Tracking West Africa’s deepwater development

Quest Offshore's Andrew Jackson discusses how the depressed global market dynamics are affecting one of the world's premier deepwater basins.

Oil from the Bonga North West underground reservoirs is produced through underwater facilities and transported by underwater pipelines to the existing Bonga floating, production, storage and offloading (FPSO) vessel. Photos from Shell.

Relatively speaking, greenfield, deepwater projects executed in West Africa, more than any offshore basin other than perhaps Brazil, are characterized by large standalone megaprojects. Supermajors have discovered vast resources in deepwater that have led to some of the largest, most complex, and most expensive field developments, which regularly include over 30 subsea trees, 50+ km of subsea production umbilical and infield flowline and high-capacity floating production assets.

Major operators such as Total, Shell, Chevron, ExxonMobil, BP and Eni have accounted for approximately 75% of all subsea equipment awards in the region since 2000. Given the swift and severe reductions to capital expenditures globally by these key players in the midst of a “lower for longer” oil price dynamic, it is no surprise that many large West African development projects have come under increased scrutiny in their path to final investment decision (FID) given their large scale and associated large development costs.

The allure of substantial deepwater reserves, however, and a mix of established and frontier acreage will ensure that West African opportunities will continue to hold significant potential within IOC’s global upstream portfolio strategies. With this significant opportunity also comes significant risk as operators invested in the area have required contingency plans to handle local geopolitical issues, extreme project economic sensitivity and a relatively long development cycle typical to the region’s large projects.

Subsea outlook

West Africa has long been a strong source for subsea equipment demand. Since 2000, the countries along West Africa have accounted for 23% of global subsea tree demand with over 75% of West African demand coming from supermajors. Angola and Nigeria have represented near 80% of the region’s subsea demand since 2000. With an expected increase in regional diversity along the west coast of the continent, Angola and Nigeria’s market share is anticipated to drop to below 70% of the region’s subsea demand through the end of the decade.

Hundreds of pipelines are transferred by crane from a cargo barge to the vessel that lays them on the sea bed at Bonga North West offshore oil field.

The high capital investment common to Angola and Nigeria is a predicted driver to this trend change as the industry moves through a period of low oil price and a serious focus on reducing the development cost of these projects. Smaller scope projects in other areas, namely the Transform Margin, are expected to see comparatively smaller project delays. Other areas around Africa are also expected to reduce West Africa’s overall impact on the region’s subsea demand as North and East Africa increase activity through the end of the decade.

While the previous decade was highly focused on greenfield project development, the early 2010’s introduced an increase in brownfield subsea tree demand as a cost effective method of increasing oil production through floating production facilities with available production capacity. Projects such as Chevron’s Agbami, Total’s Girassol and Rosa and Shell’s Bonga represent just a few of the major deepwater projects contributing regularly to the overall subsea demand via small-scale call-offs of additional subsea trees. Subsea tree awards for West Africa from 2000-2007 saw 14% for brownfield activity. The following eight years through 2015 saw that percentage grow to almost 25% of total subsea tree activity for the region as operators wished to maintain and extend production at large floating production units.

Construction activity underway

While the near-term outlook for greenfield, megaproject FID and associated equipment orders remains depressed, construction and pipeline installation activity in Africa is anticipated to rise in 2016 year over year buoyed by West African & Mediterranean installation projects. When compared to subsea equipment awards, installation activity occurs later in the project development cycle and is less immediately affected by changing execution activity levels. For instance, marine installation activities at Total’s Kaombo in Angola, Tullow’s TEN Complex (Tweneboa, Enyenra, Ntomme) in Ghana, and Total’s Egina in Nigeria contribute to West African pipeline installation activity in West Africa in 2016.

The Saipem 3000 vessel installs umbilical cables at the Bonga North West offshore oil field.

There are currently 14 high-end vessel assets operating in the West Africa region. Technip has three of these assets in the region including the Deep Pioneer, which is currently performing installation activities for Tullow’s TEN Complex and the G1200 and Skandi Africa, which are installing flowlines, umbilicals, subsea structures, rigid jumpers, manifolds and pumps on Total’s Moho North field in Congo. Other vessels in the region include Oceaneering’s Ocean Intervention III and Bourbon’s Bourbon Oceanteam 101, which are currently working in BP’s Block 31 field.

Total’s Kaombo Phase 1 project will bring additional assets to the region in Q4 2016 to begin installation campaigns that will span throughout 2016 and 2017 for the project. The joint venture between Technip and Heerema Marine Contractors was awarded the engineering, procurement, construction, installation and pre-commissioning contract for the project’s subsea umbilicals, risers and flowlines. Heerema’s Balder vessel will install the risers and the pipe-in-pipe production pipelines and Technip’s Deep Blue vessel will install all the remaining pipelines. Other vessels from Technip’s fleet will install the flexibles and umbilicals and provide construction support work. The contract was awarded in April 2014 and is worth US$3.5 billion with Technip’s share being 55% and Heerema’s share 45%.

Although a great portion of demand is driven by new project development, there is also opportunity in inspection, maintenance, and repair (IMR) demand, which encompasses a large variety of work on existing fields, ranging from visual inspection, testing, and the repair or replacement of components and pipeline infrastructure. DeepOcean was recently awarded a three-year contract to provide a light construction vessel to Tullow Ghana. The contractor has mobilized the Dina Star vessel, which commenced operations in March 2016 and will be performing IMR surveys and subsea construction on the Tullow Ghana-operated deepwater Jubilee and TEN Fields. DeepOcean also has the REM Forza mobilized in the region and is providing accommodation and construction support on the TEN project as well. The global subsea market has grown significantly over the past decade leading to a growing installed base of subsea wells with associated pipeline infrastructure providing opportunity in the IMR segment.

Andrew Jackson serves as Quest Offshore’s market research & database manager, where he works with the Quest research team to conduct research and analysis on offshore project development. Andrew graduated from Texas A&M University with a BBA in Information & Operations Management.