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Smooth operations start in design phase

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Trond Winther Trond Winther
Head of Operations Department, DNV GL - Oil & Gas
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To secure best results during production, emerging players offshore Norway are calling for operations teams to be integrated into new projects as early as feasibility studies and field development concept selection
Preparing for production is a challenge, even more so for a company that is taking on the responsibility for the first time, or new to a region and its regulatory requirements. With cost and complexity under intense scrutiny, the road to operations readiness demands even smarter approaches in today’s production environment.

“The industry understands that operations teams need including early in new projects, when decisions will influence full lifecycle costs,” said Trond Winther, head of the operations department, DNV GL – Oil & Gas. “It is also about meeting commitments on start-up dates and the first cycle of production. It can be a challenge to achieve, however. How early is early, and in what capacity and with what competences should operations teams be included?”

Value of integrated teams
Some experienced operations people recommend inclusion as early as feasibility studies and concept selection. They argue that this will ensure that operations perspectives are clear and included in the commercial framework for a project. This was the consensus among operations experts from new exploration and production (E&P) players at a roundtable briefing in Norway.[1]

French global energy player ENGIE, formerly GDF Suez, faced these challenges in preparing to become a first-time production operator on the Norwegian Continental Shelf (NCS) in November 2010, when the Gjøa gas field, developed by co-owner Statoil, would go on stream.

ENGIE drew on Statoil’s model for transitioning between project and operations phases, drafting in operations technicians before the final design decision. “People who would operate the platform day-to-day became even more heavily involved in the engineering phase,” said Per Langhaug, head of health, safety, environment and quality (HSEQ), ENGIE E&P Norge.

Early involvement: The lifecycle cost
The UK’s Centrica established its NCS exploration and production business in 2006. It has since become a solid, midsized upstream enterprise in Norway with about 50 exploration, development and production licences, about a third of them Centrica-operated.

“It is crucial to consider the full lifecycle costs of an asset rather than focusing narrowly on the phase for which a project team is responsible,” said Tom Haldorsen, operation readiness lead for Centrica E&P Norway. “Amid low oil prices, a project organization will naturally work to cut all capital expenditure (capex) costs to the minimum. For example, they may choose pipeline material that is fit-for-purpose from a safety perspective, but which could require quite a bit of maintenance and barrier management in the operation phase; so total lifecycle costs could be higher.”

A view sometimes heard is that barriers prevent including operations people early on. The argument is that project teams may feel that operations will want to ‘gold plate’ everything to maximize efficiencies in operations phase, thus driving up capex. Haldorsen suggests that this is perception rather than reality.

“Any such tension usually arises if operations is not included early, and requests late changes not budgeted for by the project manager,” observed DNV GL's Winther. Integrating teams can overcome challenges when operatorship shifts between companies, Langhaug stressed. “Initially, project teams for Gjøa referred to colleagues as ‘ENGIE ops people’ or ‘Statoil capex people’. As we organized as one team, we quickly started behaving like one.”

Tom Haldorsen, Centrica E&P Norway
Tom Haldorsen, Centrica E&P Norway
Per Langhaug, ENGIE E&P Norge
Per Langhaug, ENGIE E&P Norge
Trond Winther, DNV GL - Oil & Gas
Trond Winther, DNV GL - Oil & Gas

Operator Lundin Norway believes in the value of integration, implementing it in all phases. It also has a policy of simplifying documentation for operations readiness. Its work management system for operating and maintaining the Edvard Grieg field had only 100 critical processes, for example.

Early multi-stakeholder agreement on contracts needed to run the platform is another key learning from Gjøa, Langhaug said. He stressed the need to establish early on which operational contracts, such as logistics, have long lead times.

“It is important to ensure that tie-in and production agreements between an operating company and the host or leased asset build in appropriate knowhow and detail on operational issues that impact on value,” Winther added. “Also, project and operations teams value contractual regimes that avoid complexity and offer joint incentives for the pursuit of shared goals.”

Collaboration in action
This point is underlined by Centrica E&P Norway’s recent Strategic Partner Alliance (SPA) with DNV GL, Subsea 7, Aibel and FMC, covering all phases of project execution, and for up to 10 years from 2015.[2] The first call on the SPA has been for front-end engineering and design for the operator’s Butch development on the NCS.

“Early engagement secures optimal use of the supplier’s experience and technical solutions, and establishes a well-defined basis for the project execution phase,” explained Arne Bjørlo, vice president, projects, Centrica E&P Norway. “Increased standardization will reduce cost and project complexity. Finally, the SPA is supported by a commercial model that rewards collective value creation.”

Easier installation
Bjørlo added that through having common goals and a joint motivation to reduce costs, collaboration between the contractors has been better than in a traditional contract set-up.

“Also, design solutions proposed by one contractor are reviewed and improved to ease installation, improve safety, and reduce overall risk and cost,” he said.

“We are optimistic about the future of SPA, and for Centrica it has opened doors in terms of discussing project execution experiences with other oil companies.”

DNV GL’s soundings also see customers interested in further exploiting the experiences of other industries in innovation processes; in particular from refineries and other onshore sectors used to leaner operational models than has traditionally been the case offshore.

[1] ‘Operations readiness and assurance’, DNV GL joint industry roundtable, Stavanger, Norway, March 2016
[2] ‘Centrica signs long-term partnership agreements’, www.centrica.no, October 2015

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DNV GL prides itself on providing accurate information but makes no claims or guarantees about the accuracy, completeness or adequacy of contents in this publication, and disclaims liability for any errors or omissions. The authors’ views here do not necessarily reflect DNV GL’s views.