last 10 years,” he said, adding that market predictions suggest costs will continue increasing, at up to 5% a year. “We think this is not sustainable. We need to turn it around. With increasing costs, you would expect quality has increased. That is normal in other industries. I’m afraid to say, we have not seen this, at least not in full effect.”

Opedal gave an example. He said on one subsea project, 70% of all engineering documentation received for review was sent back due to poor quality. Nearly 20% was sent back at least three times. “During the same project NOK700 million was spent rectifying quality defects in equipment. If you extend this across the portfolio we’re paying millions for quality defects,” he said. “Cost inflation must be reversed and quality must be improved.”

The conference auditorium during UTC in Bergen. Photos from UTC. 

Statoil has been working to address costs, with a large focus on standardization—which has become a buzzword in the Norwegian sector, and has been high on the agenda at UTC for a number of years. One project, to create standardized umbilicals, comprising electrical and fiber optic cables, and hydraulic and chemical lines, is already bearing fruit.

Nexans umbilicals systems.

Nexans recently delivered the first of four “Statoil Standard” umbilicals, ordered in 2012. The first umbilical will be used at the Oseberg Delta field in the Norwegian part of the North Sea, and the technical and administrative procedures developed on the Oseberg project will be used to save time, cost, and materials during its execution and on future projects, including the Snøhvit gas field (Barents Sea), and Smørbukk South (Norwegian Sea).

Statoil has also been working with suppliers to develop a new workover tool, which can work on any Xmas tree, saving millions of NOK, Opedal said. The firm is also working on a standard subsea catalog for subsea systems, which will be made available to all other operators on the Norwegian Continental Shelf, and it is working with organizations including Norske Oil and Gas and API to increase standardization. The firm is also looking at new standard contracts for delivering subsea production systems, from 2015, to bring down CAPEX and simplify technology specifications, on new fields and aftermarket. “We are working towards more universal interfaces, like the universal work-over systems and standardized umbilicals,” Opedal said.

Statoil has also been working on other areas, including improving transparency around technology integration, having longer term lead times, and portfolio planning to help suppliers. In February this year, Statoil launched a company-wide efficiency project, called Strategic Technology, Efficiency, Program, which is currently focusing on an earlier focus on selecting more cost efficient solutions and a larger degree of standardization.

Statoil is also looking at alternatives to full subsea developments. At its February capital markets day, Statoil discussed an unmanned, low-cost wellhead platform concept, described as “subsea on slim legs.” It would be a low cost solution, with drilling from a jack up, or, where water depth prohibited using a jackup, a mobile drilling module, which could be lifted on to one of these unmanned platforms, could be used for drilling operations, before being moved to another lost-cost wellhead platform, Opedal said.

“We are assessing this and we have a real competition between subsea and this unmanned platform,” he told UTC. “As these platforms are too small to be built in Asia, (due to transport costs) they offer a great opportunity for European subcontractors. And they could be repeatable designs. The main driver for savings is replacing wet Xmas trees with dry Xmas trees.”