The subsea industry is doing incredibly well, but it needs to reduce costs and invest more in technology development—according to the key note speaker at this week's UTC 2013.
Kristian Siem, chairman of Subsea7 and its parent company Siem Industries, was addressing UTC (Underwater Technology Conference) delegates at the event in Bergen.
He said while the industry is doing “incredibly well” it has challenges. It is moving into deeper waters with higher temperatures and higher pressures, as well as into harsher environments, such as the Barents and the Arctic.
“In addition we have growing contract sizes and a shift to EPIC (engineering, procurement, installation and construction) delivery,” he said. “Here in Norway, during 2012 we saw three of the largest Norwegian SURF (subsea umbilical, riser and flowline) contracts ever in a historical context awarded in Marathon Boyla, BG Knarr and finally Totals’ Martin Linge at US$800 million. Globally this trend of ever larger EPIC contracts is even stronger.
“Inevitably as the projects get larger and more technically complex, and take place in increasingly diverse geographical areas, then so also does risk increase.
“But as we face these cross industry challenges, there is one which I believe has the potential to hold back the continued growth that our industry has been fortunate to experience in recent years.
“That challenge is escalating costs. Following the low point reached post the global economic crisis, upstream capital costs have risen back to the same level the industry experienced pre the global economic crisis, and they are continuing to rise.
“We are already seeing developments being postponed or indeed shelved as a direct result of such cost escalation, West Nile Delta in Egypt, Browse in north-west Australia, Mad Dog in the Gulf of Mexico and within the last few week one of the most high profile projects on the Norwegian Continental Shelf, Johan Castberg, has also been postponed, at least partially due to cost levels.”
Siem said the main drivers pushing up cost were: increased requirement for local content; increased risk aversion from operators leading to more stringent specifications and supervision, shortage of skilled personnel and increased complexity of projects.
He said it cost four times as much to fabricate a structure in Angola compared to Europe, at US$35,000/ton verses US$8,000/ton).
The increased specifications and supervision were impacting project management, engineering, and supply chain management. Expectation of higher levels of technical knowledge and ability placed on sub-contractors could also act as a barrier to entry for the supply chain, also raising costs, he said.
To address the issue, the industry needs to continue investment in the development of new equipment and technology to help overcome the challenges and complexity being faced and to deliver new ways of processing and extracting oil and gas—such as Statoil’s vision of a subsea factory by 2020 and Arctic operations, says Siem.
At Subsea 7, technologies being developed include electrically trace heated pipe-in-pipe, bundles for use in the Arctic, mechanically lined pipe for reel-lay, presented in a technical session during UTC, and welding technologies.
It is also developing an AIV (autonomous inspection vehicle), now at the commercialization phase, developed with academia and industry for use in monitoring, inspection and potentially intervention, based on use sensor data and mind-mapping techniques.
Technologies and materials used in other industries are also being assessed, including higher strength steels with lower weights or materials such as carbon fiber and GRP (glass fiber reinforced fabric).
The industry, operators and the supply chain, also needs to collaborate, said Siem, to become more efficient and to control costs. This would mean using people more efficiently, avoiding duplication and involving the right people and companies earlier to optimize and de-risk projects.
It would also mean more co-operation and standardization in selected areas, such as bid processes.
“We need to think longer term; rather than just the immediate requirement or opportunity as some of our suppliers may see it,” he said. “The greatest challenge for all of us is to make sure we don’t put barriers in the way to doing business.”
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