Surf City shakedown
  from: Offshore Engineer
  by: John Bradbury
  Wednesday, April 09, 2008

If you believe one player in the Scottish subsea sector then only an accident of geography can explain why Aberdeen, or, more precisely, the suburb of Westhill, can justifiably claim to be the subsea umbilicals, risers and flowlines (Surf) capital of the world. Technip’s Aberdeen headquarters is in Westhill, some of Subsea 7’s operations are already there, and Acergy will be joining them in ‘Surf City’ next spring, as John Bradbury reports.

Technip: ‘We have always been here,’ says Ian Stevenson, Technip’s senior vice president for the North Sea and Canada, declaring his company’s Westhill credentials. ‘I think I was one of the first ones who coined the phrase Surf City because you will have all three major players in the world subsea game within the Westhill industrial estate.’

Asked why, he says: ‘I think it is purely down to the availability of real estate in Aberdeen and Westhill is a very good location to be. It is outside the city and easy to get to if you live in Aberdeen.’ Today, Technip has 750 personnel based there.

Avoiding traffic, which often clogs Aberdeen’s main arteries, is part of why companies like Westhill. ‘It is a very pleasant place to be,’ adds Stevenson. ‘It is very easy to get to the airport from here. Westhill is a little town in itself.’

Technip’s global offshore fleet is managed from there, through its Offshore Operations Services unit. Headed by senior vice president Steve Woodward, this unit is responsible for the operation, maintenance and repair of Technip’s global subsea assets and equipment, and for major upgrade and newbuild plans.

‘I am running a very busy region for Technip,’ explains Stevenson. ‘Out of our total fleet utilisation, 45% is for the UKCS, the North Sea generally, and Canada.’

Group engineering expertise is maintained there too: ‘Our offshore engineering division for the globe is here. It provides specialist project support and is one of two of the group’s units responsible for R&D activities,’ explains Stevenson. ‘One of the division’s main areas of expertise is rigid pipe.’ Headed by Brett Howard, the division provides expertise on soils and fracture mechanics. Its staff, all Aberdeen based, serve all Technip’s global regions – the North Sea,West Africa and the Gulf of Mexico.

Projects

Although subsea project execution is provided by Technip units worldwide, Aberdeen handles the UKCS, Dutch, Danish and Irish sectors and supports a Canadian engineering centre. Typically UKCS projects range in value from $10 million to $100 million. However, the Aberdeen unit has been called upon for international project execution too, including the Ivory Coast and in the Mediterranean, with values in the $200-$600 million range.

‘On occasion we do projects on behalf of other units’, says Stevenson. ‘For example, last year we completed a job for CNR on the Baobab field in West Africa – a $200 million project which we managed from Aberdeen.’ Technip is also looking at another large project for Burullus Gas – the joint venture between UK-based BG Group and Egypt’s national petroleum company.

Considering the current market, Stevenson sees plenty of work. ‘The level of activity is significant. There is a huge amount of activity on the UKCS at the moment but also elsewhere as well – Norway is extremely active.’

Stevenson points to the high level of changeout opportunities, covering riser replacements on FPSOs, considerable amounts of field maintenance, and pipelay for oil majors, which is keeping his and other Surf fleets busy.

Middle-tier operators such as Talisman and Nexen are also generating much new work for the Surf specialists. ‘We are doing quite a lot of work on Duart for Talisman, and we completed Tweedsmuir last year,’ reports Stevenson. Oilexco, Tullow, Newfield and RWE-Dea are also issuing new tenders, while Technip is also providing EPIC platform step-out work for satellite fields and Statoil is contracting ‘a huge volume of pipelay over the coming year’. Norwegian Surf projects include Glitne and Tyrihans Skarv and Gjøa, Vega and Ormen Lange phase II for Norsk Hydro, plus Talisman Yme – where Technip is to install 36km of production, water injection and rigid flowlines under a Euro110 million EPIC contract.

This is despite the fact that some of the North Sea’s headline projects of the last few years –Buzzard, Snøhvit and Ormen Lange – have virtually been and gone. ‘There is a hell of a lot of activity,’ Stevenson says.

Regional hotspots remain, and for Stevenson, Angola rather than Nigeria, remains key in the African offshore arena. ‘That is my feeling from conversations with our West African guys,’ he observes. ‘And in Egypt we see another phase of the Simian/West Delta Deep development.’ Bidding will start soon on another phase of West Delta which will be another big Surf contract, while there is also work with Amerada Hess in Egypt to bid for early next year.

Turning to colder climates, Stevenson says his company has been closely following developments at Shtokman too (OE last month). ‘We are the only subsea contractor with a facilities capability, and they are looking at spars [on Shtokman] as well,’ he notes, pointing out that via the Pori yard in nearby Finland Technip has already provided the hulls for several US Gulf of Mexico spar platforms.

Vessels

Keeping fleets up to date is crucial, and five additions are planned by Technip. One is Skandi Achiever, a dive support vessel due to go on contract in the third quarter this year.

‘We are also building a new vessel in Norway, a larger DSV,’ reports Stevenson. This is due in service at the end of 2008, for a Statoil inspection, repair and maintenance contract. Also under way is a life extension programme on the DSV Orelia.

A middle-market pipelayer currently under construction for Technip, and due in service by 2010, will sit between its large capacity Deep Blue unit and the North Sea-focused Apache.

Cluster

Effectively Westhill has become a significant business cluster, and this has been noticed by Scottish Enterprise, which values the global Surf sector at about $32 billion and the UKCS market alone at $1.3 billion.

Stevenson, a Scottish Enterprise Grampian board member, says: ‘The main contractors are here and the supply chain companies are around us.’ Those supply companies include ROV specialist Perry Slingsby, a former Technip company now operating on its own.

Despite the hectic pace at present, Stevenson discounts the immediate likelihood of more sector mergers and acquisitions. ‘I think we are all too busy to think about that,’ he says. ‘Everybody is probably doing quite well in the subsea industry, so everybody is quite expensive.

‘You just never know what is around the corner,’ he adds. ‘The oil price is one thing – to be able to plan effectively has always been a difficult thing for the industry, but we have all taken our risk with the vessel building which has been announced.’

Acergy: Due to move into its imposing new 17 acre Westhill headquarters building in March next year, Acergy puts the value of global Surf market activity in 2007 at about £15 billion on an EPIC basis, including the costs of procurement of materials such as line pipe and umbilicals. ‘There is some inflationary aspect to that, and that is for all procurement, not just construction,’ explains Tim Sheehan, the company’s Aberdeen-based vice president for Europe and Canada.

It’s a big number and a hefty proportion of that will be handled through Aberdeen. Clearly Sheehan wants his share. ‘Typically history shows the company has 20% of the global Surf sector through global operations,’ he says. ‘We have about £1.5 billion per annum in our particular region and then there will be a similar volume in the Norwegian sector and therefore across North Europe and Canada we have some 20% of the global market.’ Of course more would be welcome, perhaps between 25% and 30% of the global business.

In 2003, Acergy put in place a new business blueprint which consolidated its services for Surf, IRM, field development and trunkline installation. ‘Four years on, and a large proportion of that work will be handled through Aberdeen, which has long been the hub for this kind of activity,’ Sheehan points out.

Projects

‘We work regionally but our fleet is managed from Aberdeen,’ he adds. ‘In the UK sector our cycle time is much shorter – 18 months or less – our projects move much faster and in some cases subsea construction projects are running parallel to drilling programmes. ‘This can lead to disappointment when wells fail to come in and if projects fail to materialise, as happened in the UK Southern Gas Basin with a number of projects, which have been postponed for now.’

Current projects for Acergy include tie-ins of water injection and gas export lines for the Maersk Dumbarton FPSO – formerly Kerr-McGee’s Global Producer III from the defunct Leadon field. Two hot taps are being performed for Shell into the Tampen Link line, and for Shell’s Starling field development and it is performing tie-ins on the Nexen Ettrick FPSO.

In recent weeks, Acergy has announced three new North Sea installation jobs together worth $120 million. One is to provide installation of a 16km well control umbilical for Statoil’s Alve development, tying into the Norne field FPSO, plus installation of a production riser, cabling, a subsea template and spools, and associated tie-ins to be performed in the third quarter this year and third quarter 2008.

Bluewater Industries has contracted Acergy also for installing a flowline, well control umbilical and tie-ins plus pre-commissioning for its Tristan North West field in the UK southern North Sea, scheduled for the third quarter this year. Additionally Acergy has been selected to perform a hyperbaric welded hot-tap into a 30in gas export line in the North Sea for an undisclosed client, due in the third quarter 2008.

Future contracts could come from bidding on Deep Panuke in Canada, involving long-distance tie-ins and infield flowlines, minimal facility platform tiebacks in the Southern North Sea, and the Don South West and Greater Don area developments, plus the ATP/Bluewater Cheviot project.

Vessels

Acergy recently agreed with Havila Shipping to build a new diving support vessel for northern Europe which will join its fleet in 2010. The vessel is designed to work in harsh environments with a 24-man saturation diving chamber, certified for Norway regulations. Features include a 250t crane, accommodation for 120, high transit speeds, an ice class hull and class 3 dynamic positioning. Jointly owned by Acergy and Havila, it will be operated by Acergy for ten years.

‘The addition of this new diving vessel continues our fleet rejuvenation programme,’ says Sheehan. Acergy’s ambition , he adds, is that the vessel will become a key asset in winning new Surf projects and allow the company to cover pipeline tie-in, hyperbaric welding and inspection, repair and maintenance work. Through the Seaway Heavy Lifting joint venture, a new 5000t crane vessel to be delivered by the Dutch Merwede shipyard early 2010 will also help augment Acergy’s offshore capability (see ‘Netherlands Offshore’).With its patented hull shape and class 3 DP, the new $460 million, 183m-long vessel, will target the North Sea, Mediterranean, Mexican, Middle East and Indian markets.

Markets

Although Africa’s Surf opportunities are concentrated on Angola and Nigeria, Sheehan points out some of those operations are controlled out of the US including ExxonMobil and Chevron, and others from Europe including Total in Paris. Acergy’s West Africa operations run from France.

‘You can run operations from wherever you want,’ he adds. ‘We have global awareness but we are locally based. You have to be in the local markets. You can take big management decisions where you like but you have to have local operations management.’

Having committed to a particular region with vessels, he says it is possible to see projects coming three to four years in advance which helps planning for future trends. But once a regional commitment is made, and vessels are allocated to specific projects, there can be the occasional disappointment too, ‘. . . if projects fail to materialise, as happened in the UK Southern Gas Basin recently’.

Consolidation

Asked about the likelihood of more merger and acquisition activity in the Surf sector, Sheehan, unlike Technip’s Ian Stevenson, feels that is highly likely. ‘I think the chances are it is going to happen across the sector.’

He cites moves by Oceanteam 2000 towards becoming a full-blown construction contractor, along with a number of smaller companies such as DOF, CSL and Deep Ocean, who are becoming more heavily involved in the Surf sector. ‘And TS Marine are moving up through the ranks,’ notes Sheehan. ‘You may well see some consolidation in the sector. But they have to demonstrate to the market that they have the assets and the management skills to compete.’

Now planning for the company’s upcoming move into its new three-level Westhill HQ complex – complete with its own restaurant, coffee bar and leisure facilities – Sheehan says he has started to see a slight easing of the squeeze on manpower this year, with more specialist engineers willing to relinquish profitable contract status for staff jobs. He sees 2008 as remaining busy for the Surf sector in Aberdeen with activity levels similar to this year’s. ‘I think everybody is still extremely busy.’ Hardware supply chain problems remain an issue though. ‘Still critical are line pipe, valves, control systems and flexible pipe,’ he says. ‘World steel shortages are part of the problem. Raw materials are still being stretched on a global scale.’

Subsea7: The several locations in Scotland’s oil capital occupied by Subsea 7 have their roots in history, following a series of mergers of heritage companies. But from late 2008, the company’s offices in the city will be relocated to one new building in Westhill – right next door to Acergy.

In addition to its existing presence in Westhill, Subsea 7 at present has a 12.5 acre site at Greenwell Road in Aberdeen, providing offices, workshops, warehousing and an outdoor storage area plus test facilities.

Also, at Stoneywood, it has a base for UKCS constuction and IRM work supported by its construction, project management and engineering groups. Support functions including document control, planning, logistics, procurement and finance are there also.

‘All our office personnel in the three existing sites will merge into the new Westhill building and we will redevelop the Greenwell Road site,’ reports Robin Davies, Subsea 7’s North Sea region vice president.

A civil engineer by training, Davies ran the merger of Halliburton Subsea from the Halliburton side, and then took up his current post on the formation of Subsea 7 in May 2002.

‘Westhill really has the best space for office development for the 1100 people we want to accommodate,’ explains Davies. ‘We were not aware Acergy had got their headquarters there then. It is just coincidence.’ The new site is due for completion and occupation in Autumn 2008.

Aberdeen is home to Subsea 7’s global executive management and its UK regional management and staff. From there, some West African projects are also executed. Much of its core subsea expertise earned in the North Sea, resides there. The new 12.2 acre Westhill site will primarily support UK and West African operations, and provide global support, accommodating up to 1000 staff.

‘With the exception of Brazil, most of the frontier work has been done in the North Sea. It still has the largest proportion of installed subsea trees, although the percentages are now increasing in other regions such as the Far East, the Gulf of Mexico and West Africa. But initially a lot of the subsea development was in the North Sea and there is a strong subsea capex and opex focus,’ says Davies.

‘We have had a relationship with BP from before Subsea 7 in supporting the Foinaven and Schiehallion fields in West of Shetland and that has given us a lot of capability and life of field operational expertise . . . and we will transfer that expertise to West Africa and to life of field contracts to support our EPIC work.’

Staying in Aberdeen has proved to be sound sense, too, he adds. ‘Because there has been an established subsea base here for some time, there is an infrastructure that has developed to support that.’

Because the North Sea has been the cradle for so much subsea technology, that has given Aberdeen a central role in the spreading of skills worldwide, says Davies. ‘If you look around the subsea industry now, you will find a lot of North Sea and Aberdeen personnel in a lot of other places. On the operational side, people have moved around and North Sea people are driving that forward.We are seeing some of the same clients who have moved on to other companies or who have started up their own companies.’

Vessels

Currently the company is introducing vessel support teams for pipelay – one in London and one in Aberdeen. ‘The operations team here will support the North Sea with about 10 vessels.’

From Aberdeen, Subsea 7 UK is responsible for revenues of around $800 million including Norway. Like its competitors, the company has embarked on a substantial fleet upgrade programme to ensure assets can deliver the services clients demand. Seven new vessels will augment the Subsea 7 fleet, taking it up to 22 units by the end of the decade.

Two of the new additions, Seven Oceans and Seven Seas, ‘are both designed to work in the so-called Golden Triangle of Brazil,West Africa and the Gulf of Mexico’, says Davies.

Seven Oceans, a reeled and rigid pipelayer equipped with a 400t pipe tensioner and a 3500t capacity main reel, underwent sea trials in May and is at work on Chevron’s Blind Faith development in the deepwater Gulf of Mexico. Seven Seas, currently in the Merwede shipyard in Rotterdam, is a new flexible pipelayer with a 400t vertical lay system, 400t of J-lay capability, a 400t crane and a 3000t carousel. Delivery with pipelaying equipment is due 2Q 2008.

Other new vessels include the Seven Sisters, contracted from Siem Offshore; while the Normand Seven, an ROV and subsea construction ship for flexible pipelay with top tension capacity for 300t and for water depths up to 2000m, joined Subsea 7 in July this year targeting work offshore Brazil.

Skandi Seven, a new construction vessel to be fitted with ROV and module handling equipment, is due for handover 3Q 2008. Also, the new Seven Atlantic dive support vessel, due to launch early 2008 for delivery in 2009, is being built for a Shell underwater services contract and features a 24-man saturation diving chamber.

The Normand Subsea 7, a purpose built ROV support vessel, is due to be delivered in July next year with the Skandi Bergen set to join the fleet the following month.

Expanding the Subsea 7 fleet from 16 to 22 has taken two years of planning and will, when complete, have required an investment of $800 million including equipment.

Projects

Offshore Norway, Subsea 7 landed EPIC deals worth $340 million for the Vega and Troll 02 developments. On Troll 02, it will install two flexible flowlines and an umbilical, and for Vega, 45km north of Troll, it will install one 14in and two 12in flowlines from Vega Sør to Statoil’s new Gjøa semi-submersible, plus umbilicals and three MEG lines. More recently the company landed a $45 million award from Total UK to install a 3km flowline bundle for the Jura development, tied back to the existing Forvie field, with offshore work slated for 2008 using its controlled depth tow methodology. OE

And another thing . . .

While the big three enjoy significant Surf market shares, others are seeking their own slices of the same cake.

One of the more interesting recent developments has been the establishment of Seastream, the joint venture company set up by UK flexpipe manufacturer Wellstream and Dutch-owned vessel operator Sea Trucks, which has the Surf market very much in its sights. The JV has already landed its first supply-and-install contract, for BHP Billiton’s Pyrenees development off Western Australia, with delivery scheduled in 4Q 2008.

Oceanteam Power & Umbilical, based in Aberdeen, Amsterdam and Bergen, has been beefing up its Surf capability across the North Sea. Established in 2004 as a flexible, umbilicals and power cable installer, Oceanteam has made a series of moves to strengthen its offshore capabilities. It recently bought its first two ROVS – 150hp Triton XLS heavy work class units from Perry Slingsby Systems – in a £5 million deal to support installation work. The first unit was due for delivery in August. Oceanteam, in Waterloo Quay in Aberdeen, also signed a letter of intent to acquire a new cable burial plough initially for offshore renewable energy projects, marking out its commitment to the cable installation sector. The new plough, sourced from SMD Hydrovision with a water jetting facility, can bury cable to a depth of 3m and is rated for deployment in water depths to 3000m .

With Dutch offshore contractor Tideway, Oceanteam announced a five-year joint venture agreement recently that will see the two tender for specific turnkey subsea power and cable projects globally on a mutually exclusive basis (see ‘Netherlands Offshore’).

In a further development, Oceanteam agreed to hire the cable-lay and repair vessel Team Oman for 55 days in a Euro3 million deal with vessel owner Nexans to provide umbilical repairs in the Middle East. The contract meant reorganising pipeline trenching for Gaz de France in the Dutch North Sea. Instead, Oceanteam has hired the REM Etive from TS Marine for the GdF scope in place of Team Oman, and the firm is already contracted for installing the power cable from shore to Statoil’s new Gjøa platform.

Two new construction support and flexible installation ships are due to be brought into operation by Oceanteam next year: North Ocean 102 is scheduled for delivery in the first quarter 2008, and North Ocean 103 by the fourth quarter next year. North Ocean 101, another construction support ship, is already contracted for three years with Bourbon Offshore commencing third quarter this year.

Another Aberdeen player, TS Marine revealed in June it had boosted its revenues to £26.9 million in 2006 compared with £10.4 million the previous year. TS has chartered two newbuild MT6040 vessels, due for delivery in December 2008 and April 2009 from Spain’s Astilleros Huelva shipyard, for subsea intervention and decommissioning work. TS has also chartered the Havila Harmony and the REM Etive – the latter being delivered in June and equipped for multiple roles including diverless decommissioning and intervention, in addition to supporting subsea construction for Oceanteam. OE

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