An FPSO, export pipeline and floating liquefaction solution is on the drawing board for an ultra-deepwater gas discovery in the South China Sea operated by China National Offshore Oil Corporation (CNOOC).

The cash-conscious state-owned player, which recently revealed it has cut its 2015 Capex plans by 35%, remains encouragingly keen to validate conceptual studies by the end of this quarter and kick off a FEED (Front End Engineering and Design) process for its large Lingshui 17-2 field by the end of the year or early 2016. This would be based around a gas FPSO, which would carry out basic processing before feeding into a pipeline linked to a barge-based floating liquefaction, storage and regasification unit (FSRU) 150 km away near Hainan Island.

Lingshui 17-2 sits in around 1,500 m (4,921 ft) of water in the Qiongdongnan Basin south of Hainan Island, and has had several exploration and appraisal wells drilled on it over the past three years to firm up recoverable reserves currently estimated at 100 Bcm of gas.

CNOOC’s decision at the start of 2015 to clamp down on its planned spending has made it trim its cloth accordingly on Lingshui, where it had previously been focused on its favoured concept of a Floating LNG solution, which it preferred over other floater solutions including Tension Leg Platform, Spar and semisub facilities, all linked to export pipelines to shore. The FLNG solution was favoured because of its perceived cost benefits in deepwater, as well as compared to the expense of constructing and installing a 150 km pipeline to shore plus a costly onshore LNG plant. It was also favoured as China sees FLNG as a good solution for developments in disputed waters, with a standalone facility more defendable than a conventional solution requiring lengthy and correspondingly vulnerable pipelines to shore.

The Chinese operator therefore views FLNG as a concept that it can utilise on its remotest deepwater gas discoveries in the South China Sea. But with an estimated initial Capex of US $1.6 billion to install a 1.2 MM tonne per annum FLNG facility, CNOOC has baulked at the expense as well as the perceived ‘risk’ for this still relatively new offshore production solution.

As a result the more conventional FPSO and pipeline solution, linked to a barge-based near-shore FSRU, has become the better-value option in CNOOC’s eyes, DI understands. The FSRU would represent an estimated Capex of approximately $300 million, and could be built entirely in China.

If the FEED process does get underway by the turn of the year, sources indicate CNOOC will target an engineering, procurement and construction (EPC) phase to be underway by late 2016 or early 2017, with first commercial production loosely pencilled in before the end of 2019.

  • CNOOC (and COOEC, its inhouse engineering division Offshore Oil Engineering Corporation) are also expected to issue further information soon about their ongoing Liuhua development planning in the South China Sea, where two TLPs are being lined up for the 11-1 and 16-2 oil fields.

Four EPCI bidders put in their FEED proposals towards the end of last year – FloaTEC, Technip, SBM Offshore and Kvaerner – with Technip and FloaTEC the favourites to seal the deal, although no winner has yet emerged. The FEED covers hulls, moorings and topsides.

A separate FEED is also underway for a new FPSO (Hai Yang Shi You 119) on 16-2, with an EPC tender for that due out before the end of the year, with Chinese yards such as Dalian and Shanghai Waigaoqiao the likely contenders for that work. It will replace the existing Nanhai Shengli FPSO, which has been producing the existing phase of the Liuhua 11-1 field since 1993. The 16-2 field sits in just over 404 m (1,326 ft) of water.

The Liuhua 11-1 TLP topsides is projected will weigh around 12,000 tonnes with a hull of similar weight, while 16-2 (which will be linked to the FPSO) has a topsides expected to come in at around 9,000 tonnes, with the hull weighing 10,000 tonnes. The TLPs will be linked by a 35 km pipeline.

DI hears that an EPC contract on Liuhua will be awarded at the tail end of this year, although that could possibly slip back into the first or second quarter of 2016 due to further cost-cutting initiatives by the operator in the current economic climate.