FPSOs in the U.S. Gulf: A field-tested option
FPSOs in the U.S. Gulf: A field-tested optionFloating Production Storage and Offloading systems are in use worldwide and may be particularly well suited to ultra-deepwater areas. Meanwhile, cautious regulators probe every avenue to assure safe U.S. applicationsPeter M. Lovie, Business Development Manager, Bluewater Offshore Production Systems Ltd., Houston
The dilemma of a perceived fixation on a vulnerability with storage and offloading is compared to wide acceptance of other routine import tanker operations in U.S. waters, with a focus on the tough position in which the Minerals Management Service (MMS) is placed with its responsibility to assure safe operation. Tables of data show relevant statistics of the world’s FPSO fleet and contrast FPSO attributes with other floating production systems. Introduction Not all deepwater fields are of the monster size that makes headline news. There are likely to be many more smaller fields in the ultra-deep oceans of the world — and profitable development of them is not easy in such deep water, certainly not at today’s oil prices. The worldwide popularity in recent years of tanker-based systems, i.e., FPSO vessels, has created a substantial body of industry experience that is important for deepwater developments. FPSOs are remarkably transparent to water depth, e.g., a 100-m (328-ft) water depth FPSO from the North Sea can be adapted fairly readily for operation in 1,000-m (3,280-ft) water depths, or even for 2,000-m (6,560-ft) depths. This versatility, plus the residual value of an FPSO after an initial stint producing at one location, can make the vessel leasable at economic rates, such that the risks operators take can be somewhat mitigated for these smaller fields. Examples of the progress and maturity of FPSO technology are given to substantiate these views. Growing World Fleet The world’s FPSO fleet has been growing in recent years, with robust projections from some observers for future fleet growth, even in today’s world of low oil prices and consequent frugality. Currently, there are about 74 FPSOs in the worldwide fleet, either operating or under construction, up from about one-third of that only five years ago. Like the U.S., Brazil looks to increase production in deep water, with production achieved in 2,000-m (6,560-ft) water, largely from a fleet of nine FPSOs, of which seven are VLCC size. However, the greatest FPSO concentration is now in the North Sea, with 21 of the world’s fleet to be used by 12 different oil companies — and in one of the most tightly regulated and harshest environments anywhere. Despite these trends and the pioneering of new deepwater development options in the Gulf of Mexico, there is not a single FPSO there, either operating or committed for operation. Versatility, Attributes As noted, an FPSO from shallower water can be readily adapted to great water depths. More and more, this transparency to water depth is being recognized. To cite a current example, Bluewater’s Glas Dowr FPSO has been working in the North Sea for Amerada Hess in 95-m water at the Durward and Dauntless fields. It has been released from that location and is available for other assignments. Even in these difficult times, there is a remarkable range of developments to consider for re-deployment of such a vessel, because of this insensitivity to water depth. Unlike other floating production systems, a tanker-based system can readily tolerate much greater vertical loads from mooring lines and risers. While longer mooring lines for deep water may certainly cost more than the North Sea mooring system for Glas Dowr in its present water depth, overall, the production facility for deep water is about the same and costs are not radically different. Recent studies have confirmed that this example vessel can tackle far deeper waters (like many FPSOs) by changing the mooring and riser systems. Designed for the North Sea, she can handle various physical and regulatory environments in many other parts of the world; and operation in 1,000-m, or even 2,000-m water, is a practical possibility. Flexible risers may be able to be used in many instances out to about 1,200-m (3,936-ft) depths. Beyond that, some form of hybrid riser or even a configuration of steel catenary risers becomes appropriate for that hypothetical 2,000-m water depth assignment for the Glas Dowr. But the vessel and its equipment would be essentially the same. Ongoing advances in riser technology may further enhance FPSO cost effectiveness. The Glas Dowr example also highlights how — in the event reservoirs do not perform as expected — it is no longer a matter of commercial failure through having the production platform in the wrong place and blowing almost the total investment. Now it becomes possible to cut losses and move the FPSO to another location. In this case, the total value of the vessel was not planned as being written off during the field life, even if everything had gone as planned. The choice was made to use a leased vessel, with the residual value risk being put off to the contractor owning the vessel. The result is reduced downside exposure, better than with any other deepwater development option. The contrasting and more positive example is Uisge Gorm, also a leased FPSO, which was used to produce Amerada Hess’ Fife field in the North Sea. In this development, the reserves could not stand the cost of a permanent platform plus export pipeline, or the amortization of a complete FPSO against the development. So the leased FPSO made the economics work. This time, fortune smiled on the operator, as two subsequent reservoirs were able to be tied in and produced by the same FPSO, with it staying on location well beyond the initial contract term. The result was low risk going in, and the ability to add production later. Concepts and advantages. The following points summarize some basic concepts and benefits of FPSOs:
Further, for some time, FPSOs have been readily accepted by operators and regulators for use in harsh environments and in areas of stringent regulation and strong and vocal public attention. Currently, 12 operators use 19 FPSOs (two not yet committed) in the UK and Norwegian sectors of the North Sea, i.e., one can argue that they have set a reasonable precedent for using FPSOs in the GOM. But actually obtaining the regulatory approval in the U.S. is another story. Producing in harsh environments. While FPSOs can readily enough be designed to survive in harsh environments, e.g., many years of industry experience in typhoon areas, they can also be designed and managed to keep on producing in harsh environments, while still adhering to very stringent operating safety criteria. Figs. 1 and 2 illustrate how production continued aboard Uisge Gorm during a Force 12 storm in the UK North Sea in November 1996. This storm was believed to have created the equivalent of a 50-year event, and was roughly equivalent to a Category 1 or 2 GOM hurricane.
Production continued because conditions were safely within the pre-approved operating conditions set by the contractor and pre-agreed with the field operator and government regulators — all on the basis of the many safety cases that were investigated for every conceivable operating condition. The result is that safe, reliable, high-uptime operation is feasible in virtually any environment. Trend to contractor owned. The North Sea has led the recent trend toward use of contractor-owned FPSOs that are leased to oil companies; there almost half of the FPSOs are owned by contractors. Elsewhere, there is a smaller proportion of contractor-owned units, roughly one-third. The advent of such leased facilities means that residual value risk may be put off to a contractor, reducing capital exposure and, therefore, often making shorter-life field developments more viable. All this is in marked contrast with other field development options for ultra-deep waters, in which contractor-owned (leased) facilities are not normally considered, as little or no residual risk can be taken with these options. For example, an FPSO can be more readily reused than a TLP, so there is no market in TLPs on a lease basis. Bigger vessels, deeper water, more services. Bigger vessels are being used — witness the growth of the Petrobras fleet with seven FPSOs of VLCC size, each of which can store two million barrels of oil. And FPSOs are being installed in deeper and deeper water, e.g., the large Petrobras vessels are for 800 to 1,000-m+ (2,600 to 3,280-ft) water depths. More complex systems are required. Besides production processing, water injection plus gas lift services are now commonly required, both on the typical 105,000-dwt size of North Sea FPSOs shown earlier and the 280,000-dwt size deepwater vessels operating and under construction for offshore Brazil. The next generation of large FPSOs planned for the deep waters of West Africa indicate a similar trend. Storage / Offloading Dilemma In The GOM The ghost of the Exxon Valdez oil spill still haunts us in the offshore world. And the effect of this ghost of years past is most important in the ultra-deep waters of the GOM, where the advantages of tanker-based systems may be greatest. Regulatory approval of vessels for deepwater floating production systems that would be designed to have onboard crude storage — whether FPSOs, or conceivably SPARs configured to have storage, or even some other hull type — all are faced with a stringent approval process in U.S. waters. The same is true if they are going to offload to another tanker and there is a risk of spill. Thus, the 22 oil companies that make up DeepStar have seen it worthwhile to fund a $1 million-plus effort in the preparation of an Environmental Impact Statement (EIS) for MMS to carefully assess the effect of FPSOs on air and water quality, as well as socio-economic and other effects. To that end, MMS is funding a Comparative Risk Assessment to see if FPSOs are comparable to well-proven existing GOM production systems that use floating production systems and pipelines. If all goes well, DeepStar believes this effort may help clear the way for regulatory approval of FPSOs and their introduction in the GOM. If it had not been for the up-front DeepStar initiative, individual GOM operators would have been faced with a two-or three-year delay for regulatory approval, with the attendant risks of the unknown outcomes from public hearings during the EIS process — effectively ruling out consideration of this development tool when it becomes needed and other more immediate and less controversial field development options are available. This concerted industry approach additionally avoids controversies over individual operators being "demonized" by those who might want to pressure the status quo. The "perception" of risk. The issue is not really the hull shape, but its use to store production and the risk of spills if it offloads that production to another tanker, i.e., the Storage and Offloading Dilemma. Thus, a floating production system which uses a tanker hull only to provide the deck space and load-carrying capacity for the production equipment — but which does not use the storage capability — would not be faced with such a regulatory delay, in this writer’s opinion. The same thing is likely true if it also exports oil production by pipeline instead of offloading to a shuttle tanker. While the MMS is observed to take this position for oil and gas production installations that use tanker-based FPSOs, many other tankers operate in the GOM in storage mode for transport of imported oil; but they are under the regulation of the U.S. Coast Guard (USCG). The USCG maintains that, by law, the Oil Pollution Act of 1990 (OPA 90) applies to FPSO operations on the U.S. Outer Continental Shelf (OCS), i.e., this is not a matter of regulators’ opinions. Under OPA 90, new and converted vessels would need to be double-hulled although, theoretically, an existing single-hull FPSO built before OPA 90 took effect could operate in the U.S. OCS. OPA 90 will not require all vessels operating in U.S. waters and the OCS to be double-hull until 2015. Crude oil imports require something like three to four lightering operations each day in the Gulf, where foreign-owned tankers of VLCC or ULCC size are unloaded into smaller tankers for deliveries to refineries. Many in the industry view these long-accepted lightering operations as being carried out using standards and criteria less stringent than for the offloading operations common with FPSOs. But despite the large daily lightering traffic for years, there have been no "Valdezes," no disasters. The tankers being lightered are often single-hull vessels, frequently manned by third-world crews, i.e., the standards being used are different than those proposed for FPSO operations in U.S. waters — and different than those mandated and well-proven for offloading operations in North Sea waters. Data presented by DeepStar at the June 1999 series of MMS scoping meetings (which were held at the start of the EIS process) showed that oil spills from lightering were incredibly low — of a total 2.5 billion bbl oil lightered in the GOM during 1993-1997, by all operators, only 850 bbl was spilled, or about 0.3 bbl per million bbl (0.00003%). The report, Oil spill risks from tank vessel lightering, National Research Council, 1998, describes the lightering process and its performance record in detail. These lightering operations, the fact that they adhere to USCG regulation and their obvious success over the years would demonstrate that the standards applied are clearly effective. A large, single-hulled Floating Storage Offloading (FSO) vessel with no "production" capability was installed in 1998 in Mexican water in the Cantarell project in the Gulf of Mexico. It stores up to 2,300,000 bbl of treated crude awaiting export, which is offloaded to one tanker — or even into two tankers simultaneously — for export to the U.S. and other destinations. This system is practical and safe by many accepted standards, but again, quite different from what could be foreseen for FPSOs not too far away in U.S. Gulf waters. MMS/USCG in tough position. The dilemma is that despite these many successful and safe tanker operations going on every day, the regulators continue to deliberate on even more stringent standards to deal with FPSOs producing offshore oil at locations in the GOM — a phenomenon that many believe stems from politics and the bad experiences in Alaska a decade ago that still haunt us. So, on one hand, we want to be safe and consistent with existing offshore production practices, while on the other hand, the practicalities of crude oil imports continue under a different set of standards, which have been proven safe in many vessel-years of operations. It appears that no one quibbles over the principle of "super safe and squeaky clean," but just over the means of getting there. This writer believes that this Storage and Offloading Dilemma really comes from the political and prescriptive frameworks that have grown over the years, and which are now not very well suited to dealing with this new FPSO phenomenon that our regulators are wrestling with. The author joins with the many oil companies who feel that we are very fortunate indeed to have the dedicated and practical professionals we deal with in MMS and USCG. So the intent here is really a questioning of the system that we and the regulators both have to live under, and an expression of the frustration in why we cannot accelerate and learn from others elsewhere in the world who have sweated through the difficult questions now before us. Conclusions FPSOs are well proven and widely accepted in both the deep waters of Brazil and in the harsh environments of the North Sea where stringent regulation is the norm, meaning that reasonable precedents exist for their use in the hurricane-prone and carefully regulated deep waters of the Gulf of Mexico. The laws of physics favor tanker-based systems for ultra-deep waters, e.g., 5,000 ft+, because of their large amount of economical real estate and large load carrying capacity. But use of the hull for storage and offloading is controversial in U.S. waters, which prompted the DeepStar initiative with MMS in preparing an Environmental Impact Statement to assess the use of FPSOs in the GOM. Alone among the deepwater development options, FPSOs offer the flexibility of either staying in one location as other nearby fields are later proven and tied in, or being able to be relatively economically re-deployed from one location to another, thereby allowing development of smaller reserves that otherwise would stay in the ground. Acknowledgment Thanks are due John George and Allen Verret of DeepStar’s 4100 Committee, Deborah Cranswick of the Minerals Management Service, and Lt. Cmdr. Bill Daughdrill of the U.S. Coast Guard for their thinking and suggestions, which have added valuable perspective and clarity to this article  The author
Copyright © 1999 World
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his article discusses
the important role that Floating Production Storage Offloading vessels (FPSOs) can fill in
the deepwater and ultra-deepwater areas of the U.S. Gulf of Mexico. Discussions note the
broad applications in other world areas, and list the many basic concepts of FPSOs and their
advantages, with particular emphasis on flexibility. Examples of North Sea applications show
ability to continue to operate in harsh environments. 
Peter
Lovie, business development manager for Bluewater
Offshore Production Systems, Ltd., Houston, is responsible for technical and commercial
dealings for new projects in North America. Prior positions include vice president
engineering for Bardex Subsea. He spent seven years as U.S. representative for FELS of
Singapore, responsible for marketing / negotiation of many MODU construction contracts.
Previously, he owned / managed an engineering company which pioneered a new-generation of
jackup designs. Mr. Lovie earned a BSc in civil engineering from the University of Glasgow
and an MS in applied mechanics at the University of Virginia. He has authored several
patents and more than 60 technical papers / articles. He is a registered professional
engineer in Texas and countries of the European Union. 
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