OFF515 - Offshore field development

Exercise 3
General information same as for exercise 1 and 2
The basis for the exercise is an oil discovery offshore Mid Norway. The distance to shore
is 220 km and the nearest offshore platform is located 120 km to the south. This is a large
integrated platform with a rich gas pipeline connected to an onshore gas terminal. The
gas terminal has facilities for extraction and fractionation of natural gas liquids (NGL)
and for export of dry sales gas.

The water depth in the area is 320 metres. The 100 year significant wave height is 16
metres.

The reservoir is about 12 km long and 5 km wide, see illustration. The total hydrocarbon
column is 125 meter; a 100 meter oil column with an overlying gas cap. The oil-water
contact is located 3000 metres below mean sea level (MSL).

The estimated in-place volume of oil (STOIIP) is 100 million Sm3. The estimated volume
of gas is 20 billion Sm3. (associated gas and gas in the gas cap).

The reservoir pressure and temperature have been measured to 310 bar and 110 oC at a
depth of 2950 metres.

The gas-oil ratio is 120 Sm3/Sm3 and the oil is characterized as light oil with 33o API.

The oil price is 100 USD/bbl

The gas price is 10 USD/mmbtu
Exercise 3 Design basis and estimation of costs
The majority of partners in the joint venture have decided that the field development shall be
based on the following principles:

All wells will be wet-tree wells drilled with a mobile offshore drilling unit (MODU)

The subsea production system will be based on the use of well templates with integrated
manifolds. One template may have up to six well slots

Each manifold will be connected to a production platform via flow-lines and flexible risers

The production platform will be a semisubmersible platform with a chain-wire-chain

mooring system

The equipment list for the platform topsides includes items with a total dry weight of 3108
tonnes distributed on areas as shown in the table below. (Other equipment includes
equipment/structures like helideck, flare tower, deck cranes, life boats)

The crude oil will be exported via a floating storage and offloading unit located at least
three km from the production platform

The gas will be exported via a new pipeline to the nearest platform and fed into existing
gas infrastructure

Tonnes
Living quarters 23
Power generation area 574
Water injection area 387
Utilities area 790
Well/riser area 65
Separation area 309
Gas treatment area 113
Gas compression area 334
Other equipment (cranes, life boats.) 513

Equipment list summary

Answer the following questions:

a) Prepare a reservoir lay-out sketch where all well targets are indicated

b) Prepare a sea bed lay-out sketch with all templates, flowlines, umbilicals and export
pipelines included. Indicate roughly the length of each flowline/pipline segment. Show
also the mooring lines for production platform and the storage unit.

c) Prepare a detailed dry weight estimate for the platform topsides (per area and per
discipline).

d) Prepare a complete cost estimate in a systematic Excel spread sheet for the platform
topsides and answer specifically the following questions:

o What is the total cost in mill.USD?

o What is the total procurement cost in mill.USD?
o What is the total cost for fabrication, hook-up and commissioning in mill.USD?
o What is the total marine operations cost in mill.USD?
o What is the total engineering cost in mill.USD?
o What is the total number of manhours for fabrication, hook-up and
commissioning and engineering?

The calculations can be based on the following weight summary:

Discipline Weight
Equipment 3108
Architectural 978
Electrical 643
HVAC 347
Instrument 261
Piping 1413
Structural steel 7743
Surface protection 78
Safety 212

Cost parameters can be taken from the material related to the Cost estimation Module (module
19 and the attachment below). In additions the following assumptions can be made:

Assume that hook-up and commissioning is done offshore and that the number of
manhours per tonne of topsides is 20.

Assume that engineering will require 90 manhours per tonne of topsides.

Assume that the cost of marine operations will be 5000 USD per tonne of topsides.

Assume that the cost of Management and Insurance will be 15% of all other costs.
 Attachment:

Calculation methodology
Cost estimating is a complex task, starting with the Design basis as shown below.

Then the systems design is performed and the concept is developed and described. A
consolidated technical basis for cost is prepared, including definition of technical quantities and
construction methods.

The technical basis together with market analyses and experience from previous projects is used
to define schedules and calculate costs. Inaccurate or incomplete design basis has in many
cases been used as explanation for inaccurate cost estimates.

SYSTEMS DESIGN
Main equipment list
Process systems EXPERIENCE

Utility/support systems Previous projects

Well related systems On-going projects

Drilling systems

DESIGN BASIS Pipeline systems

Objectives and scope

Subsurface and wells LAY-OUT
TECHNICAL BASIS COST & SHEDULE
Well stream data General arrangement
Physical quantities Norms
Sales products/waste Modularization
Weights Rates
Facilities requirements Facilities design based on
HSE and operational Operations Tools
Site/metocean data
needs and requirements
HSE requirements
Operational strategies
PROJECT EXECUTION
Construction method MARKET ANALYSES

Contracting Cost trends

Modularization Regional analyses

Logistics Suppliers

Transportation Capacity

Operations, vessels

For one physical part of a project the following cost elements will be discussed:

Engineering
Procurement
Construction/fabrication
Marine operations
Hook-up and commissioning
Management
Insurance

The technical basis for cost estimating comprises a detailed weight estimate and a description of
all marine operations related to construction, transportation and installation. The weight estimate
has to reflect the following weight categories:
 Equipment
Bulk materials
o Electrical
o Instrument
o Piping
o Safety
o Hvac
o Surface protection
o Architectural
Structural steel
o Primary steel
o Outfitting steel

Total weight = equipment weight + bulk weight + steel weight

See example below.

Equip Elect Instr Piping Safety Hvac Surf Arch Bulk Struc Sum
Living quarters 23 69 12 16 19 107 10 573 805 997 1825
Utilities 790 255 120 305 87 146 24 205 1143 2328 4261
Water injection 387 41 15 161 11 22 7 35 290 669 1346
Power generation 574 177 9 43 17 25 7 84 361 698 1633
Wellhead 65 23 31 395 31 0 15 5 499 1465 2029
Drilling module 0 0 0 0 0 0 0 0 0 0 0
Separation 309 31 43 240 17 23 7 28 388 658 1356
Gas treatment 113 21 8 88 9 9 4 16 154 386 653
Gas compression 334 27 23 166 21 15 5 33 291 542 1167
Other 513 513
Total 3108 643 261 1413 212 347 78 978 3932 7743 14782

Topside weight estimate - example

Engineering
The cost of engineering is calculated as:

Cost (engineering) = p x r x W, where:

o p = productivity; number of manhours per tonne (MHR/tonne)
o r = manhour rate (USD/MHR)
o W = total weight (tonnes)

The productivity depends on location (regional practice) and complexity of facility. The manhour
rate depends on location of the engineering contractor.

For early estimates an alternative approach is more commonly used:

Cost (engineering) = k x C(total), where C(total) is the total cost of procurement, fabrication,
marine operations, hook-up and commissioning, and k is a percentage; say 10-20 percent.

Procurement (cost of materials)

The cost of procurement (cost of all materials) is calculated as:

Cost (materials) = (ci x W i), where:

o W i = weight for weight category (i); (tonnes)
o ci = cost per tonne for weight category (i); (USD/tonne), including freight
o i = weight category (equipment, electrical, instrument, piping, etc)

For bulk materials and steel it is necessary to include a percentage (say 5-10% for waste.
Fabrication
The cost of fabrication is calculated as:

Cost (fabrication) = (pi x ri x W i), where:

o pi = productivity; number of manhours per tonne (MHR/tonne)
o ri = manhour rate (USD/MHR)
o W i = weight for weight category (i) (tonnes)

The productivity pi depends on weight category (i) and location (regional practice). The manhour
rate depends on the location of the fabrication site. Normally the same manhour rate is used for
all weight categories at the same site.

Marine operations
The cost of marine operations is based on a systematic and thorough description of the
operations. The cost of marine operations is calculated as:

Cost (marine operations) = (di x Ti), where:

o Ti = time needed for operation (i); (days)
o di = overall day-rate for operation (i); (USD/day)
o i = operation category

The day-rate (d) depends on type of vessel needed for the operation. Vessels are normally hired
in the global market (in particular for large vessels). But even the global market shows strong
fluctuations, depending on activity level. Since high oil price tends to increase the general activity
level, it can be observed that day-rates of construction vessels are correlated with oil price. High
oil price means high day-rates.

The day-rate has to be paid for a certain number of days (T). In general the time can be
calculated as:

o T = (Tm/d + Twow + Toperation)

Tm/d = time for mobilization and de-mobilization of vessel

Twow = time for waiting-on-weather (non-productive time)
Toperation = time for executing the operation (based on expected efficiency)

The time for mobilization and de-mobilization of vessel is primarily related to the location. The
time for waiting-on-weather depends on environmental conditions for the relevant location and
season, and on the characteristics/robustness of the vessel.

The time for executing the operation depends on type of operation and characteristic of vessel.
Normally an expensive vessel can do the operation faster than a cheap vessel.

Marine operations are of special importance for pipelines. For pipelines the time is often
calculated as:

o Toperation = L / R + Ttie-ins , where

L is length of pipeline (m), R is lay-rate (m/day) and Ttie-ins is the time needed for tie-ins (days).

Hook-up and commissioning

The cost of hook-up and commissioning is calculated as:

Cost (hook-up and commissioning) = p x r x W, where:

 o p = productivity; number of manhours per tonne (MHR/tonne)
o r = manhour rate (USD/MHR)
o W = total weight (tonnes)

The productivity depends on location and complexity of facility. The manhour rate depends on
location, and in particular whether the work is done atshore, inshore or offshore.

Management
The cost of management is calculated as:

Cost (management) = p x r x W, where:

o p = productivity; number of manhours per tonne (MHR/tonne)
o r = manhour rate (USD/MHR)
o W = total weight (tonnes)

The productivity depends on project organization and management philosophy, location of site(s)
and complexity of facility. The manhour rate depends on location of the project team.

For early estimates an alternative approach is more commonly used:

Cost (management) = q x C(total), where C(total) is the total cost of engineering, procurement,
fabrication, marine operations, hook-up and commissioning, and q is a percentage; say 10%.

Insurance
The cost for insurance for the construction/installation phase is normally estimated as a
percentage of all other cost, say 5%.

Some indications of cost parameters are shown below.

Cost parameters
Cost parameters depend on regional practices and market conditions and have to be up-dated
yearly. The data shown below are indications and can be used in the exercise.