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Experience-Based Assessment of Field Development Options and CostsHiroaki Hi rayama

Japan National Oil Corporation: JNOCKunihisa Sao

Ocean Engineering Research Inc.Cuneyt C. Capanoglu

International Design, Engineering and Analysis Service Inc.

ABSTRACTJapan National Oil Corporation (JNOC) and ten Japanese companiesforming a Joint Industry Project (JIP) have successfully developed anexperience-based assessment method, a software and the database tofacilitate study of deepwater field development options and costs. TheJIP end product, named DeepTool, relies on user specified input and/ordefault values to describe site/reservoir characteristics and developmentscenarios and1 determines capital and operating expenditures (CAPEXand OPEX) which may then be input into economic evaluation ofuser-defined field development scenarios. The database includes notonly the co,st data on producing fields in deepwater but alsoinformation/data that can be effectively used in performing morecomprehensive field development studies and conceptual design. Suchinformation, namely, worldwide environmental data and the projectexperience and resources data on more than 200 engineering companies,fabricators and installation contractors were incorporated into thedatabase.

This paper discusses the background for initiating the project,development method and the program details. Plans for updating thedatabase, upgrading the algorithms and improving the user-friendlinessand the applicability of the program are also presented.

KEY WORDSDeepwater, Evaluation, Design, Computer Software

BACKGROUNDOffshore oil and gas field development in deep water has dramaticallyincreased since 1990. Planned and producing tields in water depthsgreater than 300 m are presented on Figure 1 and the figure clearly

illustrates the rate of increase in deepwater field development.

Fixed bottom-supported structures, such as jackets and gravity basestructures (GBS), have been installed in moderate water depths up toabout 400 m. Bottom-supported compliant structures, such as theArticulated and Guyed Towers, extend the range of bottom-supportedstructures another couple of hundred meters. When the water depth isgreater, only the floating systems, such as FPSO, FPF? TLP andSPAR/DDCV, or subsea systems are technically and economicallyfeasible. Some of the more important floating system technologiesaffecting the cost effective development of deepwater fields are catenary,taut and tension leg mooring, flexible risers and the control umbilicals.These technologies will also have a prominent role in the developmentof ultra deepwater fields in water depths greater 2000m.

In the late 1980s JNOC had gathered, reviewed and evaluated fielddevelopments and the cost of field development component systemsconsisting of jackets, jackups, semisubmersibles and the tension legplatforms. This work resulted in the development of a fielddevelopment cost estimating software named Neptune. In the early1990s JNOC evaluated commercially available cost estimating softwarepackages and attempted to identify their strengths and weaknesses.The first conclusion was that the then existing software packages wereprimarily developed from a cost estimation point of view with littleengineering input. The second conclusion was that a newexperience-based assessment method for field development options andcosts was needed and this system had to be based on engineeringoriented methodology. It was also concluded that the newexperience-based system should have the following characteristics:

Proceedings of The Twelfth (2002) International Offshore and Polar Engineering Conference

Kitakyushu, Japan, May 2631, 2002

Copyright 2002 by The International Society of Offshore and Polar Engineers

ISBN 1-880653-58-3 (Set); ISSN 1098-6189 (Set)

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Deepwater Ifield development data should be gathered, reviewed andevaluated oncomponent by component basis for similar componentconfigurations by applicable parameters including size, constructionarea and installation site.(1) Evaluated data is normalized to account for unusual cost

overruns.(2) Conceptual engineering designs be performed for each of the

major bottom-supported (i.e., jacket, CPT, SPS) and floating(FPSO, FPF, TLP, Spar) field development facilities so that thecost algorithms to be developed are based on engineering logic.

(3) Developed system is validated by selecting large number ofdifferent field developments and comparing the estimated costswith actual field data.

(4) Develalped system should be user-friendly to facilitate definitionof any combination of facilities to describe a field developmentscenario.

(5) Developed system should be flexible enough to allow the user tooverride default parameters and unit rates and defines her/hisown input.

(6) The system should incorporate a large database of supportinginformation so that the system becomes a resource to a morecomprehensive conceptual design work.

(7) Engineering logic and algorithms are upgraded and the databaseupdated on a regular basis to incorporate on-going changes in theindustry and ensure validity of the system.

In 1995, when JNOC and its JIP partners (see Table 1) initiated thework to develop an experience-based field development programapplicable to water depths reaching 2,000 m, deepwater fielddevelopment was considered feasible for a water depth range of1000-1500 lm. The project goals were stated in terms of the projectthe end product as a system intended to facilitate execution of fielddevelopment studies by providing:

1) CAPEX, OPEX and economic index for various deepwaterproduction systems,

2) technical and cost data on producing deepwater fields,3) information on companies involved in engineering design,

construction, transportation and installation of offshorefaciliities and the drilling contractors, and

4) wind and wave data worldwide.

The project objectives were achieved and a comprehensiveexperience-based field development evaluation system was developed.The basic building blocks for this system are shown on Figure 2.

PROJECT TASKSThe tasks undertaken to achieve project objectives included:

I) Review and assessment of field development in deep waterand the companies involved in it,

2) Review of producing field CAPEX and OPEX ,3) Conceptual design of deepwater production systems,4) Development of design models for deepwater production

systems,5) Development of economical evaluation models,6) Development of reference sources, and7) Development of experience-based evaluation system.

The tasks identified as (I) and (2) above, required gathering, review,evaluation and documentation of technical and cost data on deepwaterfields and the component systems making the production possible.These tasks were performed by I.D.E.A.S. (International Design,Engineering, and Analysis Services, Inc.). Conceptual design workscope addressed two basic and I2 alternative options. Variablesconsidered for each production system included the water depth,wave environment, number of wells and the production characteristics(i.e., oil, gas and water). Conditions incorporated into conceptualdesign are summarized on Table 2. The participants in these tasksare shown on Table 3.

DEVELOPMENTDevelopment Basis:

Field development scenarios vary depending on many parameters.However. many of these parameters can be placed in the followingthree groups and evaluated as to their effect on what kind of a fielddevelopment scenario is to be submitted for management approval:

* Site Characteristics: Site water depth, distance from shore,environmental conditions that influence loading (i.e., wind, wave,current, ice and seismic event) and the national law.* Reservoir Characteristics: Reservoir configuration, permeability andcrude characteristics, etc. that define production condition.* Export Characteristics: Crude characteristics such as the pour pointand cloud point, distance from shore and the regulations on flaringdetermine the export mode.

All of the parameters included in these three categories areindependent variables directly affecting the field developmentscenario. Reservoir modeling and analytical studies facilitatedetermination of required deck size and payload, number ofproduction and injection wells and the selection of either a pipeline ora shuttle tanker export alternative. Site water depth and the

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environmenl.al conditions facilitate elimination of field developmentconcepts nol. compatible with production condition.

Field development concepts compatible with environmental andproduction characteristics can be conceptually designed and thedesign parameters associated with each design, such as thesingle-column versus the four-column TLP or a unitized circularversus pontoon hull semisubmersible, are identified as dependentvariables. Parametric studies conducted for each developmentconcept allow definition of most suitable configuration compatiblewith environmental, production and export conditions. Structuralsteel requirements can then be determined and the constructed costestimated. The study of transportation and installation alternativespermits estimation of their cost.

The dependent and independent variables affecting the fielddevelopment scenario are presented as flow diagram blocks on Figure3. This figure provides the user with a simplified version ofimportant items affecting CAPEX.

A similar approach was taken to develop the algorithms forestimating (operating expenditures (OPEX). Direct expenditures atthe facility were identified in terms of the number of personnel andtheir cost (i.e., salaries, burden, taxes, insurance, transportation to andfrom field), inspection and maintenance, intervention, workover,chemicals and other items such as the standby vessel, wheneverapplicable. Indirect costs associated with the supply base and thecompany head office support (engineering and management) weredocumented and appropriate cost algorithms developed.

Following discussions illustrate application of cost algorithms andtheir validation with cost data from many producing fields developedthrough the use of both bottom-supported and floating compliantstructures

Illustration:Although it is not possible to discuss the specifics of each

developed ,algorithm, several illustrations are provided to indicatetheir application. The size and the weight of the process equipmentcan be determined either from normalized equations utilizingreservoir data or based on overall production and irijection capacitiesand the database on process equipment. The size of the productionfacility and the overall deck area requirements are also determinedbased on the normalized equations in the design model or from thedatabase on production facilities.

The structure steel weight is determined based on the structure size

and the database on weight-to-volume ratios. Fabrication costs arecalculated based on the steel weight using the cost-to-weight factors.These ratios and factors are defined as unit rates in the system. About300 unit rates in total were developed to define the topside equipment,structures, mooring systems, flowline/pipeline/ riser anddrilling/completion and the normalized default unit rates for thematerial and fabrication of structural systems ranging from FPSO toSPAR are shown on Table 4. The default unit rates can be easilymodified based on the latest available cost data to ensure the accuracyof cost estimates.

Validation:Cost calculation algorithms were validated by generating the cost

data for more than 40 fields worldwide and comparing the generatedagainst actual field data. Typically four or more fields were selectedto validate the cost algorithms for each field development concept,namely the floating compliant FPSO, FPS, Spar and TLP and thebottom-supported SPS, CPT and the jacket. Fields selected for thevalidation effort are identified by field development concept, operator,field name, water depth and the location on Table 5. The cost datagenerated for each field development concept is plotted against actualcapital expenditure (CAPEX) and presented on Figure 4. Asillustrated on this figure the estimated data compare quite well withthe actual expenditures and the level of accuracy is substantiallybetter than the plus or minus 30 percent, a typical requirement forestimating cost during initial field development studies.

Validation of OPEX data was somewhat more difficult as theexpenditures not only vary as a function of the region and theapplicable rules and regulations on peisonnel and safety issues butalso on many other parameters including the activity on the facility(i.e., frequency of intervention, production profile) and the operatorsmanagement philosophy. However, adequate number of operatorscooperated by providing very useful OPEX data. Developed costalgorithms were compared against field data from the North Sea andthe Gulf of Mexico. The estimated OPEX for the overall field livescompare quite well with field data on hand. Further refinement ofoperating cost expenditure algorithms will be necessary to betterdefine the OPEX on a year-by-year basis.

Estimated CAPEX and OPEX data facilitate development ofeconomic models to determine the return on investment. Economicindexes such as IOR, NPV and POT are calculated based on theproduction profile and the lifecycle costs based on CAPEX andOPEX. The basic architecture for the economic analysis isillustrated on Figure 5. As shown on this figure, CAPEX parametersare input to define the site, reservoir and export characteristics to

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allow development of cost data based on both design and the database.The key OPEX parameters shown on Figure 5 are determined basedon both cost algorithms and the unit rates in the database. Some ofthese vafue:s could not be refined to a desirable level and thusexpressed as a percentage of CAPEX applicable to the fielddevelopment.

CAPEX and OPEX data together with economic input parametersare incorporated into economic evaluation model to determineeconomic feasibility of the field development concept underconsideration.

CHARACTERLSTICSDeveloped evaluation system is effective. user-friendly and

provides the user with comprehensive information on deepwater tiefddevelopmem. Information generated for capital and operating costscan be directly used to perform economic evaluation of alternativefield development scenarios. Other readily available informationincludes the status of technology. contractor company informationand environmental data worldwide.

The system has the following features:1) Evaluation system and the database are on a CD for use on a

personal computer.2) Field development plan can be readily defined with the use of

a small number of pre-defined tools in the Tool Box on theinput screen (see Figure 6).

3) Complex field development scenarios can be detined.4) Unit rates can be readily revised by the user (i.e., the user can

override the unit rates and default values).5) Cafc:ulation results can be filed and used for further

processing.6) Wimf and wave data including long-term distributions, arestored for 65 areas in the world.

APPLICATION EXAMPLESWork initiated in 1995 were completed in March 2001. Developed

system was used by JNOC recently to perform several fielddevelopment evaluations (see Table 6). The gravity base structures(GBS) are not suitable to develop deepwater fields and, therefore,GBS was not incorporated into present evaluation system. However,GBS costs can be estimated by substituting GBS for the jacket andreplacing the unit rates for the Jacket by the unit rates applicable toGBS.

The developed system is useful not only for field developmentevaluations, but also for performing a wide range of parametric

studies and estimating the cost of structure fabrication andinstallation.

FUTURE PLANSThe database for deepwater field development and the company

data will be updated annually or bi-annually. Cost algorithms will berevised/upgraded and the new aIgorithms added, as necessary

New concepts such as Mini TLPs, BLS, FPDSO, DME-FPSO,GTL-FPSO and LNG-FPSO will be incorporated into the evaluationsystem as soon as adequate number of ffeld data becomes available onsuch units. GBS applicable to ice environment witI be also added tothe evaluation system in a few years following Sakhafin andKamchatka developments. Data from field developments in waterdepths greater than 2000m will be added to the database in nearfuture.

CONCLUSIONExperienced-based initial field development evaluation system

provides reliable data and can be effectively used for ffefddevelopment concepts in various areas. The database in the systemwill be updated and the algorithms upgraded to reflect on-goingchanges in the offshore industry. The default values on unit rates canbe easily maintained. The developed experience-based fielddevelopment evaluation system is beneficial to the industry in threespeciffc areas:

(I) It provides a reliable system to evaluate CAPEX, OPEX andeconomic indices for a wide range of field developmentoptions,

(2) It facilitates execution of parametric studies, and(3) It offers a comprehensive database on deepwater fields,

environmental data for 65 areas around the world and theproject experience and resources data on companies involved indeveloping those fields.

It is acknowledged that a conference paper cannot present all of thedetails of a comprehensive experience-based assessment method forfield development options and costs. The primary objective of thispaper is to present general characteristics of the work accomplished todate. The secondary objective is to solicit input for future upgradingof the developed system.

ACKNOWLEDGEMENTSThe authors express their appreciation to their respective company

managements and thank all of the joint industry project participantsfor their support in the preparation of this paper.

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Table 3 Conceptual Design CompaniesConccpl Designer t

FPS. FPSO. FSO NICK-._. . ._---..Jacket JNOC. Ocean Engineering Research. .WI (Compliant Piled Tower) NKK_--. --.-SPAR After EngineeringTLP -

--. ---MODECSPS (Subsea Tie-Back system) Japan Drilfing Co.

Table I JIP Sponsor[Ocean Engineerfng Research Inc. 1 NPEX Corporation I

Japan Energy Development Co., Ltd. Tcikoku Oil Co., Ltd.

Table 5 List of Cost Comparison htfomw%!dsTabYe 2 Conceptual Design Conditions Type Operator NIUSE WD(PIatfomVField) (ml

FPS BP-Amoco NanHaiTiaoZhut 310 chiosGOM

NSNS

i

BmilNS

cllimNANA

EEX COOpcrNorsk Hydra Visund FPSNorsk Hydro Njwd APccmblaS PB-18Norsk Hydra Troll-C

FPSO BP-Amoco Naa Hai ShcapliBP FoinavcnBritish Gas khiehalliinPctrobras PB-34Statoil Norm

*I

Table 4 Unit Rate Examples for Structures1 Bern 1 System 1 Material Cost 1 Fabrication Cost 1 TCXPCO ~C8:rpraiO

TLP British-Borneo MOrpah 1 509536310a74893980

conow JollietSW Same A!&II NWShell MarsShCH RMVP_..SPAR 800 S/ton 2,200 $/tonTowide Steel All Svstems SO0 S/ton 1.900 $/ton. iAccommodatio All Systems 24,000 S/person 24,000 S/person

Outfitting Steel All Systems 2.000 S/ton 2,000 Wona&et BP Ambajaek

ChWKOll AlbaNorlhcmExxon H-wExxon HeritageNorsk Hydm GsebergBsstShell mP=Shell BuffwfnfdeBP-Amoco )ulrgnuo

134366328180313412186

Table 6 Examples of Field Development Study by DeepToolWater Distaoce to

ikeaProduction Rate We,,

Depth ShoreorH~st Gil GSSos concepttrn) Pfafon (km) (bpd) (Mhlscfd)South America l200 20 120,000 45 23 SPAR + FPSO + PipelineNorth Sea 95 20 30,000 40 5 SPS + Additional TopsideSakJteIin 500loo0 90 270,000 0 36 SPS or FPSOKmeharska 30, too 30 40,000 400 16 GBS + SPS + PipelineNote: SPS = Subsea Production (Tie-Back) System

lShell ITem:IT ~AmsmdaHess1Baldpate

TcMUt PctmnillsEneerch SPS 441Shell Malsa--F-hellExxon zirieShell T&CStatoil TOGINote: WD = Water Depth NS = North See and ShetlandGC = Offshore California GGM = Gulf of Mexico #PAR IChevron 1~

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_-___-_--..-.--- ..--- ---...-. -. .2,500 -*

I Fig. 1 Deepwater Devclopmenl

j - 2,000 .- __. .+FiS ;.. .- - - -.1

: . ipso x._ ._... OSPAR . ox -- . ,f 0

--/ ;;

t: I8 .&S...-,.-,, :8.1,l .#

, o! .: : ; I !i 1,975 1,980 1,985 1,990 1,995 2,000 2,005Year _..._-.-.- __.__ - ---.... ---.-- ___ ----____.. ..__ -- J

i 1 EconomicRevaluation lij i OPEX:,. rn&.

i.IiIii.Iii.IiiiI

~...~ ._..

-. -. -. ,Y-. -.-.Reference

I) Company Capability2) Development Status3) Wind and Wave4) Technical level

I 0 20 40 60 80 [ILI-,I... Max Wind Velocity bn/sec)I. / 1 Company_Datab= v ~.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-*-.-.-.-.-.-.-.-.-

IiI.Iii.Ii.I.Ii.-.-.-,-.-.-.-.-.-.-.-.-.-,

Fig. 2 ProgramScheme

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Now: 88DB - DaIsbarePM - Proircl tzJ+

Prmnetric Case Study. * ._............... ................ ................ ............,.......,...... ..........,.... ................ ........... . ..... ..-,

I[

ProductionII

ljcction Well IB&c Itab? II Amogemcnt

3,000

f2,000

Qz-0-ziiz

1,000

00

Fig.3 CAPEX Calculation Algorithm

Fig. 4 Program Validation

I.000 2,000Rogram(MMS)

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(Prmnncl+Vwiables) a Pcrccntcr~cCAPEX x Pereenrage

Site Opemtionx Prrcrntagc

Fig.5 Economic Evaluation

Fig. 6 Input Screen for Concept Study

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