The hottest construction market in the oil patch gets ready for faster growth.

The offshore construction market is booming despite recent low prices. With the exception of shallowwater activity in the Gulf of Mexico, construction projects are coming at such a pace that many contractors are becoming increasingly selective about the tenders to which they feel it is worth responding.
Why such a sustained surge in activity? The root cause is the world's insatiable appetite for hydrocarbon-based energy. Despite the fact that oil consumption for 2002 is forecast to rise less than 1 million b/d from the level seen in 2000, the increasingly rapid decline in rates observed throughout most of the world's producing areas means we are having to run faster than ever simply to maintain today's production levels.
When this situation is applied to individual companies and compounded by shareholder expectations of ever-rising production and profits, there is enormous pressure to keep developing finds to squeeze out more barrels. And when commodity prices sink, these companies are caught between reduced cash flow and the need to increase volumes to maintain revenues.
State-owned companies face somewhat different situations, but those in countries with large and growing populations such as China, India, Egypt, Mexico, Brazil and Indonesia are having an increasingly difficult time maintaining enough output to satisfy their own populations, let alone increasing exports. Other than in the countries of the former Soviet Union and the Arabian Gulf, the possibilities for significant finds on land are becoming more and more remote as the technology for finding and developing onshore reserves even as deep as 30,000 ft (9,150 m) has existed for decades. This leaves the offshore arena as the industry's last great hope.
Many reasons are behind the fact that most of the best prospects are only to be found offshore. First and foremost is that for the first hundred years of the industry, there was no need to go to the trouble and expense of moving out of sight of land as every year more oil was discovered than the world consumed. Although some tentative steps were taken in the late 1940s and 1950s, it wasn't until the 1960s that the industry began to develop the specialized tools needed. Interestingly, this coincided with the time when consumption overtook discoveries. Since then, technology has only slowly allowed the development of offshore finds, although exploration drilling moved rapidly into deeper waters. Another reason for the slow development has been demarcation disputes, with the Spratly Islands in Southeast Asia perhaps the best example.
The end result has been an unprecedented period of development of offshore production facilities, with new records and solutions appearing almost daily as operators move into deeper waters and confront the problems of what has until recently been considered unneeded gas.
Trends in offshore development
For many years the fixed platform was the predominant mode of offshore field development, although subsea completions first appeared in the 1960s and floating production systems appeared in the mid-1970s with Hamilton's converted semisubmersible in the UK North Sea's Argyll field.
However, since the 1980s this technique has proved less attractive, especially in deeper water. Shell's Bullwinkle platform in the Gulf of Mexico, with its total height of 1,763 ft (538 m), set a record for a pile-supported, fixed steel platform that probably never will be broken.
While the fixed platform remains a staple of shallowwater environments such as the Gulf of Mexico shelf, the Middle East and much of the Asia-Pacific region, it is under threat from a variety of other development solutions. Just as floating production systems are being designed for ever-shallower waters, a small but growing number of offshore fields are being developed without any above-water infrastructure at all. Fields within 6 miles (10 km) of the coastline may be candidates for extended-reach wells drilled from shore.
In recent years, this option was demonstrated by the record-breaking wells BP drilled at its Wytch Farm field in the United Kingdom and TotalFinaElf drilled in Tierra del Fuego. ExxonMobil is planning to use an onshore-based drilling program to tap the Chayvo and Odoptu offshore fields as part of its Sakhalin Island work. The project will require about 55 wells with horizontal displacements of 20,000 ft to 36,000 ft (6,100 m to 10,980 m).
Another option, largely independent of the distance from shore, is to combine subsea completions with pipelines directly to onshore facilities, thereby obviating the need for either a fixed or floating platform. The proposed Snøhvit development in the Barents Sea will use this approach, which will involve a world record for the length of its control umbilicals at about 100 miles (161 km). The Corrib gas field, 43 miles (70 km) off the Irish coast, and the Scarab/Saffron fields in the Mediterranean are other examples of this form of development.
The medium-term outlook for construction and installation of the key pieces of the offshore construction industry involves:
• fixed platforms;
• floating production systems;
• subsea systems; and
• major pipelines.
While many fields are being developed with some combination of these, the major distinctions remain, and usage patterns vary significantly around the globe. The possibilities for completely new technologies also exist.
Overall outlook
More than 1,600 identified offshore construction projects involving fixed and floating platforms, subsea installations and pipelines are under way or under study around the world (Figure 1). With 369, the Gulf of Mexico is host to the largest portion of these, but northwest Europe, Southeast Asia and West Africa each account for more than 200 projects.
However, only 45% of these projects are designated as firm, with the remainder still under study. It is not anticipated that all the projects under study will be completed, but even by 2005, the industry will undoubtedly see many completed projects not on the drawing board today.
Triton Energy (before its acquisition by Amerada Hess) provided an impressive example in Equatorial Guinea of what can be achieved with a fast-track project. The first deepwater field in West Africa to produce oil, the Ceiba field, was brought onto production an astonishing 13 months after the initial discovery.
Details of the numbers and the expected year of installation (where known) for each major region are given in Table 1.
Fixed platforms
Not surprisingly, the majority of fixed platforms are being placed in shallow waters, with only a few slated for water depths greater than 300 ft (92 m) and only one for a depth of more than 650 ft (198 m) (Figure 2).
The shallow waters of the Asia-Pacific region constitute the most popular area for fixed platforms, followed by the Gulf of Mexico. Despite the trend to subsea and floating developments in the North Sea, as finds, especially in the UK sector, get smaller and more remote, northwest Europe will see a significant number of fixed platform installations in the next few years (Figure 3).
The total number of projects in Figure 3 is slightly higher than in Figure 2 as it includes a few projects where the water depth is unknown.
Floating production and storage
Although most floating production and storage systems are being installed in waters deeper than 1,500 ft (458 m), a few operators are using them in very shallow waters (Figure 4). For instance, Shell and Phillips are planning to use floating production systems in less than 150 ft (46 m) of water, in Nigeria and China, respectively. For small accumulations with a limited productive life, there are obvious advantages in having a truly mobile system that can be redeployed several times. With larger fields too, a new lease on life when a field is exhausted improves the economics enormously, and a market in third-party-owned floating systems is developing rapidly. By contrast, the owners of large fixed platforms have had little success finding new homes for their structures. Even in a case like Phillips' Maureen steel gravity platform in the North Sea, which was designed to refloat with the aid of its built-in storage tanks, it has not been possible to find a suitable application that would involve its use as originally designed.
This is probably the area of offshore construction that is developing fastest. The newest floating system, the truss spar, debuted earlier this year on Kerr-McGee's Nansen field in the Gulf of Mexico. Meanwhile, the deepest tension-leg platform ever is scheduled for installation in 2004 on Anadarko's Marco Polo field, while the largest semisubmersible production facility will be a feature of the Gulf's largest field, BP's Thunder Horse.
While the "golden triangle" of deepwater activity - the Gulf of Mexico, Brazil and West Africa - account for the bulk of floating system projects, the Asia-Pacific region also has a significant number of projects proceeding (Figure 5). This in part reflects the large area and correspondingly less dense infrastructure than in most other regions. This in turn often means floater developments are the most economical as pipelines are simply too costly.
Subsea installations
Planned subsea installations are more evenly spread over the spectrum of water depths than fixed or floating platforms, although those in deep water account for the largest portion (Figure 6).
Northwest Europe is the region with the largest number of planned subsea projects (Figure 7). This reflects the decreasing size of the finds in the area - at least in the southern portions of the North Sea - which are being developed as satellites of producing fields thanks to the abundant infrastructure in place. The Gulf of Mexico is in a similar situation, although many of the one- and two-well developments in deep water.
Pipelines
Some 350 offshore pipeline projects are under construction or planned (Figure 8). These involve 432 separate pipelines with diameters generally ranging from 3 in. to 48 in. and have a total length of more than 12,300 miles (19,791 km).
As shown in Figure 8, which plots number of pipelines and miles of pipeline by major region, the average pipeline length is shortest in North America and longest in the Asia-Pacific region.
New technologies
Two particular types of offshore structure that have been discussed for some years may be close to development.
The first is the addition of a drilling module to an FPSO to create a floating drilling, production, storage and offloading vessel. All of the elements exist, and simultaneous drilling and production is widely practiced on floating and fixed platforms. Companies that have produced designs for these include Aker Maritime, Bouygues Offshore, Doris Engineering and GVA Consultants (now part of Halliburton). Water-depth capabilities are said to be 984 ft to 9,843 ft (300 m to 3,000 m), which covers all of the deeper waters likely to be of interest during the next few years. Whether the size and safety issues inherent in such a structure can be resolved remains to be seen.
The second type of offshore structure that may soon appear is a floating liquefied natural gas (LNG) plant. Liquefaction and export units as well as import and regasification units are being talked about, although no construction has been started. Shell is nearest to building a floating liquefaction plant with at least two locations already identified. The Greater Sunrise development in the Timor Sea is reportedly only awaiting approval from other members of the consortium. Approval has been slow due to partner Phillips' preference for an onshore LNG plant that also could handle gas from the Bayu-Undan field. The other strong possibility is the Kudu field offshore Namibia, where sufficient reserves have yet to be confirmed. Again, the various elements needed are available, but packaging them in a safe and reliable manner is the issue that must be addressed
Inevitably, more innovative offshore construction ideas will appear in the future, but today's planned projects, many of which involve new and record-breaking technology, will make this industry sector one to watch for many years to come.

Editor's note: Figures 2 through 8 include only those projects that are under construction or planned and specifically exclude those that are under study.

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