Testing the waters

In advance of OE’s 2017 Global FPSO Forum, held in Houston this month, Audrey Leon chats with the forum’s board members to learn what is in store for the FPSO sector and discover how digitalization may play a role.

Aerial views of the Turritella FPSO while docked at Keppel’s yard. Photos from Shell.

OE: What does the future hold for the floating production/FPSO industry because of the downturn?

Chris Barton, senior vice president, business development – Offshore, Wood Group Mustang: The challenge now is to make deepwater FPSO (floating production, storage and offloading) projects economic. Leaner, less complex designs are the talk of the day. There are a lot of assets out there and operators want to find solutions. As such, operators are considering reutilizing designs and repurposing facilities.

Operators are more willing to look at tiebacks as opposed to standalone developments. Wood Group has developed its “Catalog of Designs” as a means to an end. BP’s Mad Dog 2 is a dramatic example of how costs have changed. Estimated at US$20 billion before the price fall, the project was given the green light at $9 billion in late 2016, thanks to a significant redesign and negotiating lower prices with suppliers.

David Petruska, segment engineering technical authority - Floating Systems, BP: In general, floating production/deepwater will be negatively impacted as we remain the high margin barrels these days, but unable to set the price.

We’re seeing fewer projects with operators cutting capex and looking to spend where they can get the best rate of return and new production online the quickest. But, on the positive side, we are seeing that we can get capex cost of such projects in check to meet our economic thresholds.

We will likely see more FLNG and gas handling FPSOs in the future. The next few years will remain tough, but we should see an increase in activity even if oil prices stay about the same as we adjust for the current market conditions. Converted FPSOs could reign (although that has always been the case to some degree) as they allow for lower capex and a significant schedule advantage when executed properly.

Biasotto

Paulo Biasotto, facilities area manager, Petrobras America: Project development based on floating production/FPSO concepts will continue to face tough competition from onshore projects and other offshore development concepts, e.g. subsea tieback to existing facilities. However, floating production/FPSO concepts should still have competitive advantages in some areas based on niche markets characteristics, e.g. proximity to markets, domestic demand and existing infrastructure.

Eric Van Dijk, vice president business development, SBM Offshore: Obviously, the whole FPSO business has contracted significantly and we now all have to fight for our share of a much smaller pie. However, there are still significant discoveries that can be developed at competitive cost and these discoveries often lend themselves for FPSO solutions. FPSOs will play a central role for the foreseeable future both for oil and gas developments.

Blake Moore, independent consultant: The offshore oil industry is working through a difficult transition to remain economically competitive. With oil prices in the $40/bbl range and forecasts of $30/bbl, offshore oil development projects will likely remain challenged. New methods to design, build and operate offshore floating facilities will need to be developed to dramatically decrease costs if the industry is to recover and remain relevant. The digital transformation we have seen in other industries that have resulted in dramatic changes in the cost structure is a clear opportunity for the offshore industry. As with any transformation, the industry needs to have a clear driver and companies will need to behave in a much more collaborative way to achieve meaningful change in the cost structure. We have the driver in low oil prices that may exist for the next decade, but we have yet to see a push to collaborate between companies to drive down prices.

Crager

Bruce Crager, executive vice president, Expert Advisory Group, Endeavor Management: The floating production/FPSO market has been negatively impacted by three events. First, the significant drop and ongoing low oil price, which has slowed new development. Second, there are more FPSOs available today and coming off contract in the next year than ever before.

It is likely this number will reach 30 out of a total fleet of about 180 vessels. Some of these have already been scrapped and others are unlikely to be competitive, but there are still plenty of FPSOs available. These range from very small storage and/or processing capacity to very large capabilities, so not all available FPSOs will be candidates for any new project.

In addition, there are usually changes to be made when relocating an FPSO, such as process modifications, mooring system changes and riser/umbilical connections. Therefore, many of these existing vessels are not better solutions than a newbuild or new conversion, particularly for a long-life field.

The third event is the significant slow-down in FPSO demand for Brazil. This one region houses more FPSOs than any other area in the world and Petrobras has more FPSOs working than any other company. The combination of low oil price, the “car wash” scandal and changes in Brazilian laws and politics scene has slowed a number of possible projects.

In summary, the FPSO market will remain slow in the next one to two years, until more units are needed for new developments. In the longer term, there will be an ongoing need for FPSOs and floating production systems to develop deepwater fields, as well as those which are marginal or remote.

OE: There is plenty of buzz in the industry surrounding digitalization. How do you see this being applied in the floating production/FPSO industry? And what are the barriers to implementation?

Barton

Barton: The rapid progress of digital technology, such as big data and analytics, sensors, and control systems offers FPSO operators the chance to automate high-cost, dangerous, or error-prone tasks. Automation can significantly improve their bottom line.

There are many ways in which automating FPSO maintenance can improve production efficiency. For example, radio-frequency-identification (RFID) tagging of equipment, along with the use of other sensors, can help track activity. Tracking, in turn, enables applications that can monitor equipment condition and support predictive maintenance and automated operations shutdowns. These applications minimize risk of catastrophic failures and process disruptions, while maximizing equipment reliability and production efficiency.

Operators are already using analytical models to predict failures of critical equipment components. It also includes using simulations to test failure scenarios in platform operations and employing text mining for analysis of unstructured input from engineers and operators. In greenfield automation programs, the digital processes are built in during project development to ready the technology for future advances, taking into account the 5-7-year life cycle of these projects.

For brownfield programs, companies develop overlays (for example, upgrades of wireless and mobile) that pull the required data flow out of the platform to support analytics units. This approach helps to avoid being locked in by technology choices from the past.

Petruska: The process is starting downhole and will work its way back to the host. Initially, it will be to allow access to more real-time data to make decisions quicker, but it will then lead to more data mining to find other values to augment operations. For the host, one outcome could be fewer workers needed offshore all the way to de-manning for normal operations. Barriers will be not fully understanding the value statement of the technology and cost.

Biasotto: While the digitalization benefits are indisputable, the offshore, and oil and gas industries face some of the key challenges as the industry in general, e.g. lack of standards and regulation for digitalization, digital security and skills. While in the long-term it will require changes in the way we develop and operate floating production/FPSO facilities, in the short-term such changes will need to demonstrate cost savings are effective, otherwise it will fall behind opex reduction needs.

Van Dijk

Van Dijk: One of the main opportunities that I see is digitalization enabling remote operations and, therefore, reduced manning. This will result in cost savings on both the opex and capex side and will also improve safety by having less people offshore. I don’t think the industry is ready for a major shift yet, but it is just a matter of time before we will see broader applications.

OE: What are some new advances that may change FPSO design, construction, and/or operations?

Barton: More eWorking will certainly start transforming the industry. Wood Group is developing eXpert and eWorkpack and an example of how this technology contributes to conservation.

Petruska: I would like to see risk-based stability used, in order to improve understanding and to see if that could change the design. I suspect we will see more large gas handling FPSOs. Not an advancement, per se, but we will need to understand their design and process safety aspects vs. what we been doing with oil-dominated FPSO field developments.

Biasotto: Digitalization should support a true lifecycle management for floating production/FPSO facilities from design through operations, and across projects. Nevertheless, this should be supported by well-defined lessons learned, standardization, and integrity management goals rather than simply data accumulation in order to provide real efficiency gains.

Van Dijk: Database driven design is one development that is getting more and more traction. We are moving from 3D design to 6D or even 7D – if you talk to some operators. I still have some doubts about the cost benefits, because man-hours on projects keep on going up despite all this technology. Another interesting application is wireless commissioning and use of RFID technology. I’m convinced that definitely pays off.

The Turritella FPSO. Photo from Shell.

OE: Life Extension of existing floating systems is also another big topic for the industry due to the downturn. What are some of the technologies that you have an eye on that could be used in this space?

Barton: Technology advancements and business changes are leading operators to look at extending the service life of their offshore floating facilities. To go beyond the originally approved design life, the operator requires the approval the regulating bodies.

To obtain this approval, the operator needs to demonstrate that the facility can be maintained fit-for-service for the new life span. Developing a life extension plan requires careful re-evaluation of the design and new extrapolations of expected future damage mechanisms, including fatigue and corrosion.

Petruska

The challenge is to provide assurance that an old design that has been in an operating environment for a prolonged period will meet future needs and can satisfy demanding new regulations and design criteria.

Life extension challenges are to ensure that safety conditions remain satisfactory and that your extended use is approved by the statutory authorities. This requires a rigorous assessment of the integrity of the asset combined with a detailed analysis of potential hazards that could occur when production volumes are maintained. Advanced analysis methods and smart methodologies are being developed to enhance and streamline the analysis process.

Petruska: Better inspection and surveying equipment. Although this is not a technology, but these are rooted in the engineering, i.e. what are acceptable design limits for a life extension vs. a new design.

Biasotto: Risk based inspection (RBI), Condition based maintenance (CBM), inspection techniques, digital asset platforms for management of inspection and maintenance data.

Van Dijk: Life extensions are naturally messy and it is important to know the physical status that a facility is in. Proper asset integrity management will give us a better idea of the scope of life extension projects. Laser scanning of existing facilities will also play an important role in life extensions.