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Optimizing the FPSO Asset Is a Pathway to Revenue Growth

Optimizing the FPSO Asset Is a Pathway to Revenue Growth

A clear differentiator for best-in-class upstream companies is the speed to revenue from newly approved asset development programs. ENI is one company that has made a disruptive change in their exploration and production strategy, as ENI’s chief exploration officer, Luca Betelli, explained in a breakfast session at CERAWeek 2018. They have aggressively moved to employing big data and advanced analytics to dramatically reduce the typical time to first oil or gas — from five years to just 27 months. 

ENI and other mega energy firms can achieve this by managing and “controlling” all aspects of the exploration, appraisal and development process. ENI keeps many of the details of their upstream digital transformation process close to the vest. On the other hand, ExxonMobil, currently engaged in the early stages of development of the Rovuma LNG project in Mozambique, has chosen to share some of its groundbreaking approaches to shrinking time and cost to first gas, making two detailed presentations on its approach at the AspenTech OPTIMIZE™ 2017 conference in Houston, Texas.

So, the industry’s mega firms are making some amazing strides in improving the economics of asset plays. But what about everyone else?  

One of the appealing approaches to developing remote assets is the rapidly maturing floating production storage and offloading (FPSO) model. By commissioning FPSOs, asset owners can take advantage of more modular and repeatable design approaches than those employed in conventional platform-based or on-land production. This can also avoid the lengthy permitting processes involved in constructing production infrastructure onshore.

 

The Challenge of Contracts

A typical contracting approach for FPSOs and similar floating production facilities is to outsource not only the detailed design and construction, but also the operation of these facilities.  

In that model, the big open questions are how to:

  1. Incentivize the FPSO-contracted operator to maximize equipment reliability and uptime

  2. Provide feedback data on equipment and process performance to improve the next design process (as perfected in the ExxonMobil approach referenced above)

I’ve had opportunities to meet with several of the leading FPSO designer-supplier companies over the past year. Many of those organizations employ AspenTech’s performance engineering solution set for the design and construction of their FPSOs. I’ve been interested in working with those organizations to extend use of this design technology into the asset optimization and asset performance management area. There are some important opportunities to use these tools, as well as companion ones, across the asset lifecycle, improving the uptime and yield of FPSO equipment and systems, as well as improving the dollar yield to the asset owner. 

This is an area of strong interest at the senior executive level of these FPSO organizations. However, the contracts put in place by their clients (the asset owners) rarely give a strong incentive for the FPSO contractor to optimize performance. The costs would be borne by the contractor, while the benefits would, in many of the contracting arrangements in place today, flow to the owner.  

I recently had the chance to speak with the relevant team at one of the asset owner companies that manages the assets that are produced through FPSO contracts. There is a clear recognition of the opportunity to improve hydrocarbon production, and therefore revenue and profit, through optimization of the asset and reliability improvements. However, it requires revisiting existing long-term contracts.

It is crystal clear that this is an area in which senior executive attention is needed. To my mind, there is an obvious payoff to everyone if the three parties — the asset owner, the production facility contractor/operator and the optimization technology supplier — can work together to design a business and technical solution that provides:

  • Risk-reward balance between the parties

  • Improved asset performance and reliability

  • And, ultimately, additional revenues for both the asset owner (through increased crude/gas revenue) and the contractor (through incentives to achieve that optimization)

 

To learn more, see: 

Blog: Standardized Design Is a CAPEX-Cutter

Blog: Time is Still King in the World of Upstream

AspenTech white paper: Beyond Oil Digitalization

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