Much of the recent commentary concerning the decline in oil prices has focused on US onshore production, specifically whether the continued extraction of unconventional resources is viable at current prices. Undoubtedly, this will be a key issue for the dynamics of global supply. However, another consideration is the impact on deepwater production and in particular a key future enabler – subsea processing (SSP).
SSP encompasses a myriad of technologies, all with the potential to reduce costs and improve recovery from deepwater fields. Our Subsea Joint Industry Study – conducted earlier this year – concluded that there is clear operator appetite for technologies such as boosting. However, in recent years, not enough progress has been made in other areas of SSP such as separation or gas compression.
Cost concerns are common among operators – Statoil’s Aasgard compression project has been estimated at US$2.5 billion. Unfortunately, these concerns are likely to be magnified by current oil prices and an associated reduction in capital spending. With many SSP technologies still embryonic in their application, the current macro environment will be a substantial barrier to demonstrations of SSP cost advantages and establishing proven track records.
Cost reduction will be required for the further implementation of SSP solutions. Recently however, there have been positive developments in standardisation, highlighted by the joint industry project (JIP) between Statoil and DNV GL. Nevertheless, the current fiscal climate suggests the benefits of SSP must be clear and readily understood. A reduction in operators’ willingness to engage in Capex intensive projects will limit further field trials and severely impact the spread of relatively unproven technologies such as compression. With rising cost concerns, will operators be willing to risk substantial initial investment to develop these essential technologies, or delay their implementation in response to what may be a potentially short-lived depression in prices?
Andy Jenkins, Douglas-Westwood London
Adapted from a press release by David Bizley