U.K. operators mark progress with floaters

Development of floating production, storage, and offloading (FPSO) system technology is at the top of the petroleum industry's agenda worldwide, given the increasing trend to field developments offshore and in deeper waters. That's the view John Wils, Aberdeen director of the U.K. Offshore Operators Association (Ukooa), gave delegates at the FPSO-TECH '97 conference in Aberdeen late last month. Wils said there are 70 floating production systems in use worldwide today, and this

Nov. 3, 1997

5 min read

That's the view John Wils, Aberdeen director of the U.K. Offshore Operators Association (Ukooa), gave delegates at the FPSO-TECH '97 conference in Aberdeen late last month.

Floater status

Wils said there are 70 floating production systems in use worldwide today, and this number is expected to increase to 250 by 2010.

The world's first floater development was the U.K.'s Argyll field, developed by Hamilton Bros. in the mid-1970s with a converted semisubmersible platform.

Argyll field, no longer in production, had reserves of 100 million bbl of oil, so fixed-platform development was not then viable. Wils said, "Low cost was the driver for Argyll development and is still fundamental to floating production systems today."

Wils said floaters are forecast to account for 28% of capital expenditure for offshore developments this year and are expected to account for 39% in 1998.

"This percentage will continue to increase as offshore production rises," said Wils. "At the moment, offshore output is growing by 2% a year, and this rate is expected to continue."

Now shipyards capable of FPSO projects can be found around the world, and operators have successfully brought down development and operating costs through innovations in technology, contractual arrangements, and project financing.

Environmental opposition

Yet Wils said there has been growing concern about FPSOs from one quarter.

"In spite of their excellent environmental track record" said Wils, "FPSOs have attracted fierce criticism from environmental groups, which see them as a cheap alternative to platforms and pipelines.

"As an industry, we have failed to explain to the public why floaters are sometimes preferred to fixed platforms. We have a duty to explain that the FPSO operations won't pollute significantly or increase tanker traffic noticeably and that they are simpler to decommission than fixed platforms."

Shell's experience

Don Henery, deep water development consultant, Shell International Exploration & Production BV, said the change in Shell's undeveloped reserves portfolio in the last 10 years gives an indication why FPSOs are proving popular.

In 1986, 75% of Shell's undeveloped finds were in less than 150 m of water, 90% of discoveries were of less than 250 million boe, and 30% were oil finds.

Then, said Henery, 50% of undeveloped fields were potential platform satellites, 40% could be developed with fixed platforms, and only 10% were suited to floaters. High costs of FPSOs and associated subsea developments were a major concern.

By 1994, 65% of Shell's undeveloped portfolio were oil finds, and 40% of the total were in more than 200 m of water, "very much an oily, deepwater portfolio and typical of petroleum companies today."

Henery said one of the keys to the success of Shell's deepwater program, where FPSOs play a major role, has been average initial well rates better than were ever imagined in the 1980s.

One current problem with FPSO developments is the lack of drilling rigs and the consequent high day rates charged by drilling contractors: "Now FPSO project economics will determine if this current situation continues. Contractors risk starting another boom/bust cycle if rig hire costs are not kept under control."

Meanwhile, long-reach drilling and subsea developments are direct competitors with FPSOs for deepwater projects, and tensioned-compliant tower platforms are becoming increasingly viable for deepwater conditions.

"Also", said Henery, "smart wells and seabed processing could affect offshore facilities dramatically. Here, there is still lots of work to be done, but they are not to be forgotten about."

While FPSOs are currently booming, said Henery, they are not an automatic choice: "It will increasingly be a case of mixing and matching technologies for field developments."

Floaters are being considered now for gas developments as well: "The industry is looking to produce LNG or liquids from gas offshore. At the moment, this may seem ambitious, but for LNG, the technology is starting to look manageable."

Henery warned that, with the comparatively short lead times of FPSO developments, operators have sometimes viewed field development as a race. Several have had their fingers burned when they begin to produce from the field.

"Operators need to be putting more into the planning and development phase of FPSO projects," said Henery, "in order to improve performance, costs, and safety later on. It's not a race to get production first but to get the best returns and performance. There is a danger with FPSO developments of pressing the go-ahead button too early."

Amerada view

Jeffrey Davison, senior project engineer at Amerada Hess Ltd., told delegates the company has produced more than 220 million bbl of oil from U.K. floater developments during the past 8 years, the most by any U.K. operator.

Amerada claims to have proved FPSOs for all aspects of field development, showing them to be operationally excellent and, in the right circumstances, the most commercially attractive solution.

"The facilities themselves have been improved since 1991, "said Davison, "and over several developments, so that changes are now in the realms of fine-tuning or incorporation of new technology.

"Integration of ship systems and North Sea production technology has been achieved to a point where best practices can be incorporated from each."

Davison said Amerada sees a place for a fleet of FPSO vessels that can be deployed and redeployed on a number of developments either as early production, full-field developments, or as late-field-life replacements for more expensive facilities.

"Once such a fleet becomes established, initial capital costs will become written down, allowing contractors or operators owning such vessels to make realistic returns on their investment and allowing the cost of draining marginal fields to come down significantly."