What lies beneath . . .
  from: Offshore Engineer
  by: Jerry Greenberg
  Thursday, April 03, 2008

On the surface, oil and gas operations in the US Gulf of Mexico appear to be back to normal, but offshore drilling contractors must contend with a seasonal market that restricts the water depth capability of jackups and semisubmersibles during hurricane season. In tandem, the industry also faces a crunch of oilfield divers. Jerry Greenberg reports.

Two and a half years since hurricanes Katrina and Rita ravaged the central Gulf of Mexico, the storms’ effects are still being felt. It took many months for the industry to bring oil and gas production up to pre-storm levels by repairing damaged pipelines and platforms.

One of the obstacles at the time was a lack of divers and construction barges to meet the frenzied demand immediately after the storms. Diving companies subcontracted divers from other firms outside the Gulf, while other diving companies flocked to the region. Some of these companies hired divers from other firms, which didn’t exactly add diving capacity to the market.

The Gulf now appears to have finally returned to its ‘normal’ activity levels, but looks can be deceiving. For one, diving companies are still as busy as ever plugging and abandoning wells in preparation for platform salvage operations on structures the hurricanes damaged or toppled. One diving company executive predicts that completing this task could take another two to three years.

The US Minerals Management Service (MMS) agrees, based on the estimated percentage of wells abandoned and platforms removed.

For offshore drilling contractors, the Gulf has become a seasonal market, divided between hurricane season, which runs from the beginning of June to the end of November, and the rest of the year. Bottom-supported rigs for the most part are required to have larger air gaps than normal, which reduces the water depth in which they can drill during hurricane season.

Contractors can apply for waivers, however.

The Gulf ’s supply vessel industry escaped the hurricanes largely unscathed due mainly to its ability to quickly move boats out of harm’s way. However, they are also the recipient of a relatively dismal shelf drilling market the second half of the year due to the region’s seasonality. Boat companies with deepwater equipment are just about as busy as drilling contractors with deepwater and ultra-deepwater rigs.

The diving market in support of oil and gas activities has returned to a more normal level following the hectic activity after the hurricanes in 2005, but not long ago. ‘During the past six months we returned to a much more normal state for the industry,’ says Mike Willis, Global Industries’ senior director of diving for the Gulf of Mexico. ‘That’s not to say that the salvage and well completions that are ongoing hasn’t created a lot of work because there is still a lot of work going on.

‘I think that the salvage of those platforms, the number of platforms that are still laying on the bottom damaged and toppled by Katrina and Rita, could go on for at least another two to three years.’

Making progress

Caryl Fagot, MMS spokeswoman at its New Orleans office, says operators are making progress on well abandonment and platform removals. While she doesn’t have firm figures available, she says that the industry is about 40%-50% complete with well abandonment, but only about 20% of the damaged platforms have been removed.

‘Operators are submitting applications for permits for the work they need to do,’ Fagot says. ‘We are seeing (equipment) resources freeing up more so that work can be done. From what we hear, companies expect a lot of that work to be done this year and probably through the first quarter of 2009.’

It’s not a quick process.Willis says his company was contracted by three different customers for well abandonment and salvage operations that began in mid- 2006. By the end of 2007, only three platforms were removed. The slow pace is partly the result of the mass of pipes and wellheads damaged and tangled when the platform was hit. The pipe has to be removed and a temporary tree installed over the well before the operator can enter the well for abandonment. Once the wells are secured, derrick barges move to the site to begin platform removal operations.

‘Some of the more problematic sites, wells that have mudslides or a lot of damage with bent pipe and those type of things are going to take a lot more work and will take much longer (to complete),’ Fagot says. ‘We know that companies have had problems getting the resources to do the work, and that is part of the problem.’

The approval process for a platform removal application can take two to three weeks, although the process can be significantly quicker if necessary. Permits to P&A a well could be in hand in a matter of a few days if only one well is at issue. If more than one well at a site is to be abandoned, or if the process is more involved, obtaining a permit for that work could take a few weeks.

In some cases, the operators have applied for a rigs-to-reef status, meaning the platform would be salvaged and sunk in an area designated as a rigs-to-reef site. In this case, the operator applies with a state agency for the permit, and this process could take several months for approval.

Seasonal drilling market

The Gulf becoming a seasonal drilling market is almost purely the result of the hurricanes of 2005. The decision by some operators to reduce their drilling activity during the more active hurricane months and increase their drilling levels as the season winds down also affects the drilling market.

Many major operators left the Gulf ’s shallow waters for the more lucrative deepwater and ultra-deepwater. Taking their place in the shallow waters are smaller independents, some of which have only recently waded into the Gulf, and they are averse to taking on the risks of rig downtime as a potential result of hurricanes and tropical storms. If they can drill their wells outside the hurricane season, they will.

Additionally, new criteria for drilling on the shelf during the hurricane season dictates that jackups and submersibles increase their air gap by around 20ft to allow higher waves to pass below the rigs. In numerous instances during Hurricane Katrina, huge waves literally picked up jackup rigs and deposited them miles from their original location. High waves capsized other jackups.

Increasing the rig’s air gap reduces the water depth in which it can work for several months of the year. This, in turn, prompted some operators to postpone wells in shelf waters of 250-300ft or so until after hurricane season, adversely affecting the jackup market. Many contractors hoped that shelf drilling activity would increase after November, but that so far has not happened. The low natural gas price is said to be the culprit. Not all of the jackup rigs were faced with larger air gaps. Nabors Offshore, which operates several small workover jackups, says it received waivers allowing them to work their rigs at the designed water depth mainly because the rigs are rated for very shallow waters to begin with.

‘We were able to obtain waivers (from the MMS) for our jackups on a case-bycase basis,’ says Nabors Offshore president Jerry Shanklin. He notes that the company had not been denied such a waiver since his rigs generally work in shallow water close to shore.

Work boat market

Lower shelf drilling activity also affects the Gulf ’s work boat industry; however, another factor at work is the age and type of vessel historically used. The industry’s shallow water workhorse is the old standard 180ft supply vessel that has been around for decades. When jackup activity began declining, so did utilization and dayrates of these vessels. Supply vessel owners report that these boats are becoming more available and their dayrates are continuing to decline.

The new generation of supply vessels is also affecting utilization of older vessels. In many cases, new designs are about the same size and even smaller, but their design allows for larger capacities for liquid cargo such as drilling fluids and fuel. They are also lighter and faster than the typical 180ft unit.

Additionally, these new boats are equipped with dynamic positioning to enable them to work in deep and ultra-deepwater. Many times when an operator requires a supply vessel, the newer boats displace the 180ft vessels on the shelf, even though an older 180ft boat may be available.

Some vessel operators, mainly those with newer vessels in their fleet aimed at the deepwater market, say that 2008 could be a busy year due mainly to the extremely active level of deepwater drilling. Shelf activity could also see an increase.

‘Our client base is primarily deepwater, but there is a good mixture of both (deepwater and shelf),’ says Billy Guice, vice president for sales & marketing for Rigdon Marine. ‘Operators have a mixed bag of activity and are including shelf opportunities this year also, not only deepwater.

‘Everyone says the shelf is dying and it is all deepwater these days,’ he continues. ‘I hope it is all deepwater, but the shelf is not dying, it’s just dicey.’OE

SAME-DAY SERVICE:

Valves specialist W&O recently opened a facility in Houma, Louisiana, the company’s fifth dedicated to the Gulf of Mexico region. With its central location, W&O says the new 12,000ft² facility, with Nathan Thomassie Jr serving as operations manager, will enable same-day distribution of marine valves, pipe and fittings to regional shipyards, production platforms and drilling rigs.

‘In many cases we will be able to supply our customers in less than an hour,’ predicts W&O president and CEO Jack Guidry. ‘In time-critical businesses, such as the oil and gas industry, every minute counts.’

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