How to evaluate FPSO lifecycle costs

Louise Smyth

Floating Production Storage and Offloading (FPSO) units are a popular choice in today’s rejuvenated offshore industry, offering lower CAPAX, more flexibility and cheaper abandonment costs in comparison to fixed platforms. Repair work on idle or ageing FPSOs enables owners and operators to extend an asset’s lifespan as offshore oil and gas demand increases. A new approach that reviews entire project lifecycle costs is leading to more prudent selection of available and proven repair methods – generating millions of dollars in savings before any storage or offloading even takes place. Ian Nash, business manager at SPS Technology, reports.

Competing in today’s offshore oil and gas market requires the same attention asset owners have always given to maximising output, while reducing the cost of production – just more of it – while deep and ultra-deep oil and gas have been added to shallow water and onshore oil and gas exploration and production. This current trend means the industry will be well placed to meet increasing global demand. 

This new era has heralded more scrutiny of the costs associated with the processing and production facilities amid tighter margins than the boom decade of the 2000s. With new pipelines and fixed facilities proving highly complex and costly in offshore environments, FPSOs are a proven and cost effective alternative. The opportunity for FPSOs in today’s oil and gas market is clear, with the market expected to be worth $53.61 billion by 2023, up from $25.48 billion in 2016. 

Traditional versus modern repairs 

While the FPSO market is poised for growth and success, there is no room for complacency. Ensuring assets can operate effectively and efficiently while safeguarding life and the environment requires carefully planned and executed repairs and maintenance, particularly when dealing with older assets. This can be seen during the selection and implementation of structural steel repairs, an essential part of remedial work for FPSOs and other assets operating in the marine environment. From hulls, to deck areas, bulkheads and ballast water tanks, structural steel repairs are implemented across many areas during the lifecycle of an asset. 

Historically, it was necessary to undertake this type of work during planned repair and maintenance periods, during which traditional crop and renewal structural steel repairs could be undertaken in areas that are normally classed as hazardous or explosive. However, for more than a decade an alternative No Hot Work (NHW) solution has existed which is intrinsically safe to complete at all times, including during day to day operation. A key example of this is the patented Sandwich Plate System (SPS) offered by SPS Technology; comprising two metal plates bonded with an elastomer polyurethane core. This core is provided by BASF, SPS’ technology partners for over 20 years.

The SPS NHW solution has been utilised across a number of projects including the permanent reinstatement of deck areas on-board Modec’s ABS Classed FPSO Baobab Ivoirien MV10, and a further ABS-approved repair in 2019 covering 102m2 of the bottom and side shell of an FPSO on-station off the Ivory Coast. The same solution was also used to repair the sea chest, bottom shell and bulkhead of the FSO Komi Kribi 1 (KK1), a 1977-built Ultra Large Crude Carrier (ULCC), which was converted and installed in 2003. The FSO is now operated by ExxonMobil for Cameroon Oil Transportation Company. 

Managing fragmented budget allocation

The cost and wider benefits of No Hot Work over traditional structural steel repairs go beyond initial capital investment, with structural steel repairs typically requiring a multi-faceted allocation of repairs and maintenance budgets, and therefore can’t be compared with up front costs in isolation. In a typical scenario, budgets for structural steel repairs are spread across a number of different areas, each managed by different personnel with their own individual budget and goals. This approach can be fragmented, and senior managers need further information to be able to effectively identifying and address areas of overspend or excess downtime. 

Moreover, siloed knowledge can mean that budget holders may see a quote for structural steel repair in the first line of a crop and renewal steel repair quote. However, what they won’t see are the costs across a number of areas including, for example: project planning and management, tank cleaning, cargo tank scaffolding, cofferdam construction and dive boats. Collectively, these costs mean the total budget for crop and renewal repairs can be considerably higher than initially anticipated – typically up to 11 times higher that an SPS NHW repair. These costs include the necessity to complete crop and renewal repairs during planned maintenance periods, adding costs through further downtime and work to offset the risks associated with hot work repairs.

The reasons for siloed thinking around repair and maintenance budgets are varied and complex but can be attributed, at least in part, to the recent brain drain in the industry, which has seen budget holders typically lacking the in-depth holistic knowledge of their predecessors. The management of vessel conversions and repairs by contractors bought in to work on particular projects, with a set budget and no clear oversight of an asset or its overall repair and maintenance plan also compounds the issue and challenge.

A clear opportunity

There are signs that a new mindset is emerging, however. In deconstructing the historical barriers to cross-department communications, and furnishing additional knowledge on the industry’s new generation of decision makers, millions of dollars are already being saved, with particular proven benefits in the FPSO market. With respondents to the recent FPSO 2019: The State of the Market survey highlighting ‘A clear understanding of entire project lifecycle costs’ as one of the top three factors supporting the successful delivery of an FPSO project, the case and appetite for change is clear.

 

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