Petrodollars: Brazil says yes to FPSO, but others aren’t following suit

When Brazil’s Petrobras installs the first permanent floating production, storage and offloading (FPSO) facility in the Gulf of Mexico later this year or early in 2012, the structure likely will stand as an isolated experiment for the region rather than the first peek at a breakthrough trend.

Although several operators and the government have talked for more than a decade about introducing FPSOs to the Gulf, Petrobras remains the only company to formally do it.

During the same period that saw Petrobras make its FPSO leap, however, large Gulf rivals Chevron, Anadarko Petroleum and Shell have rejected FPSO technology as an answer to their specific deepwater production needs at other key fields, turning instead to more traditional spar and semisubmersible units at fields scheduled to launch in the next two years.

While Shell revealed September 1 that it hopes to deploy the Gulf’s second FPSO at its remote Stones prospect by 2015, offshore facilities monitor ODS-Petrodata lists that Stones prospect as the only other “possible” FPSO on the horizon for the Gulf.

Rejection of FPSO technology in the Gulf stems from the same unique factors that likely will continue to set the Gulf apart from the rest of the world in the future: Availability of a substantial subsea pipeline infrastructure and unavailability of a workable alternative for moving natural gas from a production site.

FPSOs employ shuttle tankers to offload and move oil to shore and have no way to move gas without a pipeline connection.

“Associated natural gas is still the prominent issue,” says Ken Arnold, senior technical adviser for the WorleyParsons engineering and management consultancy. “We have an existing infrastructure of pipelines for both oil and gas, and that makes it easier to use pipelines. The Gulf of Mexico is unique in that regard.”

With operators required to move gas from any production site, they must install a gas pipeline wherever they establish a production facility. “If you have to put in one, you can put in the other,” says Arnold.

As a result, he believes economic concerns likely will limit FPSO installations to fields that are primarily gas with a small amount of associated liquids. “Where economics are driven by oil, most often the economics will drive you to pipelines,” Arnold concludes.

Chevron made that decision last year in crafting its $7.5 billion plan for semisubmersible development of the high-profile Jack and St. Malo prospects, while Anadarko followed suit this year by selecting a $2 billion spar structure to develop its high-profile Lucius field.

Earlier Shell briefly had considered and then rejected FPSO technology for its $4 billion Perdido complex, citing “economics” as the reason for also selecting a spar.

Even Petrobras has hinted it might add an oil line to the gas line planned for Cascade-Chinook at some point in later phases of the development.

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For now, however, the Brazilian national oil company is moving ahead with its plan to introduce FPSO technology to the Gulf, choosing a production system at Cascade-Chinook to reflect FPSO systems it uses at home.

Arnold doubts that Petrobras chose an FPSO because of any bias toward that technology, but adds: “I think it made it easier for Petrobras to accept that solution.”

Contrasting Petrobras with Chevron, Arnold does not believe Chevron has any bias against FPSOs because it operates them elsewhere in the world. “But Chevron would be prejudiced in favor of the best economic solution,” he adds, noting that the need for a pipeline connection likely sealed the Jack decision.

Built at an estimated cost of $740 million, the FPSO for Cascade-Chinook will be operated by BW Offshore, while Overseas Shipholding Group has contracted to operate a pair of shuttle tankers for moving oil from the unit to the shore.

The facility will have capacity to store 600,000 barrels of oil while processing 80,000 b/d and exporting 16,000 Mcf/d of natural gas into the gas pipeline.

Although US oil services giant National Oilwell Varco cited the global expansion of FPSO technology as a reason for its $500 million acquisition of BW’s Advanced Production and Loading unit last year, NOV spokesman Clay Williams said his company sees the primary FPSO market as overseas rather than the Gulf of Mexico.

“The Gulf is tentatively moving in this direction (toward FPSOs), but it depends on where the discoveries are made, and how close they are to existing infrastructure,” says Williams.

He agrees with Arnold’s observation that the Gulf’s extensive pipeline infrastructure dominates decisions on development plans, with the dilemma of handling gas production as the most prominent argument against further FPSO expansion despite the impending introduction of the technology at Cascade-Chinook.

–Gary Taylor in Houston Platts