Floating into position
  from: Offshore Engineer
  by: Darius Snieckus
  Tuesday, April 29, 2008

With 50+ FPSOs on the global orderbook and another 100 being planned for or studied, the floating production market could hardly be in a more bullish cycle. Darius Snieckus speaks with Georg Sverdrup Onsrud, CEO of new entrant FPSOcean, about setting out one’s stall as a builder-owner-operator at a time when ‘almost anyone can buy a tanker and convert it’.

Installation at Drydocks World Dubai recently of a pair of equipment modules on the erstwhile Panamax shuttle tanker Nordic Laurita may have escaped the notice of most in the offshore world, but for FPSOcean chief executive officer Georg Sverdrup Onsrud the event was ‘a major milestone’ for the Oslo-headquartered outfit, moving its flagship floating production vessel, soon to be rechristened DeeP Producer 1, another step closer to sailaway this year. Scheduled for completion this summer, the shipshape dynamically positioned FPSO, designed for 400,000 barrels storage and production of some 40,000boe/d, is one of two being built for FPSOcean at the UAE yard, with the Aframax tanker Semakau Spirit in line to begin its conversion into DeeP Producer 2, as part of company plans to float out as many as six deepwater vessels ‘in the next four to six years’.

It is easy to feel confident in the FPSO sector these days. Record crude prices, deepwater development activity, and the rising popularity of early production strategies have made for a heady mix that is creating a boom in floater conversion and newbuilding, with more than 150 FPSOs either on the global orderbook or in the planning stage. And Onsrud, who established FPSOcean in 2005 on the back of a 25-year career in the offshore industry that has included stints in management at Fred Olsen Production, Aker, and Stolt (now Acergy), is among the optimists – though only partly for market-led reasons. For much as the industry’s appetite for new FPSOs has grown, so too has the number of ‘specialist’ floating production contractors.

‘It’s true that the sector is enjoying high demand at the moment but it is also true that many established FPSO companies are struggling somewhat because there are so many new companies out there now fishing from the same pond,’ Onsrud offers. ‘These new companies are converting tankers but few of them have any technological advantage to offer. Some of them may have a big balance sheet or maybe have tankers in sister companies, but, really, almost anyone can buy a tanker and convert it these days. That’s no big deal.’

‘Still,’ he adds, ‘with so many FPSO companies around it has been important for us to first identify where we think the future market growth will be, and secondly how we can benefit from using technology that will help us stand out from the crowd.’

Starting with DeeP Producer 1, FPSOcean aims to distinguish itself as a value-adding niche player in the marketplace, offering ‘unique technical solutions’ for extended well testing, early production, and deepwater field developments in benign and meteorologically hostile regions via a fleet of DP FPSOs. DP is the thing, he says. For deepwater – where some 70% of the worldwide floating production spend is forecast to be concentrated through to 2011 – ‘the deeper the water the more competitive you are with dynamic positioning, there being no water depth limits linked to mooring’. Likewise, for early production projects, a DP vessel ‘can sail straight from shallow water into deepwater or vice versa very swiftly’. And because DP FPSOs need to be able to disconnect from their risers in the case of failure of the dynamic positioning system or power black-outs, the vessels’ design is ready-made for hurricane-prone offshore areas.

‘You can see the appeal of this design already with the DP Helix Producer floating production unit that will be installed this autumn to replace the tension leg platform on the Typhoon [now Phoenix] field in the Gulf of Mexico that was damaged during the Katrina and Rita hurricanes,’ notes Onsrud, as well as the recently-approved plans by Brazil’s Petrobras to deploy the region’s first FPSO to develop the Cascade and Chinook fields in the deepwater Walker Ridge area of the US Gulf.

Structural and marine systems engineering for the conversion of FPSOcean’s DeeP Producer 1 was carried out by Inocean/Maritec, and detailed deck arrangement handled by Icepronav. EIT engineering, power distribution and control systems have been delivered out of Norway by Siemens, which has also supplied the vessel’s 2 x 17MW dual fuel gas turbines. Isle of Man-headquartered Lamprell fabricated and assembled the DeeP Producer 1’s M20 process and the M80/90 power modules at its Sharjah facility in Dubai, with installation taking place in February. Engineering and construction of the disconnectable riser buoy for the vessel as well as the hawser winch and offloading reel was undertaken by Scana, with the offloading hose coming from Sweden’s Trelleborg. Below the waterline, Germany’s Schottel has supplied 4 x 3.8MW azimuth thrusters, run by control systems supplied by Kongsberg Maritime, to compliment two existing CPP propulsion/bow thruster systems.

In the field, the vessel will have accommodation for 60.

Maiden voyage

With commissioning kicking off this month, current expectations are that the DeeP Producer 1 will complete its $239 million reincarnation and be ready for first oil on its maiden assignment – negotiations for which, according to Onsrud, are ‘very advanced with a number of oil companies’ – starting in the third quarter. To answer fast-approaching production and operation demands, FPSOcean in January followed up last autumn’s opening of new Rio de Janeiro offices by setting the seal on a technical, operational and maintenance management deal with Aberdeen-headquartered Bibby Offshore, which has in turn subcontracted Houston-based GreyStar to provide topside process operations and management for the vessel.

‘The way we looked at it, teaming up with Bibby and GreyStar was a good idea to make sure we had the strongest operational platform possible,’ says Onsrud. ‘Together their track-record is very good – and this is important to oil companies, of course, and so is important to us, as a new company. Hopefully their respective strengths – GreyStar in process operations in the US, offshore and on-, and Bibby with its history in the North Sea, Asia Pacific and the Middle East – will work together with our business plan to create a very good alliance. The next strategic step is to secure a first contract for DeeP Producer 1 and, with that done, move ahead with the fully-fledged conversion of DeeP Producer 2.’

To be converted from the double-sided Aframax tanker Semakau Spirit, the DeeP Producer 2 – ‘very much a carbon copy of DeeP Producer 1 in terms of layout and technology’ – will have the distinction of being the larger of the two sister vessels, with storage for 600,000 barrels of crude and production capacity of 90,000b/d.

FPSOcean’s long-term plan as a builderowner- operator is for ‘four to six vessels in four to six years’ – depending on the evolution of the FPSO market. ‘It has been a little slow in 2007,’ Onsrud acknowledges. ‘But if you look at the number of discoveries made of late and the projections of the global demand for oil, we believe the market is on steady footing. Extended well tests and/or early production of some of the larger discoveries we have seen recently on both sides of the Atlantic are going to continue to be popular because they generate quick cash, allow for greater learning about a field’s reservoir, and – for some oil companies with stock exchange listings – mean they can book the reserves sooner. All of this is what we want to facilitate.’

Petrobras’s headline-grabbing Tupi and Jupiter finds off Brazil, each thought to hold upwards of 5 billion barrels, he reckons, are confirmation of FPSOcean’s business plan: large reserve deepwater discoveries that will require reservoir learning and fast-tracking to first oil so as to produce the high volume cash flow needed to support long-term staged field development.

If there is a friction hindering FPSOcean’s fast-moving plans, it is that of the currently overheated activity levels in the offshore industry that are causing capacity constraints and having a negative knock-on effect on the timing of oil companies’ upcoming field development projects.

‘Many of our prospective clients appear to running behind on their previously stated ambitions – either because they don’t get their drilling rigs in time or have troubles getting their engineering teams up and running and so forth – and this is resulting in postponement of commitments to development activities, including FPSO lease contracts,’ Onsrud notes.

However the wheel of fortune may turn in the current market for FPSOs, Onsrud fancies that FPSOcean’s ‘distinction’ from the majority of its peers in the sector as a designer and builder of DP FPSOs will stand it in good stead in the near-term. ‘Yes, we are building on speculation, but we are building very different vessels from the others,’ he underlines. ‘There was some speculative building of FPSOs in the 1990s that made life very difficult for certain companies for some time, but they did eventually find contracts for the those vessels and everyone has forgotten about the bad times now that these FPSOs are making money.’

‘In Norway you currently have PetroProd, Aker Floating Production, Sevan Marine and ourselves all building on spec – there are different shades of grey here – and Prosafe recently bought two hulls,’ Onsrud continues. ‘It is my feeling that the market can absorb the conversions under construction. But, as with Bluewater [Energy Services, which had the Aframax tanker Aoka Mizu on offer for conversion for several years before signing on with Nexen to build an FPSO for the North Sea Ettrick field in 2007], contractors may have to be willing to wait a little and suffer some financial pain before these vessels find work.’

As conversion of its flagship FPSO heads into the home stretch, Onsrud is at once putting his faith in market forces and what he sees as FPSOcean’s unique selling proposition: DP FPSOs fashioned as ‘a versatile response to [the] new requirements’ presented by deep water, early production and extended well tests.

‘We are not just another FPSO company. And the engineers that are joining us as we grow seem to see the reward in working within a company that has technology at its heart,’ he concludes.

‘It has been very rewarding to see our ideas coming to fruition after three years. The big prize – our first contract – is yet to come, but we feel our business plan is being borne out by oil companies which have been very welcoming to us because they see the sense in our solution. The Seillean, the Munin, the Crystal Ocean – which has tiny storage – these are the only other DP FPSOs.’

People are saying: “This is a good idea, why hasn’t anyone thought to do it sooner.” Well, we are doing it.’ OE

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