Well timed for cost cuts

26.06.2013
The Gudrun development in the Norwegian North Sea is on schedule and set to end up NOK 2 billion below budget. Operator Statoil and main contractor Aibel explain why and how.
  • Astri Sivertsen and Monica Larsen (photos)

Four months until the Gudrun topside leaves the yard

Four months until the Gudrun topside leaves the yard
at Haugesund north of Stavanger.

 

A total of 1 100 people were working at Aibel’s Haugesund fabrication facility in late March, with most of them seeking to complete the Gudrun platform topside on time.

“Sail away is four months off,” explained construction manager Askild Mokleiv with reference to the structure extruding from the huge North Sea Shop at the Risøy yard.

The mechanical part of the job had been completed the week before, leaving only coating, insulation and testing of various instrumentation systems to be done.

After tow-out, the topside will be lifted onto the steel jacket installed on the seabed two years ago. Gudrun is due to come on stream in 2014, four decades since its discovery.

Seven years have passed since so many people were employed simultaneously at the Risøy facility, when former oil tanker Odin was converted to the Alvheim production ship.

“On a scale of one to 10, this project is a nine,” Mokleiv said, pointing to the large number of people involved and all the supervision of various yards and subcontractors required.

Aibel has an engineering, procurement and construction (EPC) contract for the three modules which collectively make up the Gudrun topside.

Pursued in Oslo, Haugesund, Thailand and Singapore, the job has taken more than 3.5 million hours. Construction has accounted for almost two million of these.

The two modules for drilling and processing were built at the Aibel yard in Thailand before being shipped to Haugesund for welding to the utilities package fabricated in Norway.

Delivered “flat-packed” from China, the helideck provided a fantastic view when Aibel’s integration manager, Willy Strømsvold, took me up to it.

A local supplier of helidecks was located only a couple of kilometres away, but the Chinese structure was cheaper and therefore preferred. Price is the deciding factor.

The Gudrun project was costed at NOK 20.3 billion in the plan for development and operation (PDO) presented in 2010, but is now expected to be NOK 2 billion cheaper.

According to Statoil, that departure from the normal rule of cost overruns on offshore schemes reflects fortunate timing. Contracts were not awarded until after the financial crisis.

This was the only project on offer in 2009, says Stig Jessen, Aibel’s executive vice president for field development. “So competition was razor-sharp, and Statoil got very good prices.”

 

Monks have blessed the module built in Thailand before it left the country

Monks have blessed the module built in Thailand before it left the country.

 

Concept

The Gudrun structure is a cut-down version of earlier development concepts, and lacks a drilling derrick, for instance. Vertical columns on the jacket mean a rig can get right up to the platform and extend its derrick over the topside well slots.

“Dry wellheads are very important on a high pressure and temperature (HPHT) field like this,” explains principal engineer Petter Gundersen at the NPD.

Gudrun could just as easily have been a subsea project, he notes, but the wellheads would then have been wet. Interventions and workovers would be more expensive and complex. Predrilling wells also permits production to start earlier.

Statoil has already employed similar solutions on Huldra and Sleipner B, eliminating drilling facilities and predrilling wells through the jacket before installing the topside.

The same approach will also be used on Gina Krog (previously Dagny). “It’s a good solution for small projects and water depths of roughly 100 metres,” says Jan Einar Malmin, Statoil’s project manager for Gudrun.

He explains why it has taken 40 years to bring the field on stream. “First, the HPHT reservoir presented challenges. But we’re better placed to tackle these now, not least because of lessons from Kvitebjørn. And a lot’s happened with drilling technology.

“Progress has also been made in understanding the sub-surface. At the same time, oil companies undoubtedly opt for the easiest fields first and take the more difficult ones later.”

The decision to develop Gudrun was taken when the NCS presented few other choices, Malmin adds. This was one of the small fields on the back burner, made commercial by technological advances.

In addition to fortunate timing, other factors contribute to reducing the total Gudrun bill. Malmin notes that the contractors for topside, jacket and pipelines have done “a fantastic job”.

Aibel was involved in every phase of the topside job, he says. Having done the pre-engineering, it was familiar with all the requirements when work began on detail design and construction.

“We’ve implemented the project with a minimum of change orders. That’s important for keeping costs down. But it also shows we’ve had contractors who can deliver what we order.”

 

At work

At work

Wells

Seven production wells are planned on Gudrun, but the topside has slots for 16. This will make it possible to incorporate new discoveries in the future.

The original plans envisaged developing the neighbouring Sigrun discovery through a subsea template tied back to Gudrun, but this reservoir proved very fragmented and too expensive to produce.

But another nearby find, Gudrun East (formerly Brynhild), could be developed with a well from the main field. A decision on this is expected in 2013, reports Malmin.

Gudrun was originally expected to stay on stream until 2016, but its producing life has now been extended by four years – partly because of the decision to develop Gina Krog.

This means that operating costs can be spread more widely, providing a positive income flow for longer than if Gudrun had produced alone.

 

Flood

Conditions change quickly in the oil business. A flood of new large developments on the NCS has been put out to tender just two years after Gudrun was the only project on offer.

The market has completely reversed, observes Jessen. “Our margins are under a great deal of pressure.”

Trends over the past three years and extra costs from the short timetable for the Gudrun topside have severely affected Aibel’s profits. “We couldn’t actually make money on this job,” he says.

To compete with the big South Korean yards, much of the company’s construction work has been moved to Thailand and the Haugesund facility does more assembly than fabrication today.

Jessen says that this trend is set to be reinforced in the future, with Norwegian yards specialising in assembling big topsides fabricated in low-cost countries.

But the bulk of the engineering work continues to be done in Norway, where knowledge of local Norsok standards and various company requirements has been built up over many years.

Moreover, Jessen says that Norwegian pay rates for engineers are still competitive internationally, and Aibel made a big commitment in the Gudrun design phase.

This meant that the construction job was done correctly from the start. Fabrication profits are often hit by the need to redo things, Jessen explains. With Norwegian engineering in place, it was also cheaper to build in Thailand.

Jan Garborg, Aibel’s project director for Gudrun, says that the company’s engineers in Singapore have taken an introductory course to get a detailed view of Norwegian standards and requirements.

“That means we’ll be able to do the work a little faster next time,” he affirms.

Aibel’s parallel to the fasttrack approach adopted by Statoil for many field developments on the NCS is to break the work down into “modulettes”.

The company completes each module – with painting, piping and cable tracks – while it is standing on the shop floor. This ensures easy access, and enhances safety and working conditions.

“We get things into position and box them up before they’re lifted,” Garborg explains. The method was first adopted on Kvitebjørn in 2003, and is used both in Haugesund and Thailand.

But it demands much planning and poses a number of procurement and fabrication challenges, Garborg says. “When it works, it is good for productivity. When it doesn’t, we take a hit.”