Bergen, Norway 11 – 13 June, 2019

Subsea is through the worst – discipline now paramount

The subsea industry has been through the toughest period in its history. How it now moves forward will come under close scrutiny.

“Extreme discipline” will be needed if the subsea industry is to move forward in a sustainable way, a leading subsea executive says.

Jon Arve Sværen, who is Program Committee Chairman of this June’s Underwater Technology Conference in Bergen – the industry’s most focused and longest established subsea technology forum – says the industry has come through one of the toughest periods in its history and optimism is returning. Since 2013, cost reduction efforts have seen a 50% drop in project costs. The challenge now is to make the changes that have been made sustainable.

“What moves the needle is technology, the way we work and the way we as an industry have been able to cut costs. We have done this and now we need to find a sustainable level and have extreme discipline moving forward,” said Sværen, who started his career working for Framo Engineering and is now vice president of business strategy processing at OneSubsea.

Higher oil prices, at about US$70/bbl, compared with $30/bbl in 2016, and cost reduction efforts have made oil companies profitable again, which means they are approving new projects and awarding contracts. In early May, Oslo-based consultancy Rystad said that some 100 new offshore projects would be sanctioned this year, globally, compared with 60 last year and just 40 in 2016.

“We are seeing a revitalisation of the market after probably the longest down turn in the industry’s history,” Sværen says. “The industry has been through a tough period and we have gone through an extreme cost cutting exercise. But, how do we make sure we maintain this as the market comes back? How do we maintain the discipline, both on the operator side and supply side, to make sure we are not just seeing another peak and another drop? Stabilising the industry is something we all would have great interest in.”

There have been some structural changes coming in to the industry. “At the start of the downturn, the focus was maybe on squeezing the margins and there was some finger pointing at who was driving the cost,” says joint UTC conference moderator Kristin Nergaard Berg, Group Leader Subsea Technology, DNV GL. “Now we see more collaboration to achieve efficiencies and getting the cost level down. There have been examples of projects where suppliers and operators have worked together to reach cost targets and they have been a success.

“There has also been an increasing trend to use standard solutions and even defining new standards,” she adds. This has included standardisation initiatives around welding, forging, documentation and subsea processing. “We have also seen that the oil majors are now focusing more on reducing their in-house specifications to achieve simpler and standard solutions. This helps a lot. But of course, the challenge is to now bring these learnings with us going forward, as good practise,” says Berg.

One check on any potential cost inflation may be onshore shale production. In March, UK-based analyst Wood Mackenzie said deepwater projects were now cost competitive with Lower 48 shale break-evens. But, cost inflation in deepwater, which has the highest costs in subsea development terms, could damage its competitiveness.

Sværen, who is also chairman of GCE Subsea, which drives UTC Bergen in partnership with the Underwater Technology Foundation (UTF), says: “It’s likely that there will be space for both (shale and subsea), with subsea cost effective through new technology, new ways of working, new ways we interface with our customers.” Indeed, supermajors have been indicating confidence in both, investing in profitable, but longer-term deepwater projects, while also reaping faster near-term returns on US onshore shale. “I expect day one of the conference is going to cast some more light on all of these topics,” says Sværen.

“There are other challenges, such as balancing the cost level with safety levels, and this has come under focus from both the authorities as well as DNV GL, which recently published a white paper highlighting concerns that too little has been invested in safety in recent years. A subsea field in operation may be considered as being pretty safe, but the equipment still needs to be manufactured and installed and the wells over hauled and maintained, so HSE is very relevant to subsea,” says Berg. “Getting in place more efficient ways to do integrity management and life-time extension for these assets is an important challenge.”

The industry has used the downturn to work towards maturing technologies such as all electric and advanced subsea processing, says Berg, and updates on these technologies will be given during the conference. But, she adds: “For subsea processing in general, there’s still a challenge to grow confidence in these technologies. There are more than 100 pumps installed: that should be technology that’s possible to select for a project, if it’s considered the best option. But subsea processing solutions also need to compete with other options. To take the next step in subsea processing the right fields and business cases need to be there to implement.”

UTC 2018 will be the 24th Underwater Technology Conference. Some 700 subsea industry professionals and 40 exhibitors are expected to attend the conference, held in Bergen’s Grieghallen from 12-14 June 2018.

Written by Elaine Maslin

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