OFFSHORE REPORT

North Sea / Gulf of Mexico experiences improve world market

Industry leaders on OTC panel share their experiences and views on environmental and cultural differences to help promote and complete cost-effective developments in new, challenging regions

t the 2000 Offshore Technology Conference in Houston, May 1 – 4, a special technical session was devoted to the topic of "Combining North Sea and Gulf of Mexico Learnings." This panel comprised 11 industry leaders from the ranks of operating and engineering companies and regulatory agencies.

The session was largely organized and promoted by Paragon Engineering Services, Inc. It was chaired by Robert D. McCavitt, operations manager, Cockrell Oil Corp. and Kenneth E. Arnold, president, Paragon. The moderator was Bob Frith, VP, Shell International E&P Inc. Selected comments and conclusions from the session are presented here.

Summarizing the session, Frith noted that the offshore industry is no longer insulated from public opinion, and it has a huge environmental responsibility to countries worldwide to effectively manage risk.

He said, "We have tough operating challenges ahead and must work together to find solutions. Industry standards are one hope for the future. We also must collaborate to deal with issues that affect the future of our industry, such as CO₂ emissions, if we are to gain access to new regions and remain a viable and acceptable industry to future generations."

Introduction

The successful future of offshore oil/gas development, in many respects, rests with the due diligence and wisdom of today’s energy leaders in combining lessons learned from two of the world’s most prolific development regions to date: the North Sea and the Gulf of Mexico. Both regions have become mature provinces, necessitating an evaluation of "next steps" for frontier development in subsea, deep water and new regions of the world, including Brazil, the Caspian Sea, West Africa and Southeast Asia.

The challenges ahead in these frontiers require thoughtful consideration of traditional work practices in both the North Sea and the Gulf of Mexico, and appropriate application of best practices, says Arnold.

"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. Our industry requires open discussion and technology transfer between the two regions to effectively compete on the world market, and address environmental and safety issues," Arnold added.

Storm-generated waves breaking on the North Sea’s Fulmar platform accentuate the more- hostile environment. Photo courtesy Shell International E&P, Inc.

Collective Wisdom

"Through our ‘collective wisdom,’ industry can expect to yield increased returns and improved risk management as we move into ultra-deep waters," said Arnold. An inherent part of harnessing that collective wisdom, says panelist Cyril Arney, technical consultant, Marathon Oil Co., is evaluating the diversity of environments, considering issues such as wave-loading and site-specific situations, including water depth and available infrastructure.

"As an industry, we need to evaluate an acceptable level of risk, while understanding the chance for failure against the traditional 100-year-design event. Frontier developments, such as Gulf of Mexico deep water, will provide industry with opportunities to prove new technology using risk-based standards. A collaborative approach to developing those risk-based standards will improve field performance, reduce life-cycle costs and ensure safe operations and environmental protection as we expand to new regions," Arney added.

A recent report, titled LOGIC or Leading Oil & Gas Industry Competitiveness, issued by the UK Department of Trade and Industry (DTI) underscores the economic value of capturing lessons learned. The report reveals that industry could save at least 40% on project costs for development of a typical, mid-sized North Sea platform with an estimated 100,000 boepd if Gulf of Mexico practices were adopted.

The DTI study used a typical UK North Sea project costing $300 million against an equivalent project in the Gulf of Mexico costing $100 million. Of the $200-million difference, the LOGIC study identified potential savings of $120 million relating to how a project is undertaken and delivered in the two regions and, as such, is considered achievable.

The remaining $80 million is related to market differences, fundamental differences in climate and operational-availability requirements, which are far more difficult to capture.

"Clearly, the industry has a significant cost driver for both operators and contractors to define and understand these differences, and to find ways of implementing the best practices of both cultures," said Pat O’Connor, Upstream Technology-Facilities Development, BP Amoco. Panelist O’Connor, concerned with operational issues, further advises that, as projects move into more technology-challenging areas such as deep water, some of the more-detailed engineering approaches and safety methodologies carried out in the North Sea may have benefit.

The Prize

Of the 40% potential cost savings claimed by LOGIC, the majority of the savings or "prize" relates to the different ways project engineering is carried out.

"To date, industry has not achieved this prize largely because benefits are not well-defined and are often disguised behind gray areas of ‘culture’ – that is, how we think and behave, and how we go about our business. Certainly, the pursuit of the prize will require change for both cultures, with a resolution and commitment to using best practices resident within both regions," said O’Connor.

The challenge here, he adds, is finding and demonstrating a way to integrate key findings into future projects in the UK and worldwide. Projects designed and managed in the UK could then become competitive with international benchmarks, and the current downturn in activity in the UK may be reversed.

The process of achieving the prize begins with understanding regional distinctions and the historical development of offshore activities between the two provinces. "Our cultural differences in production facility design are largely determined by our experience, and operating preferences of the pioneering companies that developed North Sea and Gulf of Mexico fields," said Arnold.

He explains that the U.S. industry has been heavily driven by oil company initiatives. Oil companies in America have traditionally acted as prime contractors for field development projects, executing in-house conceptual engineering, preliminary engineering and procurement, and then awarding detailed engineering, fabrication and installation contracts in a segmented fashion.

"Infrastructure developed in the Gulf of Mexico based on this type of segmented business approach. This infrastructure allows a direct relationship between operator and supplier, furnishing such specialized equipment as generators, cranes, pressure vessels and other essential equipment. The Gulf of Mexico infrastructure has engendered an inherent knowledge of how a facility will operate and an improved understanding among suppliers of an operator’s expectations," said Arnold.

In contrast, he added, the UK industry "grew up in a hurry," attempting to expedite field development activities through integrated engineering, procurement, installation and construction (EPIC) contracts awarded to consortiums. Oil companies then trained staff to manage EPC (engineering, procurement and construction) contracts, creating a lot of oversight and checking systems that impact cost and schedule. Eventually, the UK industry began experimenting with risk / reward contracting strategies, such as alliances, to "turn the tide" on excessive man-hours and increasing inefficiencies.

Complex Systems

Reservoir distinctions between the two regions also have significantly shaped development activities within the two areas. Until recent developments in deep water, a large Gulf of Mexico platform was designed to produce some 20,000 to 30,000 bopd, compared to typical North Sea platforms which, until recently, produced 200,000 to 300,000 bopd.

Further, reservoir characteristics for the GOM are generally consistent, whereas North Sea reservoirs are quite diverse, with varying crude properties and producing temperatures impacting facilities design. The complexity of North Sea facilities caused topside technology to evolve from skids to modules, resulting in large, integrated decks weighing 10,000 to 20,000 t, creating the need for heavy lifts.

The use of these large modules, therefore, limits competition for offshore installation, requiring a closer relationship between engineering and installations, thus encouraging the trend toward integrated EPIC contracts.

Environmental differences also have dramatically molded the two cultures and how they pursue offshore developments and approaches to health, safety and life support systems. The GOM experience includes mostly benign temperatures, winds and sea states, compared to the North Sea’s cold, hostile environment. In the event of a GOM hurricane, operations personnel have advance notice to evacuate, whereas in the North Sea, inclement weather is more common and can deteriorate with little warning.

In the event of an emergency, GOM personnel can escape to the sea as an alternative, or they can often contact nearby facilities for assistance. North Sea conditions and long distances from shore and other facilities make this option more hazardous. These distinctions have effected an aggregate level of fire-fighting equipment onboard a North Sea platform.

Extensive life-support systems impact all areas of design, specification, inspection and documentation. The Cullen Report issued by the UK Department of Energy in 1990, has had a significant impact on recent design practice in the North Sea. The report encourages a rational, risk-based approach to safety, matching physical and procedural safeguards to the specific risks on an installation. This process can lead to requirements for segregated areas, blast walls, complex instrumentation, alarm systems and automatic systems.

This level of specificity prevents designers from positioning equipment where it is most logical for effective operations. Gulf of Mexico designs and operations, conversely, are more fit for purpose.

Gulf of Mexico offshore location represented by this East Bay platform development reflects the region’s typically less-challenging environment. Photo courtesy Shell International E&P, Inc.

Human-Friendly Facilities

Environmental conditions in the North Sea require the UK industry to design "human-friendly" operating facilities with closed modules, vs. the GOM tradition of providing more open, naturally ventilated facilities, says Jay Smith, topsides process manager, Shell International Exploration and Production Inc. (SIEP), Deepwater Services.

"Closed modules provide protection from wind and hostile weather conditions but significantly impact design, construction and installation costs. This design approach also dictates more-complex, incident-control systems and more-extensive safety and shutdown systems; and it necessitates additional process handling equipment, adding cost and weight to the facility," Smith explains.

Another panelist adds that these design and safety issues increase project man-hours and impact the amount of post-engineering necessary during the fabrication phase. The regulatory regimes of the two regions further distinguish work practices. The UK regulatory arena typically has a higher degree of oversight, with more-stringent inspection practices, which can prove costly to operations due to required, scheduled shutdowns.

Smith says routine shutdowns do not translate well into deepwater Gulf of Mexico operations. "Shutdown of high-rate deepwater wells, particularly subsea wells, can cause mechanical problems, damage sand control and require extensive flow-assurance and hydrate-avoidance procedures, which could cost millions of dollars."

Structural failures in the early years of North Sea development contributed to increased specification and extensive regulatory documentation for traceability of any eventual problems. O’Connor adds that this culture of "designing for all possible eventualities perpetuates overdesign and often does not reflect industry experience and data for effective, safe operations."

Gulf of Mexico design practice, in contrast – says Arnold – follows a more-prescriptive, simplified approach based on operating experiences, hazards analysis and incident investigations of the thousands of installations which have been installed over the past 50 years. This experience minimizes documentation and makes regulatory compliance more efficient and purposeful.

Goal Setting

John Millar, an inspector with the UK Health and Safety Executive (HSE), says the Cullen Report recommended safety cases for North Sea installations and that goal-setting legislation replaced prescriptive requirements in an effort to enable optimum health and safety planning and design activities. "A regulatory regime of goal setting encourages industry to evaluate the best solutions for safety onboard each installation, rather than arbitrarily employing a prescribed rule that may be less suitable."

Millar advises that UK operators are now charged with evaluating possible hazards and determining how best to manage the associated risk. "Goal setting represents an explicit consideration of risks for the prevention of major accidents." He adds that goal setting and standards are compatible – "Standards embody industry experience, while a safety case builds on that experience to ensure protection of life."

The HSE maintains oversight through its assessment of safety cases and inspection of installations and related operators’ safety management systems to achieve alternative solutions as warranted. Independent reviews or verification of safety-critical elements provide additional checkpoints for optimum safety.

The Future

As part of the next steps toward arriving at best practices and improved reliability, industry leaders agree that safety case reviews and goal setting as a regulatory practice can be viable components of a global, integrated development strategy.

However, Arnold says, there is disagreement as to whether detailed safety cases including calculations of risk rates are really needed, or beneficial, for the types of installations common on the Gulf of Mexico shelf. "In more-benign environments, such as the Gulf of Mexico, effort expended to write a costly safety case and calculate risk rates may actually detract from efforts to assure compliance with accepted design practice and may reduce the overall level of safety."

He adds that the rationale for this position is described more fully in American Petroleum Institute’s (API’s) Recommended Practice 14J. "Of course, no matter whether a safety case is performed, safety must be managed in accordance with an overall program, such as a Safety and Environmental Management Program (SEMP), as described in API Recommended Practice 75."

Industry leaders also agree that more Gulf of Mexico, fit-for-purpose design practices need to be employed where possible, and that repetition of work should be avoided. North Sea project management technology – such as database-driven, 3-D computer-aided design programs, human factors reviews, increased project document control, etc. – should be incorporated in large facilities, no matter where they are located.

In general, regardless of the contracting strategy selected, operators need to trust their main contractors and rely on well-informed, experienced suppliers to deliver necessary equipment. Small, integrated teams for project leadership are preferred, and project reporting should be regular, open and high-level to effectively manage cost and performance.

Project leaders also need to be precise about their objectives, goals and the process for implementation, while being deliberate in working relationships and defining the culture. Before beginning a project, team members need to define how they are going to behave; be prepared for rejection, but remain focused on the goals. Industry needs to examine data on project successes and failures in an effort to learn from experience. Project teams also need to look beyond personal experience in an effort to better manage project risk.

Jeff Brubaker, focus area leader for Upstream Technology Engineering & Construction Management, Texaco, concurs. "We need to find the right business solution to achieve better results than before. That means looking beyond traditional experiences to place management of risk with the appropriate player," he says.

He adds that new technology necessary for frontier developments inherently carries risk, making it necessary for project participants to understand how best to manage this risk. "This communications process should include an alignment of project objectives, with a fair expectation of performance from each player."

Will Roach, group head of projects, British-Borneo USA, Inc., says these were a few of the issues addressed for the successful installation of Morpeth, the world’s first mono-column tension leg platform, located in the Ewing Bank area of the Gulf of Mexico in 1,670 ft of water.

Roach, who brought his North Sea experience with floaters to America, says a certain degree of "creative tension" between the North Sea experience and the Gulf of Mexico design practice for low-cost installations can bring significant results. In the case of Morpeth, the project was completed to first oil within 21 months from project sanction, and six months earlier than first projected during conceptual engineering.

He says the core project team defined its roles, with British-Borneo focusing on the function and operation goals of systems; contractors were relied upon for their areas of expertise. "It’s important that all participants understand each other’s roles, strengths and weaknesses. Selection of the right contracting strategy and an effective management of interfaces also contributed to a successful frontier project."

Elsewhere in the world, Smith says Shell is pushing the frontier of technology and integrating design and work processes as they consider deepwater offshore developments in 3,000 ft of water, and beyond. "We have a unique opportunity to integrate Gulf of Mexico and North Sea experiences and leverage the best of both worlds," he says.

Smith reports that topsides design teams are working to identify key, differing design practices and issues. While these efforts are still in the early design stage, team leaders are adopting appropriate Gulf of Mexico practices, North Sea practices and "hybrid" designs to achieve a more standardized approach.

For projects in new regions and emerging countries, industry leaders agree they need to work with governments and communities in a constructive way, seeking to understand the impact a project may have on an environment. Local manufacturers should be relied upon as much as possible and local work practices respected.

Acknowledgment

Several panel members who participated in the OTC session are not specifically quoted in this overview article: they include Michael Baur, facilities manager, Crazy Horse Development, BP Amoco; Elmer Danenburger, chief, Engineering and Operations Division, Minerals Management Services; and Myron Rodrigue, VP and general manager, Aker Gulf Marine. Considerable information on the North Sea was contributed by Malcolm Darricott, divisional VP and project director for Barracuda / Caratinga fields, Brown & Root Energy Services, who was not able to participate in the session as planned. Paragon Engineering assembled the Fact Sheet and organized much of the background between quoted sections from materials contributed by the panelists.