Offshore projects should combine Gulf of Mexico, North Sea approaches

Designers of offshore facilities hope to combine the lower-cost, fit-for-purpose practices of the Gulf of Mexico with the big-project management know-how of the North Sea to do marine projects better and cheaper worldwide, industry officials said Monday at the start of the annual 4-day Offshore Technology Conference in Houston.


Sam Fletcher
OGJ Online

OFFSHORE TECHNOLOGY CONFERENCE, HOUSTON�Designers of offshore facilities hope to combine the lower-cost, fit-for-purpose practices of the Gulf of Mexico with the big-project management know-how of the North Sea to do marine projects better and cheaper worldwide, industry officials said Monday at the start of the annual 4-day Offshore Technology Conference in Houston.

Participants must combine lessons learned in those two mature areas that are the world's most prolific offshore development regions, said Kenneth E Arnold, president of Paragon Engineering Services, at a Monday press conference that was a preview of a panel discussion of that subject scheduled for Wednesday afternoon at OTC.

Paragon did one of the first caparisons of offshore projects in the North Sea and Gulf of Mexico at the 1985 OTC. The study showed that a $100 million gulf project escalated to $300 million when designed by North Sea standards. More recent studies confirm that 3-to-1 price hike, said Arnold, who also is cochairman of Wednesday's special session.

About $100 million of the additional cost is because of more-complex systems for life-support and hazard mitigation required for the harsher environment of the North Sea. But Arnold blames "cultural differences" for the rest of the added cost.

Gulf-based projects are "more cost-effective, with shorter life cycles to first development," said Arnold. He acknowledged that gulf projects are usually smaller than the large, complex projects in the North Sea. However, Arnold questioned if North Sea projects may be designed to be more complex and require more offshore workers than needed.

Cultural differences
The individual-risk rates, which are an integral factor of North Sea designs, don't translate into a better safety record than the Gulf of Mexico, he claimed.

"As an industry, we need to combine North Sea Experience in designing, building, and operating large, complex facilities in harsh environments with Gulf of Mexico experience in executing projects efficiently and cost-effectively," said Arnold.

But it's not a simple matter of bringing Gulf Coast engineers over to Europe to assist in projects. "We tried that, but the [established European] culture prevailed," said Pat O'Connor, head of upstream technology and facilities development with BP Amoco PLC, who will also be part of Wednesday's panel discussion.

European shipyards are more unionized than those on the Gulf Coast, which may add as much as 25% to the costs of offshore facilities in those waters, Arnold said. But he and O'Connor claimed higher labor costs were not a significant factor in the price differences between the two areas. "The real prize is in the soft issues," said O'Connor.

"I'm not sure we have all the answers. I'm not sure everyone would agree," said Arnold, of the pending panel discussion.

However, he said, "The US-style prescription standards may be the best for offshore areas that mimic the Gulf of Mexico, which includes most of the offshore areas around the globe. The North Sea approach may be the best for harsh environments."

Deepwater operations
"There is no question that the future of offshore exploration lies in deep and ultradeep water," said Rhys J. Best, chairman and CEO of Lone Star Technologies Inc. and chairman of the Houston-based Petroleum Equipment Suppliers Association (PESA), at an earlier OTC press conference Monday. "Petroleum companies will increase capital spending on deepwater oil and gas developments by 85% during the next 5 years."

Deepwater fields account for 90% of the reserves involved in future developments off Brazil; 89% in the Gulf of Mexico; 45% off West Africa; and 46% in the North Sea, he said.

The number of discoveries in water depths exceeding 1,500 ft grew to 65 in 1999 from 33 in 1998, Best said.

"The number of wells in water depths of 3,000-5,000 ft has more than tripled in 2 years, from 12 in 1998 to 38 during 1999. In 1999, there were nine discoveries in greater than 5,000 ft of water, the first announced discoveries in those water depths since 1996. These include several discoveries in 6,000 and 7,000 ft of water and greater," he said.

Many new technologies designed for deepwater operations are being exhibited at OTC, including multiplex control systems, fiber-optic communications, robotic pipe-racking, dual-operation designs, marine drilling risers and expandable casing, and high-strength line pipe. Some of that technology, such as expandable pipe, can be readily adapted to deep-gas drilling on land, Best said.

Energy and GATS
Meanwhile, the International Association of Drilling Contractors (IADC) is pushing the World Trade Organization to include energy-related services in the global General Agreement on Trade in Services (GATS).

GATS is the first multilateral agreement to provide legally enforceable rights to trade in all services. But when the present GATS classifications were devised in the early 1990s, energy generation and supply was largely the domain of state-owned monopolies in many countries, said John R. Irwin, president and CEO of Atwood Oceanics Inc. and IADC chairman. With more countries now opening their previous energy monopolies to outside investors, Irwin wants energy-related services included in GATS to "level the playing field" for IADC members.

"There are numerous practical barriers to drilling companies," he said. "These include sometimes-arbitrary customs levies in some nations that can take as much as 18 months to work out before a rig can be cleared to enter a country. They can also result in import duties so high that it effectively confiscates the equipment."

Irwin declined to name those countries, however.

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