Buffalo hoists the FPSO standard
On 29 December 1999, just 15 months after project sanctions by BHP Petroleum (BHPP) and Canadian Petroleum, the Buffalo venture FPSO produced first oil before the end of the millennium, the project was on (it’s original) schedule and nearly 15% below (it’s original) budget. Moreover, within 48 hours, the facility was producing in excess of its 40,000 b/d design capacity; and since then, has had an uptime of 98%.
By now the floating production industry has had such a critical mass of floater and FPSO projects which have gone dramatically wrong that it is possible to finish an FPSO project a year behind schedule and more than 30% above budget and still claim ‘average performance’. In contrast to most such recent industry performances, the buffalo FPSO development illustrates ‘world class’ standards, if not by size, certainly by performance.
The Buffalo field was discovered in October 1996 when BHPP tested the Buffalo 1 well. The well flowed at 12,000 b/d of light 53 degree API oil with a very low GOR of 120. At that time BHPP held 100% of the WA-260-P Permit. Expectations for the area were high, both in terms of the expected reserve at Buffalo and the potential of numerous surrounding prospects.
In the following 20 months 3D seismic was interpreted, a buffalo delineation well was drilled, Canadian Petroleum farmed in and became a 505 joint venturer in the development and the permit, and a series of nearby exploration of wells were drilled all of which failed to find additional commercial reserve. At the end of that process, the Buffalo field as confirmed as a marginal field with about 20 million barrels of proven plus probable reserves. The upside was that the small field could be produced at high rates with only two to three wells and drained in less than 3 years.
In addition to the small size of reserves, the Buffalo development phases a rather unusual physical environment. The field is located in the northern Timor Sea, close to other petroleum developments with Lamineria (AOG January/February) about 12 km to the north-west and Elang about 55 km to the south-east. However, the Buffalo reservoir lies just under a shallow water bank – known as the ‘Big Bank’ – which is some 12 km long and about 3 km wide. This bank is effectively flat with a water depth in the range of 30-27m, while its edges drop off nearly vertically to a depth of 330 m.
Development Scheme
‘At the initial stages, every reasonable development scheme was analysed,’ recalls Buffalo project manager Thyl Kint, now BHPP’s acting business development manager in Perth. ‘However, since the crude has to be exported by tanker regardless of the scheme, FPSO options remain hard to beat for small fields with short field lives. In those circumstances, a single temporary floating facility to both process and store is almost always more economical than either a permanent production and storage facility (e.g. a gravity structure with storage), or a two facility scheme with a process facility (e.g. a process MOPU or platform) and a separate storage unit (e.g. an FSO).’
While the shallower water on the bank saved the cost of subsea wells, enabling the development wells to be drilled by a jack-up through a minimal wellhead structure, it also complicated matters where the FPSO mooring and riser system were concerned as the tanker excursions exceeded the actual water depth available to accommodate them.
The obvious solution as to moor the FPSO just of the bank in deep water. However, in order not to bring the flow lines in the deep water it was decided to moor the FPSO just off the steep edge of the bank.
“This rather unusual configuration had the result that the Buffalo Venture is both BHPP’s shallowest water and deepest water FPSO since two anchors sit in less than 30m depth while the other four sit in over 300m depth,’ notes Kint. ‘I don’t believe that was ever done before, nor ever will be again.’
Combining these technical parameters with the short field life mean that the optimum development scheme for Buffalo consisted of a rig-installed, minimum wellhead platform, producing to a nearby, leased by BHPP operated, permanently moored, converted FPSO.
By mid-1998 everyone had agreed on a way forward, time had been spent preparing the project team, tenders, tactics, and the like and things started to move at lightning speed, says Kint: ‘For about 18 months of the project team and my life everything seemed to happen in a blur,’ he admits. ‘The pace was just relentless. At 15 months after board approval in September 1998, this is the fastest full conversion FPSO development yet undertaken by BHPP Petroleum.’
Competitive contracting
Early on in the project it was determined that the actual contract strategy and the quality and thoroughness of the contract documents would be essential for achieving project success.
Point one in the BHPP approach to projects is that contracting must be very competitive. ‘Although this may sound reactionary, in an industry full of competing contractors there is no better long-term or short term commercial alternative than very competitive tendering conducted by a very competent operator team,’ explains Kint.
‘Obviously, the selection is not just low bid and long term relations, contractor/operator alignment and competence, do matter. However, we have proven that competitive tendering is compatible with either innovative contract schemes, or win-win arrangements, or non-adversarial projects.’
BHPP does admit, however, that success with this approach is only possible with well-defined and non-variable contract scopes, and excellent – not voluminous- technical specifications. Hence the competence of the operator’s project team is essential.
The second point in the company’s strategy is to utilize what it refers to as the split tendering/joint contracting approach. The concern this addresses is that when operators want to avoid interfaces and request major contractors to form an alliance before tendering, the result is often that some of the major contractors are desirable and compatible whilst others are not. In other cases, the low price of some contractors carries the higher price of others.
Hence BHPP chose to tender the leased FPSO, the offshore installation, and the supply of flexible flowlines separately. Subsequently, when only two commercially and technically acceptable contractors remained in each major category, the operator invited the remaining parties to join and submit a final tender, which did eliminate interface management. ‘In spite of what one would think, this does not really take more time, it actually narrows the possibilities and delays difficult negotiations between major contractors to a time when the field is limited and the scopes very well described and priced,’ claims Kint. ‘The joining up can happen in a very short time.’
Using this strategy the operator let its contracts as follows,
The wellhead platform that had been designed in advance by Worley Engineering was awarded to ASC-Engineering of Adelaide.
Icon Engineering of Perth was selected to co-ordinate the installation of the wellhead platform by a jack-up drilling rig. The rig contract was let to Reading & bates Falcon, which provided the Ron Tappmeyer jack-up.
The overall leased FPSO, riser, rigid flowline, and offshore installation contract was let to Modec Inc. of Japan. ‘The fact that Modec had, just a few months before, successfully brought on stream the Elang FPSO which BHPP operated at that time, was a helpful factor but certainly not one which allowed Modec to under-perform in regard to other tenderers,’ says Kint.
The FPSO bareboat lease, contract itself is quite innovative and includes some unusual commercial features. One of the features which makes it quite attractive is the inclusion of a small fixed day rate and a significant per barrel component with some additional performance factors. ‘This structure aligns both operator and contractor to maximize oil production while both parties share risk and windfall of oil revenue. It also provides a payment profile which significantly reduces lease costs as oil revenue declines thereby prolonging the economic life of the leased FPSO. This then allows the leased scheme to realize a reserve recovery not unlike that of a fixed capital development,’ explains Kint.
In addition the contract included schedule and safety performance incentives, as well as options to purchase the FPSO, modify it or extend the lease. Modec’s main subcontractors included Clough Offshore for the offshore installation, Coflexip Stena Offshore for the provision of flexible riders and Duco for the provision of the platform umbilical. In addition Sofec, which has a long-term agreement with Modec, was responsible for the provision of a single point mooring. It in turn sub-contracted the swivel to Framo of Norway. Modec also subcontracted design and project management of the process modules to Schlumberger in Singapore. Eventually, the FPSO conversion was awarded to Jurong Shipyard and construction of the process modules to Hup Seng Engineering both in Singapore.
Wellhead Platform
In a remarkable piece of fast tracking given its limited experience of such structures, ASC-Engineering built the wellhead platform in just a few months. ‘One of the things we did was to bring in Jim Walvoord as BHPP’s construction supervisor,’ explains Kint.
‘He had worked in senior construction supervision positions on the Bullwinkle, Amberjack, Pomapano, and Baldpate mega-platforms and tower in the Gulf of Mexico.
People thought this was work overkill for a tiny 330 ton platform. However, with his broad experience he ended up functioning as key technical consultant and construction adviser which significantly contributed to ASC-Engineering’s success in finishing the platform on time,’ adds Kint, describing this as ‘a clear example of BHPP’s approach – very competitive tenders followed by a very collaborative execution’.
The platform was towed from Adelaide around Australia’s east coast, complete and in the upright position, for installation in the Timor Sea. The rig installation and setting operations under Icon’s supervision also went well.
However, the drilling and grouting of the piles was pretty much a disaster and BHPP admits that the principle cause was its engineers’ failure to heed Icon’s advice to gather additional ‘open hole stability soils’ data. As a result the holes kept collapsing under reverse circulation drilling with water. A conventional mud drilling solution was eventually adopted, requiring the fast track mobilization of insert piles to meet foundation requirements. ‘It was certainly not our finest hour,’ concedes Kint, ‘and we did spend a few millions which we certainly could have saved.’
The drilling and completion of the development wells, on the other hand, was hailed as a complete success, with Kint paying tribute to the BHPP d&c team for a program that was ‘safe, effective, fast, with excellent completions and way below budget’.
FPSO Conversion
In Thyl Kint’s view, the successful conversion of the 1976 105,00dwt merchant tanker Spirit by Modec and Jurong Shipyard into the Buffalo Venture flies in the face of some widely proclaimed FPSO industry conceptions.
‘The M/T Spirit seemed almost like the caricature of the vessel one would want,’ he explains. ‘It was a vessel selected at the last minute, owned by some small “low cost” ship owner. It was operated under a flag of convenience, with a third world crew and in quite poor state of repair, with roach-infected quarters and a decrepit engine room. When we went to inspect it, you could see the fresh paint around the drums and the ropes. The segregated ballast was full of oil. The engine room still had traces from an Exocet missile impact 15 years earlier in the Arabian Gulf. It was farci-comical!’
Kint believes a key contributor to the success of this daunting, fast-track conversion job, and the quality conversion which resulted, was the willingness of the three principle parties (Jurong Shipyard, Modec, and BHPP) to work together and pool their collective experience, skills, know-how and dedication.
At a late stage in the project, it appeared the schedule was slipping under the load of initially unexpected conversion work. But following BHPP’s offer of some contract relief as well as an additional financial incentive scheme, Jurong and Modec were able to meet the operator’s target shipyard completion date. The FPSO left the shipyard for ‘harbour trials’ on 8th November and departed Singapore for the Timor Sea on 18th November.
Buffalo’s unusual shallow/deep single point mooring (SPM) was designed by Sofec in Houston. In parallel, BHPP contracted Marin in Holland to perform model tests, which, in spite of the industry’s belief in analytical models, yet again proved to be invaluable. Kint himself admits to some initial skepticism, but now concedes: ‘Without the model tests, major air gap problems could have been experienced at the SPM once in the field.’
Sofec contracted Malaysian Shipyard & Engineering to build the single point mooring. It was delivered on time and, says Kint, has proven to be very user-friendly and effective.
Process Facilities
Of all the Buffalo project components, the items that saw the biggest schedule pressures were the process modules. Initially almost a month was lost as BHPP, Modec and Schlumberger agreed on the arrangements for sub-contractors to perform the design. Finally the parties agreed to use the resources of Triune Engineering of new Delhi, India, but in Singapore under joint BHPP, Modec and Schlumberger supervision. It took some time to complete the design with work continuing non-stop over Christmas 1998 and New Year 1999.
Subsequently, the two process modules were tendered in Australia and South East Asia in the hope of increasing Australian content. However, Australian prices turned out to be 170% to 200% of Singapore’s.
By the time the process modules were subsequently awarded to Hup Seng, timely completion of modules had traded its ‘tough assignment’ tag for an ‘enormously challenging’ one. ‘By late June 1999, only the basic structural work and some pipe spools were ready,’ recalls Kint. ‘Then in just two months, these two fairly large process modules were entirely assembled, piped, instrumented and tested. All this was done on very limited space with a very small water front access. The success is certainly a tribute to the stamina and focus of Schlumberger, Modec and Hup Seng’s team.’
By early September the process modules were shipped to Jurong Shipyard with a reasonable manageable amount of finishing work left to do.
Riser System
The flowlines on the bank were selected to be rigid steel lines both for thermal(cooling) and commercial(cost) reasons. However, initially it was expected that the commercial risers would hang in a simple catenary’s fashion from the edge of the bank to the nearby FPSO SPM.
After initial engineering, this proved to be impossible. Belatedly, the riser and dynamic umbilical configuration had to be changed to a pliant wave configuration including distributed buoyancy and a complex system of two gravity bases per riser to keep the risers off the seabed in the ‘cliff’ area but on the bank, under all design circumstances.
‘Again, all parties worked hard together,’ declares Lint. ‘BHP Petroleum is certainly indebted to CSO(who handled the riser design) and Clough(who handled the gravity base design) for their competence, ingenuity, and ability to react quickly and effectively.’
In the end, he says, the riser design worked out perfectly, with the risers draping from the top of the bank, over the ‘cliff’ face, to the SPM.
An unusual mix of activities attended Buffalo’s offshore installation phase. In addition to the expected FPSO, mooring, and riser installation, a pair of two kilometer rigid steel flowlines had to be laid and tied onto the existing wellhead platform. The unusual gravity bases for the riser system had to be set in the seabed. Moreover, where most of the flowline work had to be executed on the bank in very shallow water, the FPSO installation and the ‘other end’ of the risers and umbilical, had to be installed in quite deep water.
Clough offshore opted to use its small, non-powered Java Constructor derrick/lay barge to complete its work. This barge, with just 270 tons lifting capacity is by no means a sophisticated tool. However, Clough made the best of it by a combination of ingenuous and cleverly engineered procedures and top-class supervision and management. Installation of the bases, tie-in of the risers to the bases, and tie-in of the flowlines to the platform, all in the very special physical environment of the bank, were successfully executed by a novel combination of diving, rowing and surface operations.
The Buffalo Project is the sixth successful FPSO or floater project, which BHPP has executed in the region. However, in terms of successful handover of a finished project to operations, the company’s previous history was somewhat chequered one.
Operation input became one of the major improvement areas where BHPP wanted to achieve success with Buffalo. A close link with BHPP operations was established from the concept stage. At project sanction the project was moved to BHPP’s Australia Operated Asset Team in Perth. FPSO operations personnel were placed on the team and integrated into the project design and construction supervision team. And, operations personnel played a major role in the final stages of the project.
Operations
In terms of the nature of operations, as this was a bareboat charter, BHPP was to operate the FPSO. However, with only a three-year filed life the company wanted to hold the FPSO Management team, whilst the actual operating staff could best come from an operations and maintenance contractor which ahs a long term commitment towards this type of activity.
Provision of operations personnel and maintenance for the FPSO was tendered in the market, and a joint venture of Modec and Schlumberger emerged as the successful tenderer. BHPP is quick to point out, however, that award to Modec was no forgone conclusion, and that it had indeed come close to awarding the work to another party.
As operations were planned, an optimal FPSO crew size of 18- three from BHPP and 15 from the contractor- was identified, giving Buffalo Venture the distinction of having the lowest manning level of any FPSO operating off Australia.
Overall the hand-over from project to operating team went very smoothly, reports Kint. ‘The early mobilization of operations staff to the shipyard where they played a critical role both in the physical completion of the work and the commissioning of the equipment was essential in the project’s success,’ he maintains.
‘Upon first oil, the FPSO was bale to meet its design rate in 48 hours and has since had an uptime of 98%,’ adds Kint. ‘This has only been possible because of both the quality of the product, and the competence and dedication of the small operating team. Routine operations are now established. The FPSO has regularly produced in excess of 50,000b/d and from BHP petroleum’s standpoint the Buffalo Project certainly illustrates a very successful hand-over from Project to Operations.
The Outcome
In a final analysis, in spite of a marginal reserve pool, the Buffalo Project was delivered with an excellent safety record, on schedule, an d is operating reliably, generating value income to both BHP petroleum and Canadian Petroleum, as well as Modec. In addition, it was completed about 15% below its approved US $88 million capital budget, and the lease and expected operating costs over its three-year life are also 15% below that for which the project was sanctioned.
‘Regardless of how one looks upon it, this project is a success,’ concludes Thyl Kint. ‘In terms of performance it ranks in the top 5% of most categories. All the contractors involved, the project teams and the operating team deserve enormous credit for what they have accomplished. I am honored to work with all the people who made this a reality.
‘Yes, we had some engineering and schedule challenges during the project. Yes, there were some things that could have been done better. Every project ahs such items. However, the clear focus by a competent team on effective contracting with strong relationships enabled all these challenges to be met.’
‘This project is living proof that, right now, there is a body of people and contractors out there capable of successfully and rapidly delivering complex FPSO projects. It also proves that with the right people and attitudes, perceived gap between operations and projects or between marine culture and offshore culture, can be bridged easily.’
‘We certainly plan to embed the successful lessons from Buffalo into BHP Petroleum’s organization,’ adds Kint. ‘We are also keen to share the lessons learned and our successful way of doing business with the industry.’
COURTSEY: ASIAN OIL & GAS MAY/JUNE 2000
