BUILDING

FUTURE
JPT SPECIAL SECTION: OFFSHORE HEAVY LIFT

FOR A STRONG

The Heerema semisubmersible crane vessel Thialf lifts the tower top section of the Chevron Tombua Landana compliant tower during installation of the facility offshore Angola in 2008.

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BY JOEL PARSHALL, JPT FEATURES EDITOR

or the offshore heavy lift vessel industry, the market remains very challenging with a return to robust conditions likely to wait several years. Reflecting the lag in the way multiyear project activity responds to changes in the economy, it wasnt until late 2009 that the sectors utilization rate began to plummet. From a 70%* rate in August 2009, as calculated by market research firm ODS-Petrodata, utilization sank to 46% by December and 37% by January 2010, edging up only to 42% by the end of the first quarter. With the delay or cancellation of several new vessel projects, as utilization tumbled, excess supply began to dwindle. Utilization stabilized and even pushed above 72% in August, before settling at 56% for the yearhardly a brisk pace but at least well off the early-year lows. While newbuild vessel activity did not disappear and continues this year, there have also been additional project delays and cancellations, according to Mark Rae, senior market analyst at ODS-Petrodata. I think the industry is going to start to see an uptick in 2013, where heavy lift contractors are indicating that operator interest is increasing, said Keith Smith, enterprise category manager for offshore installation and heavy lift at Shell International E&P. Even with the newbuilds coming on, there appears to be a growing demand. A major question remains on how soon field development activity in the US Gulf of Mexico (GOM) will return to levels comparable to those seen before the Deepwater Horizon disaster. The effect of the US drilling moratorium, now lifted, was to displace vessels to other global markets. Some of those markets were already beginning to tighten, according to Smith. When GOM activity picks up again, he predicts there will be a pull on resources. Bruce Gresham, vice president for North America at Heerema Marine Contractors US, said the utilization rate in the upper tier of the heavy lift market where his company operates is still healthy, although we have gaps. Looking at the GOM, he said, This situation on drilling permits, or lack of drilling permits, without a doubt is going to have an impact on a steady stream of projects going forward. Whereas 2013 looks to be a busy year for us here in the Gulf with some major facility installations, the moratorium on drilling will cause some projects that would have otherwise been executed in 2014 to slip back a year. But the opportunities are there, certainly plenty of prospects in deep and ultradeep water that will create a significant amount of work in the future. We have a bump in the road right now. Most other world markets appear steady, according to Gresham. However, the picture is looking markedly better in the North Sea. We actually see a very healthy market, driven by some upgrade programs on existing fields to increase recovery rates, he said. That can lead to new platforms that need to house additional risers. There is the windmillor, as some refer to it, wind parksmarket, and then there is also the

*Includes vessels of at least 500 metric ton lifting capacity.

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At left, the Heerema SSCVs Balder and Thialf (partly hidden) perform their work during the 2009 installation of Shells Perdido spar in the US GOM. At right, the Versabar heavy lift catamaran VB-10000 removes a fire-damaged GOM platform last year.

platform abandonment market. If you take the North Sea as the more traditional heavy lift market, the outlook is pretty good. Worldwide, according to ODS-Petrodata, the fleet stood at 100 vessels at the beginning of March, which included 12 newbuilds delivered in 2010 and one so far this year. Those 13 newbuilds were two more than the total number of new vessels delivered during 2007 to 2009, probably a reflection of the better times in which the investment decisions were made. In the superheavy category, often referred to as megalift, the global fleet has four semisubmersible crane vessels (SSCVs) and one crane barge with lifting capacities exceeding 5000 metric tons (MT). Beneath that level are 35 vessels in the 1500 to 5000 MT lifting range where much of the recent and anticipated newbuild growth is concentrated. The remaining vessels are in the 500 to 1500 MT lifting range. The largest vessels are the SSCVs Thialf, owned and operated by Heerema Marine Contractors, and S7000, owned and operated by Saipem. Both have dual rotating cranes, with the Thialf capable of lifting 14 200 MT at a 31.2m radius and the S7000 capable of lifting 14 000 MT at a 42 m radius. Other vessels in the superheavy lift class are the Heerema SSCV Hermod with a dual-crane lift capacity of 8100 MT, the China Offshore Oil Engineering Company (COOEC) self-propelled barge Lan Jing with a single-crane lift capacity of 7500 MT, and the Heerema Balder with a dual-crane lift capacity of 6300 MT and pipelay capability. The Lan Jing, built in 2008, is the only recent addition to this heavy lift segment. The Thialf and S7000 were built in the mid-1980s and the Hermod and Balder in the late 1970s, although all have undergone major upgrades since then that each has represented hundreds of millions of dollars worth of investment. The number of newbuilds, according to ODS-Petrodata, is slated to rise to 14 this year, including the one already delivered. Seven more are expected in 2012 and two in 2013. A lot of the newbuilds on order are vessels in the middle range of lifting capacity, up to approximately 5000 MT, Smith said. We dont see any dual-crane semisub-

mersibles for the megalift market, like the Thialf or the S7000, being built. The vessel selection trend for newbuilds has a lot to do with the field development concepts the oil industry is embracing. Developers essentially have a choice of installing a fixed platform; tension leg platform (TLP); semisubmersible, floating production, storage, and offloading system (FPSO); or a spar. A semi, an FPSO, and a TLP really dont require the super heavy lift vessels because they are done in what we call quayside integration, Smith said. In these cases, the entire production facility is assembled and commissioned shoreside and brought to the installation site by means of a wet tow, where the facility is attached to its preinstalled mooring system and needed connections with any production and support infrastructure already in place are made. The megalift crane vessels, however, are active in the markets for installation of pilings, moorings, and TLP tendons. A fixed platform and a spar potentially need a heavy lift vessel, Smith said. But an increasing number of fixed platforms are now being installed by floatovers. In the floatover method, a fully assembled, commissioned platform topsides is brought to site on a transport barge, positioned over the platform jacket that has already been attached to the seafloor, and then lowered into its resting position on the jacket. Thus far, Murphy Oils Kikeh facility offshore Malaysia is the only spar installed by means of a floatover, a process that is especially challenging because it involves placing a floating system onto a floating body. The other 18 spars in the world have been installed with a heavy lift vessel, Smith said. Those spars included Shells Perdido installation in the GOM, the worlds deepest offshore production facility in more than 7,800 ft of water. The spars integrated topsides was installed in a US GOM record lift of 9,773 short tons** by the Thialf in early 2009. The market challenges for the offshore heavy lift industry have frequently been formidable, given the historically wide fluctuations in the price of oil, the booms and busts in the offshore industry, and the long lead times and huge
**8666 MT.

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JPT SPECIAL SECTION: OFFSHORE HEAVY LIFT

D
Computer-designed graphics depict the Allseas Pieter Schelte, slated for delivery in 2013. The dual-monohull heavy lift vessel is designed for single-lift installation or removal of large platforms and for pipelay operations. A) Slot at bow accommodates topsides section. Eight horizontal beams with hydraulic lift clamps are situated at either side to lift or lower topsides. At stern are tilting lift beams for jacket installation or removal. B) Topsides removal operation is shown. C) Beams at stern lift jacket out of water. D) Beams tilt back into rest position to lay jacket horizontally on deck.

capital commitments required for new vessel construction. Newbuilds planned and financed when capital is easier to attract can easily wind up delivered into falling markets. Thus, the inherent economics put considerable risk into newbuild investment decisions, and vessel retirements from the fleet are rare. Meanwhile, the oil industry over time takes on ever greater technical challenges that the fleet must face. Deeper, deeper, and even deeper is the way Jack Spaan, offshore projects manager at Jumbo Offshore, described one of the most basic challenges. He continued, If it is twice as heavy, it is four times more expensive. If it is twice as deep, it is four times more expensivewhich probably isnt completely true because it is more expensive than that. The trend, Spaan noted, is that the sort of developments being done are scattered geographically and tend to be in more hostile environments, such as west of the Shetlands in the Atlantic or the north of Canada, Newfoundland, hostile areas where you can have icebergs. And also in deeper and deeper water and deeper reservoirs in the subsoil. To address the market risks posed by more remote locations; uncertainty about the future pace of the platform decommissioning, or abandonment, projects; and the fundamental risks stemming from oils peaks and troughs; newbuild designs are often incorporating dual capabilities such as heavy lift and pipelay. Having the same vessel perform both functions on the same job would be the ideal scenario for both the contractor and the operator, Gresham said. However, even if that does not happen, the contractor has improved the odds of keeping the vessel at work because of multifunction capability. Either way, utilization is likely to improve. Said Smith, When we go out into these frontier areas, if we have a vessel that can do both heavy lift and pipelay, for example, it minimizes our mobilization and demobilization [transit] costs, which could be a significant part of the contract. In addition, most of these new vessels being built have high transit speeds, generally 12 to 14 knots. If you compare them with the big SSCVs, which have transit speeds of approximately 6 knots, the new vessels can transit between regions faster, be on location quicker, and enable projects to be completed sooner. Having a combination of capabilities will benefit the fleet, but there will be new challenges from a business point of view as well. You can do more, but the key will be managing your portfolio so that you optimize the utilization at the right value to generate a sustainable rate of return, Gresham said. In any case, with the age and condition of the fleet, vessel owners are at a point where investment in new capacity has to be made. And youre seeing it, he said, people are committing and building, and there is a lot of new capacity that is going to come on the market in the next few years, no doubt. Some of the new vessels that have just entered the fleet or will over the next three years include COOECs Hai Yang Shi You 201, a 4000-MT monohull crane and pipelay vessel with DP-3 dynamic positioning and

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JPT SPECIAL SECTION: OFFSHORE HEAVY LIFT

Born in the USA.

After a successful initial deployment last October, Versabars VB - 10000 returns to the Gulf of Mexico to fulfill a busy project schedule in 2011. Built in the USA, the innovative lift vessel and its predecessor the Bottom Feeder have pioneered the single-piece retrieval of topsides sunk by hurricanes.

www.vbar.com solutions@vbar.com
Houston, TX (713) 937-3100 New Orleans, LA (504) 392-3200

Versabar

The Power of Engineering Delivered

12-knot transit speed, delivered in the second half of 2010. The Versabar VB-10000, a catamaran heavy lift vessel, delivered in late 2010. The vessel consists of two customdesigned barges on which are mounted twin 240-ft gantry cranes. Four independent blocks, controllable in separate or synchronized modes, provide lifting capacity of 6000 MT, which could be increased by altering the block size.

With a DP-3 system now being commissioned and expected to be in operation by midyear, the vessel will be able to perform deepwater lifting and lowering. Seaway Heavy Liftings Oleg Strashnov, a 5000-MT, DP-3 monohull crane vessel with 14-knot transit speed, delivered in late 2010 and being placed into operation this year. The Subsea 7 Borealis, a 5000MT, DP-3 monohull crane and pipelay

www.seatrucksgroup.com

S e a Tr u c k s G r o u p

STG

Jascon 25 connected to the West Atlas Rig in the Timor Sea

DELIVERING THE DIFFERENCE

Sea Trucks Group is an international group of companies offering offshore installation services to the Oil & Gas industry worldwide. With its new DP3 offshore construction eet the group offers its clients efcient solutions for decommissioning and heavy lift services due to the large unobstructed decks of the vessels and crane capacities up to 1800 tonnes.

vessel with 13-knot transit speed, to be delivered in 2012. Heeremas Aegir, a 4000-MT, DP-3 monohull crane and pipelay vessel with transit speed of 12 to 14 knots, to be delivered in 2013. The Allseas Pieter Schelte, a dual-monohull, DP heavy lift and pipelay vessel with lift capacities of 48 000 MT for topsides and 25 000 MT for jackets. The vessel is designed for singlelift installation or removal of large platforms. At the vessels bow is a slot that is 400 ft by 171 ft, which can accommodate a topsides. Lifting and lowering is done by means of eight horizontal beams with hydraulic lift clamps, with an active motion compensation system in operation throughout the lift. Two tilting lift beams at the stern are used for jacket installation or removal. In pipelay configuration, the Pieter Schelte will be the largest pipelay vessel in the world. The vessel is slated for delivery in late 2013 to go into operation the following year. Looking ahead, Spaan believes that despite the current pullback, the offshore heavy lift industry has a very solid future. Over the next 10 years, with the emerging markets and growing population, the growth in demand for oil I believe will be continuous, he said. Therefore, there will be an increase in demand for the offshore heavy lift industry because the easy, accessible areas for the most part have been explored. So there is a need to establish facilities that will tend to be farther out in the ocean and at greater water depths. Heeremas Gresham concurs. I think overall its a strong future for this segment of the industry, he said. The key is to create synergies with other segments. You need to have multiple capabilities both in the type of vessels you offer and the people and assets that you have available to create synergies. I think that you are going to see more consolidation, fleets will become more diversified, and those operating solely in the shallow heavy lift market I think will become a rare breed. JPT

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JPT SPECIAL SECTION: OFFSHORE HEAVY LIFT

DECOMMISSIONING: A GROWING BUT CHALLENGING MARKET

BY JOEL PARSHALL, JPT FEATURES EDITOR
B Y JOEL PARSHALL, JPT FEATURES EDI TOR
Innovative method of removing and transporting jacket in a single piece is executed by dual cranes of Heeremas Thialf at the ConocoPhillips Ekofisk cessation project offshore Norway last year.

he potential market for decommissioning offshore oil and gas production facilities, the process of dismantling and removing them at the end of their useful lives, is large and almost inevitably will grow. More than 8,000 offshore platforms are in place somewhere in the world, according to global insurer Munich Re. The vast majority are in production, but every year some produce their final hydrocarbons. Even new facilities being installed each year will reach that point someday. Essentially, they all line up as decommissioning projects, if one takes the long view. Decommissioning, required by law in an increasing number of countries worldwide*, has been going on for years. The premise is simple. Operators who develop offshore facilities should be responsible for removing them once they have gone into permanent disuse, rather than leaving the facilities to have a continuing impact on the

*Globally, regulatory regimes are characterized by different levels of maturity and definition related to decommissioning. Differing production arrangements are also a factor, i.e. production sharing agreements where host governments own the assets from which international companies produce, with the liability burden not always clear. Proposed guidelines by the World Bank for governments and international companies to follow in various frontier areas where the bank is supporting development are an effort to establish greater consistency in decommissioning requirements and practices.

ocean environment and deteriorateposing a risk of toppling or generating debris in extreme weather conditions. However, while decommissioning is a market that appears to be inexhaustible, as long as there is an offshore oil industry, creating a business around it carries substantial risks. Merely planning for potential decommissioning projects can be a challenge. Timetables have often been stretched out and extensions granted to operators, particularly when oil markets have been soft, so heavy lift contractors working the decommissioning market are not always able to predict how many removals will materialize over a given period. When I started work [in Europe] 20 years ago, there was talk about decommissioning old platforms, said Jack Spaan, offshore projects manager at Jumbo Offshore. The execution of decommissioning projects, however, is delayed time and time again. It has partly to do with lifetime extension of fields. It also has to do with the fact that there is no gain from platform removal. It is driven by legislation. So yes, this work will be there, but because there is no benefit, no cash reward at the end of the day, the sense of urgency is low. And therefore the value of the work to be performed is always under pressure. Randall Abadie, technical authority for offshore structures, marine, and diving for upstream Americas operations at Shell, said, When you are building a project, you are waiting to get that first oil. You want that oil flowing into the system. Youve got a lot of people working, so youve got

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JPT SPECIAL SECTION: OFFSHORE HEAVY LIFT

to set that deck right on schedule. If it takes a lot of extras to make it to the contract, its weve got to do this. On the decommissioning end, there is no first oil. The only money you make is minimizing the decommissioning cost. The prospect of stepped up decommissioning activity in the US Gulf of Mexico (GOM) has emerged with a regulatory directive (NTL No. 2010G05) issued by the US Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) last October that a platform or other facility no longer useful for operations be removed within a maximum of five years of the directives effective date or of the facility attaining that status. The big wave of abandonments [removals] is not here yet, but there are more companies planning them now, Abadie said. If the BOEMRE holds to what it says, there will be more companies doing this. Depending upon the level of industry activity in the GOM over the next several years, there could be a pull on resources, he said. The need for eventual decommissioning is recognized by the operator at the outset of a project, with the cost calculated as part of the total project and, as a rule, reviewed at regular intervals throughout the project life to update that cost. The cost itself is something that governments have incentive to minimize, Spaan noted, because it is an operational expenditure for the oil companies and therefore reduces the revenue stream for the government. For the contractor, estimating the cost of a decommissioning project can be tricky. You know that you will have unknowns, so you will need to prepare for that, Spaan said. I believe decommissioning is more difficult than placing a platform because you are doing everything in the reverse order. With the installation, you have elements that are designed for the actions you are going to takethis element is designed for lifting and that element is designed for skidding. The biggest decommissioning challenge is that you dont know really what you have and what condition it is in. When your facility has been in a hostile environment for 40 years, its not the quality of structure it was 40 years ago. There can be numerous health, safety, and environment challenges in handling older facilities, for example, encountering lead-based paint or naturally occurring radioactive materials, as well as dealing with hydrocarbon residues. On some of the oldest platforms, asbestos may be present. One of the key aspects is the lack of knowledge of the state of the facility and the integrity of the components you have to remove, said Bruce Gresham, vice president for North America at Heerema Marine Contractors US. When facilities are no longer producing, maintaining them becomes less of a priority for an operator, certainly. And the longer it sits out there, in that case, the worse condition its going to be in. And then its about record keeping, being able to document things that have altered or significantly affected the facility. There is just going to beand this is our experiencea tremendous

amount of uncertainties. Some of the biggest challenges are the unknowns, the surprises, and how to establish a fair balance of contractual risk between the contractor and the operator. Operators executing a removal try to minimize the amount of work required offshore, preferably contracting for vessels that need to make as few lifts as possible and enable everything to be taken ashore without having to break it down. That is the most efficient way to do it, with the least risk, Abadie said. It is much cheaper and safer to cut up and dismantle a structure in a yard onshore than to do it offshore. In the US Gulf Coast area, operators are allowed to sink decommissioned platform jackets in designated areas of the continental shelf to create artificial reefs that attract various forms of aquatic life and are a boon to sport fishing. Reefing is not allowed for platform topsides sections. In the North Sea, reefing of any platform component is not allowed, although regulators in individual cases can grant permission for concrete gravity base structures or lower jacket sectionswhere total jacket weight exceeds 10 000 MTto be left in place. The prospect of heightened decommissioning activity in the GOM in coming years holds a number of questions for the industry. To date, decommissioning projects have involved essentially fixed platform facilities in shallow water. Deep and ultradeep facilities will not be facing decommissioning for a good many years, but eventually they will. The few superheavy semisubmersible crane vessels that install many of these types of facilities are more than 25 years old. Are these vessels going to be around 20 years from now, or will the market support the significant investment required for a newbuild to ensure removal by the same means? Gresham said. In addition, decommissioning activity in Europe has spawned the growth of yards focused exclusively on decommissioning very large structures. Such facilities dont exist in the Gulf of Mexico per se, certainly not the types of facilities you see in Europe, Gresham said. The North Sea doesnt allow reefing. The Gulf of Mexico today allows it. Will that change? And reefing a small jacket from a platform is one thing. But reefing a TLP (tension leg platform), a semi, or a spar hull will be a whole different set of circumstances. If you had to dispose of these facilities like you do in the North Sea, is somebody going to step up to the plate and make that kind of investment? In the future, a few offshore production installations may qualify for alternative uses that would exempt them from removal requirements, such as wind power generation or CO2 injection facilities. In addition, if industry efforts to improve reserve recovery continue, numerous decommissioning projects may be delayedperhaps for quite a while. If that happens, surely neither industry nor government would object. JPT

JPT MAY 2011

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