Editor's note: This feature first appeared in the July/August 2024 issue of Offshore magazine.
By Jeremy Beckman, Editor, Europe
Engineering alliances are increasingly seen as the way forward among the majors and NOCs as they struggle with the technical, financial and environmental complexities of their future offshore projects. Subsea 7 executives outlined their company’s approach to addressing these dilemmas during a recent presentation to analysts and investors at the company’s pipeline spoolbase in Norway.
CEO John Evans, in his introduction, predicted that the oil and gas business would still be around for decades to come. “Subsea spending is very much on the way up after years of under-investment in our sector, and we can see clear paths for exceptional growth in subsea…Our framework is to adapt to speeding up or down in future. And digital is key, clients demand it, it speeds up our delivery.”
“Today we’re also going from providing SURF to SURF/SPS on an integrated basis…and we’re open to contracting in many different ways, whichever suit the clients’ needs,” Evans added. He further noted that despite the high turnover of “young pretenders” that have come and gone in the subsea construction sector over the past few decades, the same “Big 3” today are Subsea 7 and TechnipFMC (via their predecessor formats) and Saipem as in the mid-1980s. “And there is no sign of new pretenders coming in.”
Olivier Blaringhem, Executive Vice President—Sales & Conventional at Subsea 7, said the company was increasingly focused on providing solutions to optimize the lifecycle economics of subsea field developments. The process starts with early engagement and proposing viable solutions as soon as possible to allow operators to make decisions on field architecture, he said. “Then, we work with the supply chain to secure fabrication slots to guarantee that a project will happen on time, and we also secure our vessels early- so we have a good understanding of the risks.”
The field development group’s 200-strong team comprises 80 front-end engineers and 120 other specialists in different domains, including procurement. Xodus, a wholly owned but independent company, can also provide a complementary consultation service to operator clients “in fields we don’t have expertise, such as electrification and environment.” He cited Equinor’s Bacalhau offshore Brazil project and Woodside’s Sangomar project off Senegal as big deepwater projects that might not have been awarded to Subsea 7 without Xodus providing insights into process safety.
While certain major operators such as Aker BP in Norway have embraced alliances with contractors to take their projects forward, others have remained very traditional in their approach to the market, he claimed. “Chevron and Shell have typically gone out to three bidders, then moved ahead with procurement…But there has been a trend over the last few quarters, they are now coming to us directly on certain project, not necessarily on early engagement – it could be the execution phase –but `let’s make this project happen together’.” The deepwater line-up in his presentation included the Aphrodite, Nargis, Gorgon Stage 3 and Gato do Mato projects. Following negotiations, Subsea 7 expects to announce further awards from the two majors in the coming quarters, he added.
One of the company’s specialties is its bundle technology, which combines and connects production and injection pipelines, flowlines, risers, umbilicals, power cables, fiber optics, hydraulics and pipeline structures in a sheath-like structure that is pre-fabricated at the company’s yard in Wick, northern Scotland. A vessel collects and tows the completed package and installs it at the field location. The service was developed for tiebacks of 30 mi [48 km] or less in the North Sea, where it has featured in 89 projects. Subsea 7 is now in discussions with various companies on taking the technology to the land-locked Caspian Sea, Blaringhem said, “where there is a very limited number of pipelay vessels. It could be a game-changer for them to make their projects happen at a reduced cost and carbon footprint.”
Another internal development is a proprietary digitalization platform, designed to help operators visualize options for their projects through manipulating software products – available live and online – based on actual seabed conditions and the field’s oil and gas characteristics. Subsea 7 can build the architecture “live,” in the field, and devise numerous scenarios for the operators to choose from.
“The clients can use the scenarios to play with the production cost, capex and operational cost. We can also provide a carbon footprint…The client can choose the best combination to go with a particular scenario,” Blaringhem said. "During the project delivery phase, it’s about how we want to handle the huge amount of data that we create during a project in a digital manner."
Subsea 7 has developed a project management lifecycle service and plans in the next two years to move all its projects onto this digital platform. Once a project is complete, the company aims to deliver a digital twin to the operator. The process is happening already, and is supporting client decisions on optimizing productivity.
“Recently, Aker BP in Norway gave us a digital twin of an existing field they have: we used this to look at scenarios for a tieback and to define the architecture for the tieback. This is the way the industry is going," Blaringhem said.
SUBSEA INTEGRATION ALLIANCE
Since 2015, Subsea7 and SLB have worked together under the Subsea Integration Alliance (SIA), with the duo recently teamed up with Aker Solutions to form the expanded subsea technology services joint venture OneSubsea. Since its inception, the SIA has accounted for more than 25% of Subsea 7’s revenue with $8 billion of contract awards. One of the alliance’s recent innovations is the “Port to Process” concept, of which phase 1 of Turkish Petroleum’s subsea-beach Sakariya gas field project in the Black Sea was the first example.
The idea, Blaringem explained, is to provide the operator, under one contract, the reservoir well completions (scope handled by SLB), the SPS and the SURF (SIA’s scope) and the onshore facilities (SLB). “So under one contract, provide the wellheads, transportation for the products, and the reception terminal before the oil and gas enters the onshore distribution network or goes offshore.”
Sakariya came onstream 30 months after discovery, a process which would normally have taken five to 10 years, he suggested. Turkish Petroleum has since awarded the consortium the subsea second phase development, and Subsea 7/OneSubsea are also working on a life of field solution for the same client.
The next step could be to extend “Port to Process” to carbon capture and storage, but in reverse. SLB and Aker Carbon Capture have just closed their new joint venture for this market. They will offer to construct a project’s carbon capture infrastructure onshore, including the terminal and reception facilities for the CO2 captured from industrial emitters. The SIA alliance will then transport the CO2 offshore with SLB responsible for storing it in the reservoir or aquifer.
In Brazil, Blaringhem continued, Subsea 7 is providing its full life cycle service: early phase, execution, Life of Field. One example is Bacalhau in the Santos basin; Equinor chose the company at the pre-FEED stage to develop the project, with early engagement on the risers and flowlines. The execution phase is now under way, through the SIA. Currently under construction in the same basin are Mero 3 and 4 and Búzios 8 and 9. The operator, Petrobras, “doesn’t come to us for the early phase, they prefer to go direct to the execution phase. But again, it’s all about our enabling products, flowlines and risers.” Brazil should provide a $2-billion market for Subsea 7 from 2026 onwards, he added.
Equinor also appointed Subsea 7, OneSubsea and the SIA to help it find solutions for the Wisting and Bay du Nord projects in the Barents Sea and offshore eastern Canada, under a strategic collaboration agreement that runs for eight years, plus extensions. “We bid these projects in 2022-23, but Equinor and its partners gave up as they couldn’t make them work, Now, they have gone with the SIA as their best chance to make it happen: the idea is to have FID in place in 2026, then move to execution through the 2030s. Here Equinor is coming to us for early engagement, integrated services and for digital solutions.” Finally, Subsea 7 has been in an exclusive alliance with bp since October for certain geographies, formed “in the context of a market which is very busy today.” The two are already collaborating in the UK [the Clair Ridge expansion west of Shetland was one listed on Blaringhem’s slides], and there are also opportunities offshore Trinidad & Tobago.”
ALL-ROUND FLEET
Phil Simons, Executive Vice President—Projects and Operations, said the average age of Subsea 7’s construction vessel fleet is now 12 years. The company looks at owning vessels that do the core of its work, he explained, supplemented by short or long-term charters of other parties’ support vessels. The fleet is also one of the few offering all main pipelay modes, J-lay, S-lay and reel-lay.
Seven Vega, the company’s most modern vessel, has been in Brazil working on Bacalhau; it will then be in service on the Mero 3 project. Seven Oceans, after finishing work for Woodside at the Barossa project in the Timor Sea, was due to relocate to the Norwegian Sea for Aker BP’s latest tiebacks in the Skarv area. Seven Navica, which earlier in the year completed the Northern Lights carbon capture pipeline in the North Sea, departed Subsea 7’s Vigra spoolbase in Norway in June for the Fenris-Valhall tieback in the North Sea. All the company’s reel-lay vessels are fully booked for the next few years, Simons added.
Recently Seven Champion made its debut in the Middle East, as the first dynamically positioned heavy-lift vessel to operate in the region, with a 3,200-t crane onboard, to install topsides and jackets built by local partner Larsen and Toubro for Aramco. Seven Borealis also headed to Saudi Arabia to work on Aramco’s Zuluf project after completing a 120-km (74.5 mi) gas pipelay installation for ExxonMobil offshore Guyana.
Among the company’s network of spoolbases, Seven Oceans is due to visit Ingleside in Texas ahead of pipelay for Beacon Offshore Energy’s Shenandoah project in the US Gulf of Mexico. Ubu in Brazil is performing all the welding for Petrobras’ pipelay jobs, Simons claimed. Having finished work for Bacalhau, the site was preparing to spool out the pipelines for Mero 3, then Mero 4, Búzios 8 and 9. At Lobito in Angola, part of a larger fabrication site, the spoolbase is supporting TotalEnergies’ CLOV3 development in offshore Block 17. Subsea 7’s product developments, he added, include heavy-wall pipe up to 45 mm thick for certain projects in the US GoM. Despite being so thick, the pipes can be bent around reels for reels and can support very high spec, 20,000-psi (1,379-bar) welds, with virtually zero defects in welds.
NORWAY INCENTIVES
Monica Bjorkmann, Senior Vice President—Norway, said that during the first wave of COVID in 2020, she and her colleagues at Subsea 7 worked with Equinor, Aker BP and others to persuade the government to enact a temporary tax regime for Norway’s oil and gas industry. The paramount aims were to sustain activity through the downturn, “and to make sure we didn’t lose capacity and competence for the coming energy transition. Many projects in our backlog now are due to that temporary tax regime, a lot of those having been sanctioned at the end of 2022.”
Subsea 7 has been instrumental in delivering most of Norway’s key projects over the last 15 years, she continued, including Equinor’s Aasta Hansteen in the Norwegian Sea, the largest on the NCS at the time and in the deepest water, 1,350 m/4,429 ft (the company was responsible for the full SURF scope, along with tow-out and hook-up of the spar platform topsides). It has since managed the EPCI for Equinor’s Martin Linge in the North Sea, twice the size of Hansteen in terms of the project scope, and it is now supporting Aker BP on the multi-field Yggdrasil development in the North Sea, said to be around three times the size of Hansteen.
“Subsea 7 has built over one half of Norway’s subsea infrastructure. Now it is working on more complex projects both independently and with OneSubsea,” Bjorkmann said. In Norway, the company has 600 personnel onshore and works with around 1,000 suppliers, with a base in Dusavik supporting mob/demobilization and maintenance of its vessels (around seven Subsea 7 construction ships are currently working offshore Norway throughout the year), and the Vigra spoolbase. The teams are working on 16 projects at present on the NCS for ConocoPhillips, OKEA, Sval Energi, Aker BP, Equinor, and Shell, with a $2-3 billion contracts backlog through 2028.
As for future opportunities on the shelf, “we see $5 billion in pipeline,” Bjorkmann said. “Around 80 projects, probably smaller in scope, are coming. Equinor is maturing a large portfolio of projects.” Subsea 7’s work for Aker BP is with OneSubsea in the Subsea Integration Alliance, “maturing projects together from the early concept stage through execution until first oil or gas. The team is together in our offices in Stavanger, all integrated, we don’t know who is from which company. The traditional role of client/suppliers is not really there.”
Knut Sandvik, Senior Vice President—Projects at Aker BP, who also spoke at the presentation, said his company had grown from producing a few thousand barrels a day offshore Norway over a decade ago, as Det norske oljeselskap, to 450,000 b/d following acquisitions and mergers involving Marathon and then BP in Norway, and most recently Lundin. “We are a pure play oil and gas company, and we want to be best at it, with a focus on low cost and low carbon.”
“But we want to grow further. Half our production in 2028 will come from the projects we are developing now, up to 250-350 MMboe/d in 2028, and our ambition is to go north of 500,000 boe/d. Most of these developments are $35-40/boe breakeven, with short payback times, low emissions, and most involve power from shore. For project execution…we believe in front loading, and alliances are a key element. We want to enter contracts early with our equipment suppliers to get everyone onboard to help project planning. History shows a lack of early phase planning is the main reason that projects for wrong.”
Aker BP’s Subsea Alliance in Norway is unique, Sandvik said, because the company as an operator is included. “Aker BP is a relatively small organization and it needs close co-operation to take these projects through. We have done 17 projects with the Subsea Alliance since 2016, with a total revenue of NOK17 billion [$1.58 billion], all on time and within budget.” Now the alliance is working on six more projects with a combined revenue of NOK33 billion ($3.08 billion), with over 700 km (435 mi) of pipelines and umbilicals to be laid, and over 50 subsea wells to be drilled over the next three years, occupying 2,000 vessel days.
Future NCS activity, he predicted, would be dominated by subsea tiebacks, “but these are also getting quite marginal, with more difficult reservoirs, longer step-outs, and smaller, so we need to be smarter, come up with new technical and commercial solutions, a new business model. And we also need to look at the authorities’ requirements. Partnership and alliances will take us there, it’s just a matter of taking this further.
“The benefits of the alliance arrangement are early involvement – knowing who is going to do it, where to do it, what technology will be used, what sort assets to be used. Moving early to develop the best solutions is key, and also securing predictability and capacity.” For the future, he added, Aker BP is thinking of extending the model to a tieback alliance encompassing drilling, wells, subsea, and modifications. “And also, to go deeper in the value chain, bringing onboard some of the key equipment suppliers further down. There is a continued need for new solutions and business models.”
