Deepwater O&G Projects Get Creative in Development Structures, Cutting Costs and Expanding Reach

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Researched by Industrial Info Resources (Sugar Land, Texas)--A recurring theme in the Oil and Gas Industry today is the possible long-term nature of depressed crude prices. To navigate this low-price environment, thinking in the industry has shifted from "what are we going to do to get by until prices come back?" to "how can we make $40 per barrel profitable for us?" In the deepwater offshore industry, where new-build platforms are multi-billion dollar undertakings, cutting costs by even 1% can mean millions in savings. Using new development structures such as "hub and spoke" and "design one, build two," offshore operators are maximizing efficiencies and exploiting new resources in new ways to allow continued development as an industry.

The hub-and-spoke structure is a field development structure wherein an operator builds a production platform "hub," to which tiebacks can be constructed to link the platform with a number of fields. The advantage is that those tiebacks, the "spokes," can be owned and operated by a third party. This provides the opportunity for the tieback owner to explore the resources on their block without having to incur the costs of a full platform, while allowing the platform, "hub," operator the ability to access more fields without incurring the costs of the leases, tieback or drilling plus the added benefit of tolling the tieback operator for use of the platform hub's facilities. The Gulfstar One Floating Production Spar (FPS) owned by Gulf Star One LLC, a joint venture between Williams Companies Incorporated (NYSE:WMB) (Tulsa, Oklahoma) and an American subsidiary of Marubeni Corporation (Tokyo, Japan), is a hub facility, allowing third-party producers to connect to downstream pipelines without having to build their own platforms. Noble Energy Incorporated (NYSE:NBL) (Houston, Texas) is one such company using a tieback to Gulfstar to explore its Gunflint prospects.

The "design one, build two concept" is best exemplified by Anadarko Petroleum Corporation (NYSE:APC) (The Woodlands, Texas). Anadarko's two platforms, Lucius and Heidelberg, are design twins. Anadarko was freed from the need to design an entirely new platform by using the designs for Lucius on Heidelberg, thus saving the company the cost of design work. It also likely gave Anadarko an advantage on permitting as the design had already been given the green light when Lucius was built, meaning there was precedent for the design to be approved. Finally, the consolidation of design shortened the development timeline of Heidelberg, also helping cut costs on its development.

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