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PDO rush fuels NCS optimism

Expectations to the Norwegian Continental Shelf (NCS) are high. As we rounded off 2017, NOK 122.9 Bn of new projects had been submitted – with more to come in 2018.

Statistics from the Norwegian Petroleum Directorate (NPD) in January put the accumulated Capex in Plans for Development and Operation (PDO) expected to be submitted in 2017 and 2018 at some NOK 90 Bn per annum. Twelve months later, PDOs worth NOK 122.9 Bn have been formally submitted to the authorities, signalling an end to the famine within the Norwegian offshore oil and gas supply industry.

And still oil and gas companies have not tapped into the expected 2018 PDOs…

These are the new business opportunities

A total of 10 new PDO´s were submitted in 2017. The first main contracts have already been awarded, but quite a few are still up for grabs – and a feeding frenzy is expected as the EPCI contractors starts looking for subcontractors and suppliers.

Here is the complete list of the new development projects, and the “who won what” -list:

Njord Future

Operator:       Statoil
Where:           Norwegian Sea
Capex:            NOK 15.1 Bn
Onstream:      2020

Project:
The Njord A semi and the Njord Bravo FSO will be upgraded to recover the remaining resources on the Njord, Hyme og Bauge fields.

Statoil has awarded the contract for complete upgrade of the Njord A platform to Kvaerner. The contract has an estimated value of around NOK 5 Bn, which includes a complete upgrade of hull and topside – and facilitating the tie-in of the operator´s Bauge field.

Kvaerner sibling, Aker Solutions have secured the NOK 1 Bn deal for providing design engineering for the upgrading of the semi-submersible Njord A platform.

Siemens have been contracted to supply new control and safety systems (Njord A EPC SAS) under a NOK 63 million scheme, while the total frame agreement between the parties are valued at NOK 150 million.

In 2018 the Njord partners will award the contract for the upgrade of the Njord Bravo FSO.

Bauge (Snilehorn)

Operator:       Statoil
Where:           Norwegian Sea
Capex:            NOK 3.8 Bn
Onstream:      2020

Project:
The Bauge discovery will be developed through a Cap-X subsea production system, including a template with two oil producers, and one water injector tied back 16 kilometres to the Njord A platform for processing and export.

Installation work will be conducted by Ocean Installer under its Marina Wave 1 -program, which also includes work on Statoil´s Johan Sverdrup and Utgard fields. Umbilicals for the same three fields will be provided by Aker Solutions for an undisclosed sum.

Fenja (Pil & Bue)

Operator:       VNG Norge
Where:           Norwegian Sea
Capex:            NOK 10.2 Bn
Onstream:      2021

Project:
Fenja will be developed with two subsea templates. Six wells (three producers, two water injectors and one gas injector) will be connected to the Njord A platform for processing and storage and export via the Njord Bravo FSO.

Ahead of submitting the PDO in December 2017, VNG Norge issued Letters of Intent (LOI) to TechnipFMC and North Atlantic Drilling Norway Ltd:

The former was signed for the EPCI of the SPS (Subsea Production Systems) and SURF (Subsea structures, Umbilicals, Risers and Flowlines).

The latter was signed for utilising “West Phoenix” for drilling six fixed development wells (three producers, two water injectors and one gas injector) and three optional wells after the fixed period.

Snorre Expansion Project

Operator:       Statoil
Where:           North Sea
Capex:            NOK 19 Bn
Onstream:      2021

Project:   
Upgrading the Snorre A TLP for reception of production from – and supplying injection water and gas to – six new subsea templates for production and alternating water/gas injection. Said templates will host a total of 24 new wells, 12 for production and 12 for injection, with pipelines and umbilicals between the subsea templates and Snorre A to be installed.

Statoil has awarded Aibel, which conducted the FEED study to plan the hook up and the required modifications to the platform deck, the NOK 1.6 Bn EPCIC contract for the actual work.

The operator has further confirmed its Letter of Intent (LoI) with TechnipFMC (FMC Kongsberg Subsea AS at the time of signing) for the subsea system for the project. The EPCI contract (at the time of signing the LoI) is worth “slightly less than NOK 2 Bn.”

Fabrication and installation of the pipeline bundle systems will be handled by Subsea 7 under an EPCI contract. According to Subsea 7 the contract value is between USD 150 to 300 m (NOK 1.25 – 2.5 Bn).

Drilling will be handled by Transocean´s “Transocean Spitsbergen” -semi under a 22 -well, 33 month, USD 286 m contract commencing in 3Q 2019.

Skogul (Storklakken)

Operator:       AkerBP
Where:           North Sea
Capex:            NOK 1.5 Bn
Onstream:      1Q 2020

Project:
The Skogul field will be developed as a subsea tieback to Alvheim FPSO, via Vilje. Aker Solutions will deliver two subsea manifolds, control system and umbilicals for Skogul, which will be tied back to the North Sea Alvheim field. The subsea work will be carried out as part of Aker Solutions’ subsea alliance with Aker BP and Subsea 7.

Valhall Flank West

Operator:       Aker BP
Where:           North Sea
Capex:            NOK 5.5 Bn
Onstream:      4Q 2019

Project:
Valhall Flank West will be developed from a new Normally Unmanned Installation (NUI), tied back to the Valhall field centre for processing and export.

Aker Solutions have been chosen to carry out engineering and procurement for the NUI as part of a wellhead platform alliance with Aker BP, Kvaerner and ABB.

The operator has awarded Kvaerner the contract for fabrication and hook up of the topside and steel jacket substructure for Valhall Flank West. The contract for the normally unmanned platform represents a breakthrough in Kvaerner’s strategy for smaller platforms. The contract has a value of close to NOK 1 Bn for Kvaerner.

ABB´s part of the alliance´s work is to design, deliver and install systems for electrical power, instruments, control and telecom (EICT).

Finally, the subsea alliance between Subsea 7 and Aker Solutions have secured the contract for delivering and installing the subsea production system, mainly pipelines and umbilicals.

Ærfugl (Snadd)

Operator:       Aker BP
Where:           Norwegian Sea
Capex:            NOK 8.5 Bn
Onstream:      4Q 2020

Project:
The Ærfugl gas condensate field will be developed as a subsea field tied back to the Skarv FPSO. Aker Solutions will deliver the subsea production system for the first phase of the development. This includes wellheads, vertical subsea trees, a tie-in module and an umbilical riser base for the three new production wells in the southern part of the field – in addition to the existing A-1 H well. Subsea 7 have won the SURF contract for the first phase.

Both contracts include an option for Ærfugl Phase 2:

The second phase is subject to further maturation, but the reference case includes two additional wells in the northern part of the field and one in Snadd Outer also tied into the Skarv FPSO with an estimated production start late 2023.

Johan Castberg

Operator:       Statoil
Where:           Barents Sea
Capex:            NOK 49 Bn
Onstream:      2022

Project:
The field development concept includes a production vessel (FPSO) and an extensive subsea development with a total of 30 wells, 10 subsea templates and two satellite structures, making it the largest subsea field under development in the world today.

Statoil has chosen Sembcorp Marine Rigs & Floaters Pte. Ltd in Singapore for the construction of the hull and integrated living quarters for the floater. The contract covers engineering, procurement and construction, and has a value of NOK 4 billion. Meanwhile, Sembcorp have contracted Aker Solutions to design the vessel´s living quarters.

Aker Solutions´ involvement goes further, as the operator have chosen them to provide the subsea system under an EPCI contract, and also carry out engineering and procurement management. The contracts have a total value about NOK 4 Bn. Aker Solutions did the FEED for the development.

Furthermore, Statoil has contracted SBM Offshore for delivering the turret mooring system for the FPSO. The EPC contract is an exercise of an option in connection with the conclusion of a FEED contract with the same company.

The Johan Castberg field will have a supply and helicopter base in Hammerfest and an operations organisation based in Harstad. The costs of operating the field are estimated at some NOK 1.15 Bn per year.

Ekofisk South Water injection

Operator:       ConocoPhillips
Where:           North Sea
Capex:            NOK 2.3 Bn
Onstream:      4Q 2018

Project:
New subsea template, Ekofisk 2/4 VC, is to be installed in Ekofisk South to support four water injection wells. The template will be tied back to the existing water injection subsea template, Ekofisk 2/4 VB.

North Atlantic Drilling’s jackup West Elara will handle the drilling as part of its long term-contract in the area.

Yme New Development

Operator:       Repsol
Where:           North Sea
Capex:            NOK 8 Bn
Onstream:      2020

Project:

The revised PDO for the Yme field is based on re-use of existing facilities to the extent possible, a new wellhead module on top of the existing caisson and the lease of a mobile offshore drilling- and production unit. This means that the existing storage tank, caisson, pipelines, subsea templates and offloading system will be reused. All existing wells will be used and further wells will be drilled.

Maersk Drilling has been awarded the contract, which has an estimated duration of five years and options for up to an additional five years, for drilling and production jack-up Mærsk Inspirer. The contract covers drilling and production on the Yme New Development, following modification work to the production module. The jack-up is expected to commence operations on the Yme field as early as 4th quarter of 2019.

Aker Solutions won the NOK 1 Bn contract from Maersk Drilling to modify the production module on Mærsk Inspirer. The work scope covers engineering, procurement, construction, installation and commissioning services.

The operator has also awarded Kvaerner the NOK 70 m contract for constructing a permanent caisson support structure for the project. Kvaerner’s scope includes procurement of materials and construction of the Yme support structure.

High expectations for 2018

The NPD expected the rush of incoming projects to continue in 2018, adding Capex to the tune of NOK 90 Bn to the NCS portfolio.

Not surprisingly, Phase II of the giant Johan Sverdrup field accounts for the lion´s share of the investments. Incorporating another processing platform, as well as several subsea templates and the Utsira power-from-shore projects, Statoil expects to shell out between NOK 45 and 50 Bn on the Phase II –scheme.

The operator also has a second major project up its sleeve, this time on its aging gas giant Troll; the Troll Future -project. Extracting additional gas reserves in the west of the field is the aim, and different development solutions have been evaluated, including a straight subsea tie-back to existing facilities and an additional floater, but the licence has not heralded any conclusions as of yet.

Krafla is another Statoil-operated project for which a PDO is expected in 2018, and while the operator in early phases were planning a subsea tie-back to Oseberg, a stand-alone development is being considered. In parallel, other operators in the so called Noaka -area (North of Alvheim–Krafla/Askja) have suggested a joint development of the full cluster, thus attracting the attention of the authorities.

Already high activity levels

There is already a high level of activity on the shelf. At the turn of the year, 12 major development projects were in various stages of development, with only three of which to be completed in 2017.

Sources:

*1) NPD´s ”Sokkelåret 2016”

*2) SSB 2Q, 2017

*3) Statoil Capital Markets Update 2017

*4) Statoil´s Snorre Expansion Project white paper

*5) VNG´s Pil & Bue project white paper

*6) Statoil´s Eirin project white paper
*7) Njord Future/Bauge PDOs

*8) Statoil.com, ”Johan Sverdrup”

*9) MPE State Budget 2016/2017

*10) MPE State Budget 2017/2018

*11) MPE/Ekofisk South PDO figures

*12) VNG, Fenja PDO

*13) Statoil, Johan Castberg PDO

*14) Repsol, Yme revised PDO

*15) AkerBP, Ærfugl PDO

*16) AkerBP, Valhall Flank West PDO

*17) AkerBP, Skogul PDO

*18) Statoil, Snorre Expansion Project PDO