Companies that provide equipment and services to the deepwater oil and gas operations sector see little prospect that soaring costs will be reined in anytime soon.
New productivity solutions are offered to help cope with the shortages of drilling rigs and qualified personnel that are contributing to those rising costs. Adding to cost pressures are new design criteria being implemented in the wake of the devastating hurricanes in the Gulf of Mexico in recent years. Environmental concerns also remain paramount in the deepwater service and supply sector. Evolving technology is spawning new deepwater designs to address productivity, efficiency, safety, and environmental challenges, particularly for the deepwater Gulf of Mexico.
Soaring costs
The supply chain for drilling rigs is still quite strained and appears to remain so through 2010, according to Eric H. Namtvedt, president of FloaTEC.
“We are still seeing operators and drilling contractors call on options for late 2010/early 2011 deliveries, and, more importantly, that is the time frame when a large number of floating production platforms will be competing for the same yard and equipment capacities,” he says. “The bottom line is that we will see continued ‘high activity’ for the foreseeable future.”
Gary Shaw, technology leader, VetcoGray, a GE Oil & Gas business, contends that the primary driver for the higher costs in deep water mostly has to do with the rig cost and not the equipment costs: “That said, we have seen large increases in our part of the business as well due to the escalating cost of raw materials. The [rig cost] is partly linked to the complex systems required onboard a deepwater drilling vessel and partly the price of oil; the [equipment cost] has to do with the developing economies and their appetite for raw material. As long as the drivers are the same, the deepwater development cost is likely to remain high.”
Brian Skeels, emerging technology manager, FMC Technologies, doesn’t see any near-term letup in high costs in the deepwater drilling and production sector.
“It’s a simple case of supply and demand in a ‘construction’ bidding market,” he says. “Dayrates will soften when either MODU [mobile offshore drilling unit] demand softens, the rig count goes up, and/or alternative methods play a (secondary) role to divert some of the demand needed for well workovers/interventions.”
Among the alternative methods that Skeels sees as possible solutions to accommodate continuing strong demand for deepwater drillings rigs-beyond the obvious one of more newbuilds to address drilling and completion needs-are efforts to “1) continue to work with ideas to leverage smaller (‘lesser-generation’) drilling rigs to artificially extend their capability using slimbore drilling and drilling risers, free-standing risers, preset moorings, etc.; and 2) bring to the marketplace light well (i.e., rigless) intervention for workovers and other subsea maintenance jobs.”
Namtvedt also contends that “reliability and operability will be key for deepwater rig providers to get the needed productivity out of the high unit cost-thus companies with experienced crews and a strong network of subcontractors and supplier infrastructure in place will be preferred.”
The same situation applies to the fabrication community, he adds: “Unfortunately, I think we will see a number of ‘train wrecks’ before the current rig construction backlog has been delivered.”
Uri G. Nooteboom, vice-president, field development projects for INTEC, notes that drilling, manufacturing, and installation contractors are loaded to capacity with the wave of development projects that is moving though the system right now.
“Once these development projects have been delivered-say, 2009-10-the manufacturing/installation industry may see a slowdown from current levels since exploration has lagged behind and many projects are being delayed because of cost concerns,” he points out. “As a result, costs are likely to stabilize or possibly come down from their current levels. As usual, this is a self-governing cycle.”
Environmental/safety concerns
The continuing plunge into ever-deeper waters is resulting in new designs and design criteria to address environmental and safety concerns.
Namtvedt thinks that new design criteria for post-Katrina Gulf of Mexico will drive the size of platforms and moorings, and deep target drilling such as subsalt will further impact a need for high payload capacities.
“FloaTEC has proven solutions, from our portfolio of spar, TLP, or semisubmersible, that optimize payload to steel and buoyancy and thus minimize the size of our platform solutions,” he says. “Solutions that allow for quay-side integration (TLP and semi) reduce the need for extensive offshore lifts and integration work in exposed offshore locations, with corresponding risks for delays.”
Regarding environmental issues, Namtvedt contends that emerging new guidelines requiring zero discharge to air and water will further impact platform designs to be able to handle more equipment and larger payloads.
Despite industry’s excellent track record with regard to accidental discharges, Shaw points out that the release of even environmentally friendly fluids such as water-based control fluids are starting to come under scrutiny by the industry.
“We are developing new products that minimize or eliminate the use of traditional hydraulic power,” he says. “Another promising area is in the development of materials and coatings that reduce the amount of grease used in our products.”
Shaw also cites requirements on control and process facilities for zero-emission production that are a common concern for both deepwater and arctic designs. “We are looking at active internals for subsea processing (giving reduced chemical requirements), thermal insulation alternatives (giving reduced needs for hydrate, wax, and scale inhibition chemicals), and solutions to reduce the need for hydraulics,” he notes. “Subsea processing facilities also show significant potential to reduce the environmental footprint of a subsea facility because the increased flexibility in the design will allow for increased efficiency in the boosting facility.”
“It should also be noted that systems like HIPPS [high-integrity pipeline protection systems] and subsea processing may show a significantly smaller carbon footprint because they offer a possibility to reduce overall steel volumes.” ]