Decreasing operational costs and financial risks through FPSOs

Almost 40 years have passed since Shell’s launch of the first FPSO (floating production, storage and offloading) in the Castellon Field, off the Spanish coast. Initially used as a cost-effective solution for marginal fields, FPSOs are now more appealing than fixed structures, as they can decrease installation and decommissioning costs, as well as financial risks.

As operators seek to reduce their risk exposure in the current low oil price environment, the role of FPSOs seem to be destined to grow, as long as issues related to continued service, such as maintaining hull structural and mooring system integrity, are addressed.

Those maintenace issues “are not easily rectified on station”, said Danny Constantinis, chairman and chief executive officer of integrity services provider EM&I

New projects

An effective solution for fields situated in deep waters, FPSOs are used to process and store hydrocarbons, which are then offloaded to shuttle tankers or transmitted via pipelines. 

In 2014, 264 assets were already active. Three-fifths of them were represented by FPSO units. According to Energy Maritime Associates, new construction contracts for floating production systems amounted to $16 billion in 2014.

New orders included three large FPSOs for Angola and two for the UK North Sea.

Angola

Two of Angola’s FPSOs were ordered by Total, which awarded the $4 billion-contract to Saipem. The deal includes a $1 billion-operation and maintenance services deal. The two assets are going to be positioned in 2017 in the Kaombo oil field, Block 32.

The third FPSO destined to Angola was ordered by Eni, with the $2.9 billion-contract awarded to Bumi Armada. The unit will be placed in 2016 the East Hub, Block 15/06.

Barents Sea

In February 2015, the production of Goliat FPSO, the largest cylindrical floating production, storage and offloading facility in the world, was completed in South Korea by Hyundai Heavy Industries (HHI).

Ordered by Eni Norge, Goliat will operate in the Barents Sea, approximately 53 miles (85 kilometers) northwest of Hammerfest, in Norway.

Planned to store one million barrels of oil per day, it weighs 64,000 tons and measures 367 feet (112 meters) in diameter, and 246 feet (75 meters) in height.

Tight market

In 1976, the Dutch-based company SBM Offshore supplied the mooring system for Shell’s pioneering vessel in Spain’s Castellon field. 

Today, SBM Offshore possesses a fleet of 11 leased FPSOs in operation, while three more assets are under construction and one is on standby.

In 2014, the company’s reported consolidated IFRS (International Financial Reporting Standards) net income was $ 652 million versus US $175 million in the previous year.

For the company, the new challenges are ultra deepwater and the development of FPSO products for LNG production.

The competition is tight, though. BW Offshore is present in the Americas, Europe, Asia Pacific and West Africa, where it has a fleet of 14 FPSOs. Operated by Petrobras, its BW Pioneer is the first FPSO in the US Gulf of Mexico. With a turret and mooring system at 2,500 meters deep, it is the deepest moored FPSO.

Another leading company is Modec. Founded in 1968, the Tokyo-based firm operates 14 FPSOs, with four projects under construction. In 2014, its operating profit, ordinary profit and net income increased significantly compared with 2013. Modec's revenue jumped from 254.4 to 378.5 billion JPY, a 48.8% increase.

      

Credit: HeliRy

Ensuring integrity management

In the current low oil price environment, floating production units (FPU) are often considered more appealing than fixed structures.

They can decrease installation and decommissioning costs, as well as financial risks. Besides, they can be easily relocated to other fields.

In 2014, 70% of FPSO units were converted tankers. Thus, they present several challenges in terms of monitoring and maintenance.

Other important life extension challenges include fatigue estimation, PoB (Personnel on Board) constraints and the risks of cost cutting on maintenance.

Prevention and new solutions for life extension

An important prerequisite for life extension is arranging basic infrastructure for maintenance from the beginning.

“Basic maintenance infrastructure transforms any life extension project in terms of viability and achievability,” said Andrew Peden, naval architect at Energo Engineering (KBR).

On the new solutions front, Constantinis (EM&I) explained that “the design, maintenance, corrosion protection, fatigue life management and inspection strategy for a long life on site asset needs to change if the industry is to achieve 25 years plus on station".

Preserving the integrity of mooring lines

The main challenge concerning mooring lines is preserving the integrity of the system that links them to the wells and pipelines.

The high rates of mooring system failures are indeed a very serious concern for the industry.

Twenty-one mooring issues were reported between 2003 and 2013 on floating storage units (FSU). In eight cases, the incidents concerned multiple line failures. Four of them resulted in vessel drift.

In February 2011, the Gryphon Alpha FPSO operated by Maersk Oil experienced a mooring failure during a storm - four out of its 10 mooring lines broke. The incident damaged subsea assets such as risers and flowlines.

Converted assets come with expensive maintenance

Asked to operate far beyond their planned design life, converted assets are often difficult and expensive to maintain.

Efficient integrity management strategies are therefore crucial to ensure that facilities continue to operate safely, according to Robert Gordon, senior principal engineer at DNV GL.

If assets can continue to operate at reasonable OPEX levels, their life extension is a cost-effective option, especially in a low oil price environment.

Since operators expect their floating assets to produce for 25 years or more, managing their integrity while they are on station and in production is vital.

By Daniel Atzori