Although the need for life-cycle asset management has always existed for operators, particularly those with more mature assets, it now has a bigger part in business planning.

Life-cycle asset management has become an increasingly significant issue for operators of mature assets in the North Sea, where many platforms are operating well below peak production levels. Getting the best economic performance from these aging installations has led operators to seek innovative asset management solutions. In this search they are increasingly involving their operations support contractors.
April 2002 saw the formation of Sigma 3 in the North Sea, which combines offshore expertise from Wood Group, Kellogg Brown and Root (KBR) and Amec. Sigma 3 is responsible for operations support on Shell's UK North Sea business units, covering the Brent fields and the northern and central sectors.
Previously Wood Group and Amec took care of Shell's Brent and northern North Sea business unit as a joint venture, while KBR handled Shell's central North Sea assets.

Formation of Sigma 3, which has a 7-year, US $1.185 billion (£750 million) service deal, demonstrates Shell's desire to optimize operation of offshore assets. It came after Shell reviewed its existing integrated service contracts in 2001. Sigma 3 is charged with helping Shell attain higher production, safety and cost-competitive goals.

How are those goals best achieved? Amec believes designing for asset management should begin at the project concept stage.

"We would seek to get involved with a customer on the definition of facilities to be provided, looking at the total life (of an asset) and the desired operating philosophy," said Ian Hume, director of international offshore operations for Amec.

Facilities should be designed from the outset with a planned operation and maintenance philosophy in mind. That way, Hume said, "The facilities you end up with allow you to operate and maintain them as you would wish to do so."

Platforms previously were designed mainly for immediate project deliverables, to get first oil or gas as quickly as possible. In other words, cost and schedule were the primary if not sole drivers. The oil price then was, in equivalent terms, something like $150/bbl in the North Sea. Now it's a different story as the cost of North Sea production squeezes profit margins.

Delivering optimized operations throughout the life cycle stems from the design philosophy that low-maintenance equipment equals low-maintenance cost.

A platform has to be optimized for reengineering and modification. "You have to make sure the whole life cycle is taken into the equation," Hume said.

Taking a process train design as an example, Hume said the issue is whether to design the unit at startup for plateau production level, or for a lower, average production profile.

"It depends on how much (price) sensitivity you want to build into the equation," the Amec manager said. "There are always questions that have to be answered. It may be a small reservoir or a small recovery factor and you need to design the facilities to maximize production in the first, second or third year - or you may not."

Taking floating production, storage and offloading vessels (FPSOs) as another example, a design might be optimized for reuse.

Bluewater's Glas Dowr FPSO was a high-specification new-build for the North Sea that has been redeployed off South Africa. BHP Billiton also built fixed platforms designed for reuse around the North West Shelf area off Australia. In both cases, high-end initial costs were offset by secondary use.
"Money comes into it in terms of equipment specification and selection," Hume added. "You take into account the whole life-cycle economics."

Why the need for asset management? With the benefit of hindsight, it was required at the outset of the North Sea offshore boom in the mid-1970s. But only now are operators grappling with the problems of maintaining 25-year-old installations.

"On the UK Continental Shelf you are looking at a lot of mature assets which are producing one-third of what they were producing at peak or less, so it becomes extremely critical that you manage the cost of continuing production to the optimum of the remaining life," Hume said.

Margins between revenue and production cost are narrowing with these older assets. "In some cases it is clearly a question of decommissioning getting close. Effective whole-life approaches can extend the economic operating life of the assets. The need for life-cycle asset management has always been there," Hume said. "It is only more apparent now because of the disappearing margin between revenue and the cost of production."

Decommissioning

BP, Shell and Kerr-McGee are among those who have bitten the decommissioning bullet in the North Sea. Tail-end production specialist DNO Heather agreed to take over operations on BP's Thistle platform. Shell decommissioned several field systems, including the Brent spar storage unit and the Fulmar floating storage unit. And Kerr-McGee sold its Hutton tension-leg platform for $29 million to Russia's Sevmorneftegas for redeployment off northern Russia. TotalFinaElf and ConocoPhillips also are examining decommissioning issues for the Frigg and Ekofisk fields.

Shell chose to outsource maintenance to contractors on its deepwater Malamapaya gas-to-power project in the Philippines. Here, Amec is the lead maintenance contractor. Putting in place the traditional kind of support infrastructure staffed by expatriate Shell personnel was too costly. Merely substituting contractors for Shell expatriates was not a viable solution. "The economics would just not stand up in terms of technical support," Hume said.

Amec's support solution for Malampaya was to provide a Web-enabled remote support capability. This involved making available the necessary technical skills to provide operations and maintenance support for Malampaya's offshore gravity-based production facility and onshore gas plant via the Internet.
Day-to-day technical skills are provided locally in the Philippines with a 90% indigenous and10% expatriate workforce. Hume said the Web-system has expanded since it was provided just over a year ago when Malampaya came onstream. "The team supporting Malampaya now supports a number of assets across the world, so that the customer can access niche technical skills without having to fly out ex-pats."

Amec is using this same remote support philosophy in Korea. "You can start delivering a virtual organization which gives the customer real-time access to solutions provision with significantly greater value than having that organizational capability 100% on the ground."

Furthermore, Hume said, Amec has enjoyed the financial benefits of providing this service to a range of major and independent oil companies, as well as businesses in other sectors. "You access best practice much better than if you kept all that skill in-house," he said.

Taking Malampaya as an example, Hume said it was necessary to establish an effective supply chain for the Philippines. "This was the first major hydrocarbon development. There was just no supply chain available to support that project to the level of excellence, quality and management that Shell or we would have expected. We moved away a long time ago from the 'one-stop-shop, you-can-get-it-all' approach. We are moving along the supply chain to get the most cost-effective solutions for our clients."

Hume admitted there were some skills requirements on Malampaya that Amec could not cost-effectively develop. Instead it coached local suppliers into providing them. For fabric maintenance, scaffolding, painting, valve and electrical repair workshops, small and medium enterprises were encouraged to provide what was needed, to the required standards.

For example, Cape Eastern developed relationships and introduced best practices with local suppliers for scaffolding, painting and general fabric maintenance support.

Amec now regards itself not only as a service provider but a facilitator, a solutions broker.

Web-based remote support also is being provided to the China National Offshore Corp. in Indonesia, while the Korea National Oil Corp. is getting a similarly remote support service from Amec in Aberdeen, Scotland.

On Exxon's Kizomba A project, Amec worked on engineering and design in Houston, Texas, with Hyundai, and has delivered the operability and maintainability input into that design remotely from Aberdeen.

On Shell's Bonga FPSO project, design was done from London. "Whether it's London to Aberdeen or Manila to Aberdeen, it's still remote support," Hume added.

Since the Oct. 12, 2002, Bali bombings that killed nearly 200 people, life-cycle asset management has had to factor security into the equation. For Amec, this has meant reviewing existing security and crisis management policies, which in the case of Indonesia, has included urging its expatriate staff to stay away from known congregation points for their communities.

Achieving good life-cycle performance depends on good management tools. To achieve this, Amec operates a fully integrated management software package covering administration, health, safety, environment and quality systems.

How big is the market?

One yardstick for answering this is the oil majors' operational expenditure budgets. Amec regards those budgets as the starting point for measuring asset management opportunities worldwide.

"That market in the UK is enormous," Hume said. "It is billions of pounds. And the global market is tens of billions of pounds. Clearly not all of these budget sums are or will be directed at outsourced asset management support. Contractors must identify their role in the value chain and what differentiates them from others. That is the scale of the opportunity."

For one company, the opportunity is providing data that allows operators to maximize asset utilization. It specializes in providing real-time monitoring tools that build up into a suite of information systems that can be used to optimize performance over the asset's life cycle.

Telegnomic, formed in April 2000, counts BP, Schlumberger and Shell among its clients. Through its Asset Intelligence System, it offers real-time data on assets and operations worldwide.

Sensors installed into well-related equipment provide critical path information needed for ensuring optimal performance. This can range from downhole measurements of flow rates, pressure and temperature in production wells, to data gathered from operating plants offshore. This data then is used to provide asset optimization and intelligence.

"We can plug into whatever instruments, sensors and systems are deployed locally," said Telegnomic's UK Managing Director Patrick Newton. Any communication system then can transport data to a base for analysis, he said.

Asset databases can range from spreadsheets to sophisticated libraries detailing wells and their production history. Huge volumes of information can be generated through this constant monitoring and measuring approach to life-cycle asset management. Therefore, the technology to handle this digital information must be sophisticated too. Hardware and software provides data capture, then a server receives, processes and stores data, which can accessed through various formats, such as the Internet or spreadsheets.

"Ten thousand data points become a single object in a database," Newton said.
Communication is provided by fiber-optic cable, hardwiring or through scada systems that collect and transport raw data into a data warehouse. Once data is captured within an appropriate database, algorithms are applied to discover what is statistically significant. For example, if reservoir temperature in a given well is consistent for a month, that information in isolation may not be significant, but any variation of that temperature over a longer period may well be. This is the kind of significance that Telegnomic's algorithms are looking for.

And it is done in real-time - every 250 milliseconds, for example - four times a second. Data is conveyed to a remote transmission unit that can contain 10, 20 or even 40 gigabytes of memory storage.
From this raw data, management models can be built to provide analysis, optimization and predictive modes for preventative maintenance schedules to avoid breakdowns or failures. As wells are continuously monitored in real time, alerts and alarms can be generated whenever well assets begin to function outside predetermined operating parameters. Potential problems can be identified before they occur - saving companies costly workover downtime and repairs. A fully auditable escalation trail provides tracking of an event and the steps taken to fix the situation. This is where the value of this technology lies - turning data into useable business information.