The merger of Baker Hughes and General Electric brought a unique match of capabilties across the oil and gas project lifecycle. It also brought complication given the firms’ size and girth.
Now, as the firms redefine their relationship, the still-combined entity is tackling another challenge: making subsea projects more viable.
Baker Hughes, still a GE company (BHGE), hopes to remedy the cost-, labor-, and time-intensive process of executing offshore projects through deployment of its “Subsea Connect” approach, which the firm says can cut project development costs by 30%.
The offshore industry has long extolled the virtues of collaboration, modularization, and standardization, and BHGE, with its involvement in nearly every layer of a subsea project, is putting them to practice. The pillars of the approach are an emphasis on open communication with operators and other contractors from the very beginning of a project, new modular deepwater equipment, and digital tools to improve project designs and processes.
This spans from the reservoir to the topside and from early planning through the life of the field, commingling BHGE’s oilfield service, turbomachinery and process solutions, and digital solutions businesses as well as its partners’ engineering, procurement, construction, and installation know-how.
Announcement of Subsea Connect comes as deepwater spending gradually picks up. A recent report from consultancy Wood Mackenzie forecasts total annual deepwater capital expenditure to increase to nearly $60 billion by 2022 from $50 billion currently—assuming that the recent dive in oil prices isn’t here to stay.
Meanwhile, breakeven costs have fallen to $49/BOE from $78/BOE in 2014 reflecting downsized and better executed projects. The average deepwater project sanctioned during 2014–2016 started up 5% under budget—a contrast from cost overruns of 10–15% from projects sanctioned during 2006–13. Subsea Connect is intended to sustain such savings by keeping structural costs permanent, even as more investment could result in cost inflation across the sector.
As it stands now, offshore contractors are still trying to rebound from the downturn. The oilfield equipment business, particularly subsea, is still “a stressed segment,” Neil Saunders, BHGE president and chief executive officer, oilfield equipment, acknowledged during a late November media event announcing Subsea Connect. “There's still overcapacity in the market. But there's a lot of encouragement in terms of the activity increases that we're seeing.”
“We're going to have to work differently and creatively—innovatively—to create the opportunity for us to start delivering margin in the way that we were” before the industry downturn, Saunders said.
Integrated Subsea System
The genesis of Subsea Connect involved BHGE redesigning its subsea equipment to ensure easier installation, production, and intervention. The resulting system, consisting of different products branded “Aptara,” includes a lightweight compact tree, modular compact manifold, composite flexible risers, SFX wellhead solution, modular compact pump, and subsea connection systems.
The products are structured into standard components and subassemblies that can be completed depending on project requirements. They are modular and lightweight, serving as building blocks for the overall system.
The primary aim of Aptara is to bring “a system to the industry that can be adapted to the solution on the project, but it’s fit for purpose, it’s not over-specified, and it’s not overly expensive,” said Graham Gillies, BHGE vice president, subsea systems and services.
Adding substance to the 30% cost-reduction figure touted by the company, Gillies noted that the Aptara tree is some 50% lighter than traditional vertical trees, removing 60 tonnes of material weight compared with the company’s DVXT system. “That makes not only the cost of manufacturing the system more efficient but also means the installability of the system is much more cost effective,” Gillies said. It makes the tree easier to service as well, he added.
As the product evolves, Aptara trees will come with different offerings such as a 5k-psi and 1000–1500-m option and a 10k-psi and 3000-m option, with a 15k-psi variant likely in the works as well given operator demand.
Flexibility is Key
Saunders emphasized that Aptara and Subsea Connect aren’t inextricable. BHGE can still execute a project under the model while providing different subsea equipment if an operator finds that equipment—perhaps due to familiarity—more suitable. “The other aspects would still be there. We would still reverse engineer the project into the economics that work for the project.”
BHGE, for example, is deploying all elements of the Subsea Connect model, including Aptara equipment, on Aberdeen-based Siccar Point Energy’s 100%-owned Cambo field northwest of the Shetland Islands. The approach is also being used for BP’s Tortue project on the maritime border of Mauritania and Senegal. That project, however, will not use Aptara. BP is expected to make a final investment decision on Tortue soon.
Before a project is launched, BHGE provides the operator with different selections of financial models showing potential return on investment, and ultimately they choose the option combining the best commercial model, project execution plan, and technology.
For the subsea system, operators can choose a make-to-order option using established modular components, a configure-to-order option tuning the system for unique conditions including downhole pressure and temperature, and an engineer-to-order option for more difficult conditions. “But what I stress to operators,” Gillies said, “is that 80% of the subsea developments that are going to move forward [will] fit into the make-to-order and configure-to-order categories.”
In addition to working closely with BP on Tortue, BHGE is collaborating with engineering, procurement, and construction firm McDermott International, which the British major also contracted. BHGE and McDermott have worked together on other projects.
While planning a new development, “the first thing you really need to think about is what is the best partnership you need to create to get the best project execution outcome,” Gillies said. He noted that some of BHGE’s partners may be strong in some markets but not-so-strong in others. Some have assets that are good for specific projects but perhaps over-engineered for others.
Operator-Contractor Dialogue
When discussing Subsea Connect with customers, Saunders said they “almost unanimously talked about tiebacks” alone, an area where he expects to see the model frequently applied. BHGE has already tested Subsea Connect in a three-well tieback in the North Sea, he said, taking a previously “unsanctionable” project to the point of final investment decision.
Gillies noted that, before the downturn, the industry was “very transactional.” But BHGE and operators have since realized that “the level of early engagement and collaboration that you do up front can actually improve the success of project economics.”
“We like to talk about our customers trying to preferentially engineer us every which way they can. We’ve had some challenges internally as well,” said Saunders. “The subsea is a relatively young industry. It’s entirely engineering driven with a whole community of engineers who want to solve tough problems in a different way and improve things. Hopefully what we’ve been through in the downturn and driving things like this will inject a level of maturity into the business.”