Mega-projects: mega spending

Neda Djahansouzi

December 1, 2014

Offshore oil and gas mega projects are increasing in scale and cost. Some 41% of ExxonMobil’s 2015 capital spending for projects under construction in 2015 is likely to be directed to one project alone. Neda Djahansouzi, Energy Researcher, Infield Systems, takes a look at the top five projects, by capital spending, in 2015.

Infield Systems profiles the top five most capital intensive offshore oil and gas projects currently under development, Infield Systems expects these to comprise the Ichthys, Hebron, Aasta Hansteen, Prelude and Mariner fields.

Ichthys (WA-285-P)

Located in the Browse basin, offshore Western Australia and targeting 12.8Tcf of natural gas and 527MM bbl of condensate, in waters just 230m deep, the Ichthys field is deemed a giant field. Operator Inpex and its partners are currently aiming for a 2016 start-up, with gas to be exported via an 889km subsea pipeline to onshore processing facilities in the Northern Territory, while condensate from the field will be pumped to an FPSO.

Infield Systems’ forecasts suggest that expenditure, in 2015, on the Ichthys field is likely to be 39.5% greater than any other global fields currently under construction. With 92.8% being invested in the floating platform facility and the remainder directed towards the SPM element of the project.

Like most operators, Inpex is looking to cut the escalating costs of its projects and has therefore recently farmed out 1.2% of its stake to Kansai Electric Power, following a similar deal in June to sell 2.625% to CPC. Once finalized, Inpex will hold 62.245% operatorship, alongside Total (30%), Tokyo Gas (1.575%), Osaka Gas (1.2%), Chubu Electric Power (0.735%) and Toho Gas (0.42%).

Hebron

ExxonMobil’s Hebron oil field in Canada will require the highest level of fixed platform expenditure in 2015. The field will be developed using a gravity-based structure, designed to provide production and accommodation facilities. Infield Systems projects that 41% of ExxonMobil’s Capex for projects currently under construction in 2015 is likely to be directed towards Hebron, revealing the scale of the project.

The Hebron oil field is 350km offshore Newfoundland in 93m water depth. The field is estimated to produce 705MM bbl and Infield Systems forecasts first oil by mid-2017. ExxonMobil owns a 36.3% stake in partnership with Chevron (26.6%), Suncor Energy (22.7%), Statoil (9.7%) and Nalcor (4.9%).

Three consortia are currently bidding to secure a major topsides integration contract for Hebron’s gravity-based structure. Amec has teamed up with Black & McDonald, Wood Group PSN with GJ Cahill, and Kentz has partnered with Kiewit and Kvaerner, in order to meet the province’s stringent local content requirements.

Aasta Hansteen

Due on stream in 2017, Aasta Hansteen is the deepest field development on the Norwegian Continental Shelf (NCS) and will use the world’s largest spar platform to be installed at 1274 water depth. The Aasta Hansteen discovery is 295km offshore Norway and contains an estimated 1.35Tcf reserves.

The Aasta Hanteen project is currently the most expensive in Europe, due to the relatively high cost of the platform and associated infrastructure. Consequently, Statoil recently sold part of its stake to Wintershall in order to help reduce risk and cost. Statoil remain the operator of Aasta Hansteen with a 51% stake. Wintershall hold a 24% stake, with other partners including OMV (15%) and ConocoPhillips (10%).

Infield Systems remains cautious in its profitability projections for the project, after the recent shelving of the Zidane, Linnorm and Kristin gas export projects. Profitability will be dependent on new discoveries.

Prelude (WA-371-P)

The Prelude natural gas field was discovered by Shell in 2007 and contains 3Tcf. It is in the Browse basin, offshore Western Australia, in 200m water depth. The field is operated by Shell, with a 67.5% stake, along with Inpex (17.5%), KOGAS (10%) and OPIC (5%).

The relatively small size of the field and the remote location led Shell to choose to invest in one of the world’s first FLNG facilities. The Prelude FLNG facility is being built at Samsung Heavy Industry’s Geoje Island shipyard in South Korea. Once complete, it will be 488m-long, 74m-wide, weighing more than 600,000-tonne, and is expected to produce 3.6mtpa of LNG per annum to meet growing demand in Asia.

As FLNG technology is still in its infancy, the project is forecast to be extremely capital intensive.

Mariner

The Mariner heavy oil field is in the northern section of the UK North Sea and in 110m water depth. Statoil operates the field, with a 65% interest, with partners Nippon Oil (28.9%) and Dyas (6%).

Due to the heavy oil in the field, Statoil chose to develop it using a production, drilling and quarters platform based on a steel jacket, tied-back to a floating storage unit. Infield Systems expects production from Mariner to start in 2017. The piled platform is likely to demand a 95.5% share of this project’s Capex in 2015; almost 50% of which will relate to its installation, while the remainder will be invested in the procurement and construction of the fixed platform. A mere 4.5% of Capex is directed towards the floating storage unit, with capital expenditure on this element of the project expected to extend to 2017.


Neda Djahansouzi
is Energy Researcher at Infield Systems. She joined the company in March 2014 and is responsible for updating Infield’s Energy Database and supporting the Business Strategy and Transaction Services department. Neda holds a first class BSc. (Hons) degree in Management with Marketing from the Robert Gordon University.