Down but not out

Jon Fredrik Müller, Rystad Energy

August 1, 2016

The oil price crash brings subsea processing opportunities, says Rystad Energy’s Jon Fredrik Müller.

The Åsgard subsea compressor manifold station was installed in summer 2013 with the Saipem 7000. Photo by Øyvind Hagen - Statoil ASA.

There have been few subsea developments sanctioned over the last year due to the falling oil prices. With oil prices currently in the US$50/bbl range, sanctioning activity is still moving slowly. Cost compression and re-engineering of previously planned concepts are lowering breakevens of many projects, towards levels that could warrant sanctioning. Although Rystad Energy believes in a strengthening of the oil price towards 2020, we still see few offshore projects sanctioned this year. However, we do see an increasing interest to discuss possibilities for subsea processing. Especially subsea boosting and compression solutions, which could bring additional volumes from existing fields in a profitable way, have recently received increased focus from the operators.

Of the different kinds of subsea processing, it is subsea boosting that has matured the most. The main advantages of subsea boosting are accelerated production, increased production and recovery, and development of low energy reservoirs, heavy oil fields, long tiebacks, and other fields where pressure differentials might be an issue. The first subsea booster pump was a twin-screw multiphase pump developed by GE Oil & Gas, which was installed on Eni’s Prezioso field in Italy in 1994. Although GE was first, it is OneSubsea (through Framo Engineering) that has become the market leader with their helico-axial pumps. Today, several different solutions for subsea boosting have been installed, or awarded. Currently, the portfolio of projects count close to 40 fields around the globe, see figure 1.

Figure 1: Subsea boosting and compression projects by water depth (meters) and installation year. Source: Rystad Energy.

Conventional subsea boosting solutions have often involved large topside structures like variable speed drives (VSDs). For brownfield applications, the need for topside equipment have in many instances resulted in potential subsea boosting projects being shelved, due to limited topside availability. However, new technology developments will likely reduce the need for topside equipment, or almost remove it all together. Several developments point in this direction, like developments of subsea booster pumps with integrated VSDs, like Fuglesangs Subsea is developing, or marinization of equipment that is normally put topside. There are also ongoing developments on smaller booster pumps, optimized for boosting single well streams. These solutions will likely increase the number of fields applicable for subsea boosting. These pumps could be configured as a traditional booster pump, but there are also developments integrating the boosters into flowline jumpers, as Aker Solutions and Baker Hughes have done.

An illustraton of the the wet gas compressor meant for the Gullfaks South subsea factory. Illustration from Statoil.

Another subsea processing technology that could increase production from producing fields is subsea compression. Traditionally, producing gas fields with need for compression have installed gas compressors on an existing platform, or built a new platform. By taking the compression subsea one can reduce the need for additional platforms and place the compressor close to the well, which increases the effect. However, subsea compression systems are complex and require large gas resources to justify the investments.

Currently, there are two subsea compression systems in operation, a dry gas compressor at Åsgard and a wet gas compressor at Gullfaks South, both Statoil operated fields. Aker Solutions delivered the Åsgard project, which includes pre-compression separation, while OneSubsea delivered the system for Gullfaks South. The Gullfaks South project has had some initial problems, but the Åsgard system has so far run like clockwork. Although somewhat costly projects, part of the costs should probably be allocated to research and development, and thus, future systems are likely to be considerably cheaper.

Subsea separation is the concept of separating gas/liquids or oil/water at the seabed, and might in some instances be a prerequisite for other subsea processing systems. Many of the applications so far have been in conjunction with subsea booster pumps, and subsea separation is today a proven technology. While OneSubsea has taken the largest share of the booster market, it is FMC Technologies that has become the market leader in the separation segment, being system provider on the majority of projects completed, see figure 2.

Figure 2: Subsea separation projects by water depth (meters) and installation year. Source: Rystad Energy.

Booster pumps are mainly used on oil fields with low gas to oil ratios, both for heavier and lighter crudes. The key regions have been, and will continue to be, Brazil, the US Gulf of Mexico, the North Sea and West Africa due to the water depths, reservoir characteristics and tie back distances. Subsea gas compression projects require somewhat larger resource base than the booster pumps, in order to be commercial. Key regions for this technology over the next coming years will likely be the North Sea, Australia, East Africa and the Mediterranean. Subsea separation systems have now been installed at 11 fields operated by Petrobras, Statoil, Shell and Total. All the fields lay in Brazil, Norway, US GoM or Angola, and going forward these areas, including the rest of the North Sea and West Africa, are seen as the primary markets for such systems.

Considering the number of subsea fields (~1500) compared to the number of subsea boosting (~40), compression projects (2) and subsea separation (11) systems, the current technology adoption is low. The main reasons for this are related to costs, uncertainty regarding reliability (proven on boosting and separation by now), and a general conservatism in the industry. In the current low price oil environment, we have seen clear signs that operators are looking into how to increase the production from existing fields to improve cash flows short/medium term. In some instances, the operator may prioritize such projects, over greenfield developments, due to a lower overall capex and time to production. Due to this, the current downturn may yield an increase in subsea processing projects for brownfield applications. Brownfield processing could be some of the more interesting projects before greenfield sanctioning picks up with an estimated recovery in the oil price towards 2020.

Jon Fredrik
joined Rystad Energy in 2010. Before that, he worked as a consultant at Accenture. His area of expertise includes strategy and market assessments, macro analysis, transaction support and valuation for upstream E&P, oilfield services, financial institutions and governments. He holds an M.Sc. in Industrial Economics and Technology Management from NTNU, Norway and participated in a graduate exchange program at the Haskayne School of Business, University of Calgary.