The offshore oil industry has been driven by the introduction of new technologies since its inception. And we fully expect that embrace of technology – and its requisite spending – will continue. This article provides an overview of offshore industry trends, looking at various geographic regions.

It’s apparent that capital expenditures have been steadily increasing in subsea production since 2004, and this trend should continue for at least the next five years. Floating production units have also seen an exponential increase in demand. In 2001-06 there were 121 FPS units. During 2007-12, the FPS units are projected to increase by approximately 120 percent. Subsea expense and floating activity increases of this magnitude suggest a hospitable environment for technology novelties. That can be seen by reviewing the developments of the last decade or so.

In 1995, Statoil’s Heidrun project in the North Sea introduced one of the world’s first concrete tension-leg platforms. The advancements made on the Heidrun project also allowed Statoil to move from the engineering and design phase to first oil in only five years. This represented a major improvement in project management. Today, 21 fields use tension-leg platforms, and 26 are due to come online by 2015.

Brewing in the Gulf of Mexico during 1997 were projects with enhancements. These include BHP Billiton’s Neptune, in Viosca Knoll in the GOM, which plays host to both dry-tree wells and subsea wells, and Shell’s Mensa project, in the Gulf’s Mississippi Canyon, which set a record for the longest subsea tie-back. A decade later, the current tie-back record is held by Ormen Lange at 125 kilometers, and is projected to be broken by Statoil’s Snovhit field in 2007. Away from the GOM, the North American market was expanding its exploration efforts into the icy waters of Canada. There, the Hibernia project consists of a gravity-based platform that stands 224 meters high. While this is an impressive development, the North Sea has used gravity-based systems for years. The Hibernia project’s real technological achievement is its “ice belt,” 15 meters thick. This belt, or ice wall, includes 16 sharp points intended to distribute the force of an iceberg over the entire platform, thus decreasing the potential for damage.

In 1999, Statoil pushed the limits of known floating production storage and off-loading (FPSO) capabilities with its Asgard field in the North Sea, utilizing a ship with a processing capacity of 200,000 barrels of oil per day and a storage capacity of 907,000 barrels. Furthermore, at the time, the Asgard field was one of the world’s more complex subsea structures, with 60 wells atop a deep, high-pressure, high-temperature reservoir. Such field development concepts are now common in places like offshore West Africa.

In 2000, Petrobras achieved an important milestone at the Roncador field offshore Brazil. One of its key developments was a dynamically positioned early-production system, which gave way to a dedicated production system. These technological innovations allowed Petrobras to move from discovery to production in an astonishing 27 months, curbing the time span from discovery to production yet again. At about the same time, Total’s Girassol project offshore Angola began employing a new technology known as the single-line offset riser concept. This was an important achievement, as it de-coupled the risers from the floating production system, effectively eliminating a main source of riser-line fatigue. This enhancement is essential to today’s market, enabling numerous FPSO deployments, including 40 of the FPSOs now working off the west coast of Africa.

In 2001, Shell’s Malampaya field came online in Asia. This was truly a pioneering field, as it utilized subsea wells as the sole source of gas for onshore power stations. Malampaya also employed the use of an electro-hydraulic control system, which was a relatively new and unproven technology at the time.

BP’s Na Kika project in the GOM’s Mississippi Canyon, which came online in 2003, is home to many new achievements in subsea technology. Some of the field’s major achievements are the commingling of three reservoirs, the use of multiphase meters in the Gulf, the installation of pipe-in-pipe risers, and the use of the heave-compensated landing system to install subsea trees and related equipment. These innovations have become standard adaptations in other fields around the world.

Led by the innovations from BHP’s Neptune project, Kerr-McGee’s Red Hawk came online in 2004. This GOM project employed the use of the world’s first cell spar. The cell spar reduced the reserve threshold needed for an economical development in deep waters, paving the way for the development of other deepwater fields previously considered uneconomic. In 2006, the Dalia field came online, representing another important technological breakthrough. The Dalia field is significant because it was deemed the largest subsea production system ever installed. It is also important to note Total’s use of subsea separation on the Pazflor development offshore Angola, which is expected to come online in 2011; this is one of the first times this technology will be used as an enhancing rather than an enabling technology. That Total is using subsea separation when it is not required for the development of the field speaks volumes about its potential impact on the industry as a whole.

These offshore technology achievements are merely some of the many highlights that have helped shape an industry entrenched in new technologies. While the technology of the past will undoubtedly remain a strong part of the future, the industry possesses key opportunities for new innovations.

When considering the future of technology in the subsea industry, it is important to understand which challenges the industry will face. Most often, these challenges are the primary drivers behind developments of new technology. Even though the North Sea is the most mature area, there are significant challenges the region must overcome to remain viable, and it is arguably the most affected by high oil prices. If oil prices drop too low, the region will have to implement new technologies to ensure that subsea production remains profitable. Potential solutions include the use of subsea separation, pioneered by Statoil’s Troll (currently being implemented on Statoil’s Tordis field and Total’s Pazflor), and long-distance, remote-controlled power supplies and umbilicals.

Currently, the consensus within the industry is that all-electric systems may overtake hydraulic ones as the preferred subsea choice. This use of technology, coupled with subsea processing, will allow operators to develop and produce from fields more cheaply, because it enables long and deep subsea tie-backs, potentially eliminating the cost of a floating production system. Another factor, sure to contribute to improved North Sea technological applications, is its harsh operating environment. While this is not a new situation for the area, the North Sea could continue to be a testing ground for new technologies, or modifications to existing technologies, which could better facilitate production in such environments.

Much like the North Sea, the GOM is home to a harsh subsea environment, which has already pushed the boundaries of subsea technology and produced many new and exciting innovations. As the Gulf moves into deeper waters, operators must continue to develop the most economical production means. Along with the obvious challenges associated with moving exploration and production into deeper water are those posed by high-pressure, high-temperature wells. Many of the major future projects that will drive increased production from the Gulf feature complex reservoirs with extremely high temperatures and pressures. For example, both Chevron’s Jack field and Shell’s Perdido Hub development will play host to complicated wells from challenging reservoirs that will require the use of new or adapted technology, such as subsea separation and boosting. These technologies are important because they help make production from such fields more economical and more realistic. The use of subsea processing, incorporating separation and boosting, will increase the oil-flow rate, making the field more economical. The use of subsea separation on the Perdido field will be an important technological milestone, given the development’s water depth of more than 8,000 feet.

Challenging environmental conditions also exist in the Gulf, home to some difficult eddy and loop currents which can greatly impact the design and reliability of a field’s infrastructure. This is an important distinction because many newer technologies that exist in other areas are primed to be implemented in the Gulf. For example, Total’s use of a single line offset riser concept on the Girassol field offshore Angola is being promoted as a great fit for the GOM’s loop currents and mitigating issues in vortex-induced-vibration fatigue. By decoupling the risers from the vessel, the risers are no longer subjected to the movements of the floating production unit, which in turn increases their potential life- span by reducing the fatigue they encounter. This is an important new technology, as it could remove the added field development cost of replacing risers and diminish the loss associated with brief suspensions of production. Another notable challenge of operating in the Gulf of Mexico is the potential for hurricanes, a risk that became obvious after Katrina and Rita in 2005. This obstacle provides a great example of how an existing technology, the FPSO vessel, can be adapted to fit the needs of the Gulf. Using a disconnectable turret FPSO, an operator could theoretically position it over the field during normal working conditions, and disconnect it during a hurricane to remove it from the storm’s path. This application of existing technologies could prove beneficial over the next ten years as the industry seeks to avoid a repeat of the damage and lost production inflicted by the 2005 storms. The GOM is in a great position to implement both new technologies, as well as new adaptations of existing technologies already in use in the industry.

South America will also have its own set of issues to analyze when developing and adapting new technologies. The pioneering innovations made by such companies as Brazil’s Petrobras will serve as a stepping-stone for new initiatives. For example, the partnership formed between Petrobras and Mexico’s Pemex could push the development of new technologies, as both companies strive to develop the reserves found in Mexico’s portion of the Gulf. While new technologies have already been developed for this region, there will certainly be room for more as both Petrobras and Pemex will be able to view the region from a different standpoint. The atmosphere of innovation within Petrobras, along with Pemex’s desire to play a larger role in the world’s oil production, will undoubtedly lead to new technological approaches to subsea field development over the next five to fifteen years, and more.

Adding to the subsea industry’s technological achievements, the Africa/Mediterranean region has its own challenges looming. Perhaps the most important is its ongoing social and political unrest, which will play a major role in all aspects of field development, including the development and implementation of new technologies.

Nigeria provides the clearest example of this problem. Due to the constant threat of militia attacks and unstable governments, many of the world’s top companies have scaled back or even abandoned their Nigerian operations. Taking a lesson from those with Nigerian onshore operations, they have had a general desire to keep projects offshore as much as possible. This will presumably create the ideal environment for subsea separation and processing. While this technology is still relatively new, projects like Total’s Pazflor in Block 17 offshore Angola will help bring it into mainstream field development plans. By processing raw fluids subsea, operators can limit the role of onshore facilities, effectively downgrading the potential for danger from hostile groups.

Another potential roadblock facing the Africa/Mediterranean region is the uncertainty that comes with moving into deeper and more complex geological and geophysical terrains. While other regions of the world, such as the Gulf of Mexico, have already started the move into ultra deepwaters, there is always a degree of uncertainty when progressing deeper into underexplored areas. For example, BP’s major Block 31 project calls for a specialized pipeline system to be installed to compensate for the combination of water depth and ambient temperatures at such depths. This is a situation that is not suitable for existing technology, and will require the development of a new solution, or at the very least the development of a new application of an existing technology. Certainly, the Africa/Mediterranean region is host to a unique group of factors that will drive the need for extended technological development.

Finally, the fastest growing region in the subsea industry, Asia/Pacific, will play an integral role in the technology’s continued development. The most notable obstacle in the region is the lack of infrastructure in deeper water and remote areas farther from shore. This factor could very well drive the development of new technologies, as the desire for quick production from these fields may run counter to the requisite time to build pipeline infrastructure. The Asia/Pacific region is already home to many FPSOs and shuttle tankers, which bypass the need to pipe product from the field. However, with the FPSO market poised to grow tighter, operators in this region may be forced to consider some sort of pipeline system to deliver to shore. Also, the gas and LNG markets, which are driving much of this area’s growth, will have their own set of technology requirements primarily focused on getting the gas to shore safely and efficiently. Some of the ideas being pursued are the use of cryogenic pipelines and modifications to current FPS technologies. Both of these would allow operators to keep the gas in a liquid state for transport.

Another important element affecting the region is the development of middle-class economies that are in stark contrast to those of the region’s past. This new growth in energy demand has increased the need to produce from fields in a timely manner. In a potential clash between government-run national oil companies and this new class system, technology could play an integral role in sating the needs of all involved.

In conclusion, it is evident that the offshore industry has built a large portion of its viability around technology. Whether it’s the ability to economically produce from stand-alone deepwater fields, or to introduce subsea processing techniques that allow for long distance subsea tie-backs, the offshore industry has consistently developed new technologies that enable the push for deeper and more complex exploration and production. As the industry moves forward to help meet the global energy demand, it is important to note that while past advancements were primarily driven by the inability to develop certain fields, over the next 10 to 20 years a large portion of the innovations will derive from the desire to develop a field in the most economical way possible, driving increased efficiencies and lower costs.

Paul Hillegeist is the president of Quest Offshore Resources, Inc. Matt Pickard and Jeni Hyland are analysts at Quest.

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