3 Cost-Saving Strategies for Developing Marginal Oil Fields

3 Cost-Saving Strategies for Developing Marginal Oil Fields

  • Oil and gas operators are looking to develop marginal fields as output declines in mature fields
  • Key cost-saving strategies include the use of minimum facility platforms, adoption of standard engineering designs and bundling orders
  • More oil fields have been classified as marginal because of the shifting cost-versus-returns balance
August 20, 2021 | Oil and Gas Blogs

Mature oil fields supply most of the world’s daily crude output. But with the output from these fields declining, oil producers are looking to develop marginal fields.

Marginal fields are smaller oil fields that usually remain unexploited due to their limited reserves, lack of area infrastructure and prohibitive development costs, but since oil producers have limited control over the oil reserves and infrastructure, they are focusing on reducing the development costs.

Some of their cost-saving strategies include using conductor-supported platforms, adopting standardized engineering designs for offshore fixed structures, and bulk ordering offshore platforms.

1. Minimum facility platform and conductor-supported minimum offshore structures

Conventionally, a minimum facility platform (MFP) is used in marginal shallow-water development. An MFP typically comprises surface wellheads, trees and manifolds but does not include separation facilities. The MFPs can be tied back to an adjacent production facility or a larger field production network, reducing the capital expenditure.

In contrast, a conductor-supported minimum offshore structure, or CoSMOS, eliminates the use of a separate supporting jacket structure.

In addition to this, CoSMOS also offers features such as modular design, fast procurement, low fabrication cost and ease of installation. The cost of a CoSMOS platform from front-end engineering design to installation can be 30-40% lower compared to that of a conventional jacket-supported platform.

For example, PTTEP, the national oil company of Thailand, has been using a conventional MFP in the Gulf of Thailand since 2017 and is also planning to use a similar structure in the Gulf of Moattama in Myanmar.

KrisEnergy, an independent oil and gas company, has also been using a similar structure in the Apsara oil field development in offshore Cambodia. Of late, 2H Offshore has emerged as a major player in CoSMOS platforms, having designed more than half of these across the world.

2. Standardized engineering designs

Another common cost-saving strategy is the “design one, build many” approach. This is where oil companies slightly modify structural layouts to adapt to a particular field’s conditions.

The approach saves on design time as labor costs. It allows for the fabrication to start parallelly with designing tweaks while continuing to facilitate advance procurement of bulk materials and long lead equipment. This reduces the lead time for new offshore platforms.

The oil industry has seen many cases of adoption of standard engineering designs to reduce the overall cost of marginal oil field development.

Worley, an Australian engineering firm, has come up with a new concept in wellhead platforms suitable for installation in deep-level water and to withstand rough sea conditions.

Wood Group Mustang, a U.K.-based oil and gas consultancy, performed a similar kind of task for Anadarko Petroleum (acquired by Occidental Petroleum) for its operations in the Heidelberg Field in the Gulf of Mexico. It used the designs of topside from Lucius field, also in the Gulf of Mexico, reducing the hours needed for labor, engineering and equipment procurement.

3. Bundle orders

Oil and gas operators tend to award multiple offshore platform contracts to a single engineering, procurement and construction (EPC) contractor to reduce costs and eliminate redundancy.

National oil companies either award a large number of wellhead platform contracts for multiple fields or bundle the needs and contracts of multiple local operators and give the order to one EPC contractor. This approach decreases the per-unit cost of the platforms.

For example, PTTEP, Chevron and Mitsui Oil Exploration Company awarded many wellhead platforms to the same EPC contractor under the Arthit and Bongkot expansion project.

Conclusion

The rising number of oil field discoveries and low oil prices have led to more fields being classified as marginal because of the shifting cost-versus-returns balance.

Combined with the declining revenue from maturing fields, it is becoming important for oil and gas operators to employ these cost-saving strategies to stay profitable and meet the growing energy demand.

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