FPSOs Enter The Gulf Of Mexico Operator Tool Box

Abstract

Editor’s note: This is the second of two articles on the technical challenges and regulatory hurdles that were overcome to allow the use of floating production, storage, and offloading vessels (FPSOs) in the US Gulf of Mexico (GOM). The FPSO that will be installed at Petrobras’ Cascade/Chinook development in the deepwater GOM is planned for mid-2010 startup. As 2006 progressed, teams of operators’ engineers continued deliberations on how to make a start on producing two US Gulf of Mexico (GOM) field developments using a floating production, storage, and offloading (FPSO) vessel as an early production system (EPS). One team decided against it and the other agreed that an FPSO did make good sense for its field. It was an interesting contrast in the philosophies of two operators: one (Chevron) very deliberative and exhaustive, investigating all options before proceeding and only then in a tightly organized project management and planning structure; the other (Petrobras) with a more pragmatic approach, borne of the uncertainties faced in production from these untested formations and their success in Brazil in trying out production for a short period at new fields (Fig. 1). The use of an FPSO was agreed for the Petrobras-operated Cascade/Chinook development (Devon as a partner on Cascade and Total on Chinook). At multiple standing-room-only technical sessions at the 2007 Offshore Technology Conference in Houston, the offshore industry debated and settled on design-code revisions. Simultaneously, negotiations proceeded on contracting the first FPSO for the GOM, and August 2007 saw the contract signed for chartering the first FPSO in US GOM waters, for the Cascade/Chinook development. Competition had been fierce for this pioneering project. Within weeks, two new shuttle tankers were chartered to provide export to GOM ports. This was not as simple as it sounds, as these tankers would transport oil from one US port (the FPSO) to another US port (the shore terminal or refinery) and so had to conform to the Jones Act, which stipulated that Crews had to be US citizens. The ownership of the tankers had to be at least 75% US. Tankers for Jones Act trade had to be built in the US. All of the conditions translate to high capital expenditure and day rates, approximately 2–3 times that of a non-Jones Act tanker. The Merchant Marine Act of 1920 (The “Jones Act”) does apply to shuttle tankers, but does not apply to FPSOs. By standards elsewhere in the world, the shuttle tankers used in the US GOM are not particularly efficient—they are small (approximately 330,000 bbl capacity) to enable entry into US GOM ports with 40 ft draft restrictions, and must have alternate use in products service in US waters if the shuttle-tanker business does not continue.