Collaboration, creativity and commercial partnerships – the new upstream triumvirate

By Dave McKendrick, Baker Hughes

The Premier-operated Solan field consists of two producers and injectors tied back to a platform, and a new Solan production well (P3) is planned for 2020 to boost production from the central northern part of the reservoir and to extend field life (photo: Premier Oil)

How industry partnership models mark a new era for extending life of field.

The Oil & Gas Authority estimates that 30 new fields have come onstream in the United Kingdom Continental Shelf (UKCS) since 2015. Under the UK industry’s Vision 2035 strategy, the aim is for the North Sea to still be producing more than 1mm boe/d in 2035.

Although this could be seen as a slightly intangible figure to some, it highlights the significance of field life extension. The need to manage the UKCS resources efficiently and prolong the life of oil and gas developments for as long as possible has created a search for enhanced technology and process efficiencies within the industry.

Commercial models, creativity and collaboration are not terms traditionally associated with upstream oil and gas, until now that is. Customary operator-supplier models are being turned on their head in order to meet the demands of this new environment, with significant success.

A new perspective on partnerships
This change has been encouraged by a number of critical factors which have emerged over the past decade. Operators have found that overall capital expenditure can be decreased by utilising the processing capacity on existing platforms, rather than building new structures for every field. To that end, much smaller reservoirs can be developed more economically today than ever before. For example, extraction via subsea tiebacks require significantly lower initial investments, compared with developments using fixed installations or FPSOs, and operators can achieve first production in a much quicker time, significantly improving NPV, cash flows and overall project economics.

Significant too, is the number of independent operators working in this region today. The market for single wells has expanded as they take over mature assets from majors and international oil companies (IOC)s, increasing the opportunities for tiebacks, infill wells, intervention and well stimulation.

Technological innovation is also allowing the exploitation of these new and complex discoveries, the majority of which are smaller and more remote than ever. As a result, advances in tie-back technology are more in demand than ever within this modern-day context. Marginal pools and infill projects in UKCS require more collaboration across the value chain and often a completely new approach to project economics.

As such, a huge market with unforeseen potential is emerging, one that is centred on/applying new project management models and innovative production systems, designed to achieve significant cost savings and early production delivery.

Baker Hughes is one such company that has undergone significant review and reconfiguration of internal processes and procedures to ensure it is a step ahead of this new market environment. The result has been demonstrable success over several recent projects, innovation in its tie-back technology, and a new approach to commercial partnerships.

The Solan field
The Solan field, in the UKCS, was discovered in 1991 and has an estimated 20 years’ field life. The field development plan was approved in 2012 and it has been in operation, since early 2016, by Premier Oil. Initially, there were two producing wells. Well three is required to be brought on efficiently.

In this case the operator approached Baker Hughes (BH) at an early stage in order to assess how this could be made possible.

Leveraging teams across our Oilfield Services and Oilfield Equipment departments, and by applying North Sea-developed best practices, including our ongoing work on the Johan Sverdrup project in Norway, a unique approach to the well was developed in collaboration with the operator.

Collaboration
Collaboration has been the industry’s watchword since 2014’s Wood Report, but despite progress, action hasn’t quite caught up with rhetoric. At the outset of this phase of work, joint workshops were held between BH and the client. The aim of which was to forge a joint approach towards unpicking and rebuilding the necessary project specifications, rather than simply doing what had been done before.

Baker Hughes’ integrated project delivery process – Project Connect – changes the way subsea projects are developed
Baker Hughes’ integrated project delivery process – Project Connect – changes the way subsea projects are developed (photo: Baker Hughes)

The result was a jointly defined scope of work that eradicated features and processes which may have legitimately been included if the project had followed the normal methodology but instead were found to be surplus to this context on closer interrogation.

BH invited the operator to visit development facilities that carry out audits and inspections of the equipment manufacturing, assembly and preparations. Timelines were fine tuned in collaboration between the two companies in terms of equipment order placing, critical path optimisation and execution plans.

Dedicated senior account managers were assigned as the communications lynch-pin, not only between the two companies but to provide an integrated overview of the services BH supplied from project outset to contract execution. The simplification of communications structures held huge benefits in terms of efficiencies and streamlining operations.

The collaboration also went a step further than practical delivery. It marked one of the first instances of innovative fiscal project modelling beyond that of a traditional buyer-seller process. As part of the commercial structure, Premier Oil and BH reached an agreement to align payment with milestone dates, reducing the operator’s cash outlay prior to the completion of the well.

Optimised results
By rigorously reviewing the customary approach to project development, including the specifications, working relationships, and fiscal management in partnership, BH was able to assist in lowering the economic development point of Solan P3 for Premier Oil.

All told, this is the first of many examples as to how the life of fields can be extended further, commercially and practically, in the UKCS and beyond. Perhaps the industry is about to become known for its creativity, as much as its ingenuity, after all.

Dave McKendrick is Oilfield Equipment senior commercial manager at Baker Hughes.