SPE 93507

Enhancing Marginal Field Development Economics by Leasing Operated Production

Facilities
A. MacLean, SPE, Expro Intl. Group PLC

Copyright 2005, Society of Petroleum Engineers Inc.

This paper was prepared for presentation at the 14th SPE Middle East Oil & Gas Show and
Conference held in Bahrain International Exhibition Centre, Bahrain, 1215 March 2005.
This paper was selected for presentation by an SPE Program Committee following review of
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presented, have not been reviewed by the Society of Petroleum Engineers and are subject to
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Abstract
Innovative technical advances are now enabling operators to
consider development of fields previously identified as
uneconomic or marginal. However such projects can still fail
to progress since development using a traditional engineering,
procurement and construct (EPC) approach does not always
meet the required targets for economics, risk and timescale
necessary for approval to proceed.
In this paper the author will detail how the use of fit-forpurpose production facilities mobilised on a leased, operated
and maintained basis now offers an alternative approach to the
provision of a field production solution. This approach
enables operators to limit their initial set-up and infrastructure
costs at the front end of a project, to gather additional
information on the performance and productivity of their wells
and to make a more informed decision on the future of the
field. As a result, operators can keep both their project and
capital risk exposure to a minimum.
By achieving this production on a fast-track basis, revenue
from the sale of produced well fluids is generated early.
Combined with the low initial cost and lower capital risk of
this approach, the economic viability of progressing an asset to
full scale production is further enhanced. Based on this
sequential investment model, a real option analysis of the
overall field development plan can therefore make a project
viable, even if the overall project net present value (NPV)
appears marginal using more traditional methods.
In conclusion the paper will present technical solutions for
the various field evaluation and production stages of a full
field development utilising the leased facility approach,
associated commercial models and case studies for recently
completed projects.

Introduction
Expenditure on the exploration and production of
hydrocarbons from oil and gas fields around the world,
including the evaluation and interpretation of seismic surveys,
exploration and appraisal drilling, development planning,
development drilling, engineering, procurement and
installation of production facilities and pipelines, operation
and maintenance of reservoirs, wells and facilities, facility
upgrades, logistical support and eventual decommissioning,
reaches several billions of dollars every year. All stages of the
exploration and production process require detailed
assessments, both technical and commercial, before decisions
are made on the development options. These decisions will
ultimately dictate the level of success of the overall field
development.
Advanced techniques and technologies are now available
that enable operators to gain a better understanding of their
reservoirs (e.g. 3D seismic surveys), as well as giving them
more innovative solutions for accessing their reserves (e.g.
horizontal drilling). However, whilst having more information
and options available at each stage of the field evaluation and
development process increases the likely chance of success of
the overall project, only once a well has been drilled, tested
and produced over a reasonable period of time will the
operator truly understanding the real production issues
associated with their field and therefore the real value of their
asset.
Leased production facilities have been utilised for surface
well testing, both onshore and offshore, for many years.
These facilities provide invaluable data on the productivity of
the reservoir which the operator can then use when making
important field development decisions. However, well testing
is specifically only a short term evaluation (typically 14 to 21
days, depending on the number of zones being tested). The
next step, following the well test, can still be a difficult one to
take; either to carry out a longer term extended well test or to
install a production facility on the field.
Traditional Approaches to Field Development
Extended Well Testing. Following the well test on a field, an
operator may consider progressing the field development by
undertaking a longer period of testing; i.e. an extended well
test (EWT). An EWT is typically carried out over a period of

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between 1 and 6 months, producing crude oil from the well

and flaring the associated gas. This offers the operator the
opportunity to obtain early revenue from sale of the crude
produced during the EWT, enhancing the overall field
development cash flow. However, the EWT also offers the
potential value of the information learned from the extended
production operations; how does the well perform; are the
results as expected; do the results affect the way the field
should be developed, the facilities required and the estimated
value of the asset?
EWTs are often carried out using conventional well testing
equipment which is readily available from the oilfield services
industry. This enables these still relatively short term
production operations to be completed at reasonable cost.
However, in many cases this is not practical, particularly with
the increased focus on environmental issues often prohibiting
the continuous flaring of gas during the EWT. Whilst this
does not preclude the completion of an EWT, the engineering
of the EWT system required is often now more involved with
the production equipment becoming relatively complex (e.g.
gas compression facilities). The number of EWTs carried out
has therefore been seen to reduce in recent years.
Field Development. The design and engineering of full field
development facilities is a major undertaking which can
encompass conceptual studies, detailed feasibility studies,
selection of alternatives, definition of the development
solution, planning and detailed scoping, detailed design and
specification, engineering, procurement, construction,
installation, commissioning and start-up.
Significant
engineering resources and capabilities are required to meet the
complex equipment requirements; oil needs to be stabilised
and processed to meet export specifications, produced water
may need cleaning to meet environmental regulations for
disposal, gas may need processing for use as fuel and
compression for export, as required, and additional systems
may be necessary for water injection, power generation, fiscal
metering and export of the produced fluids. The facility must
also meet the stringent certification requirements for a
production installation, with the appropriate safety and
environmental regulations required for the long term operation
of the plant.
Traditionally, such facilities have been provided on an
engineering, procurement and construction (EPC) basis. The
EPC approach and working methodologies of EPC contractors
have been developed to enable large scale, resource intensive
engineering projects to be completed, and have been widely
used in the oil and gas industry. Whilst the EPC approach can
be very successfully employed, such contracts can also suffer
problems; delays in the decision making process can compress
the execution phase, creating time pressure leading to same
as before solutions and slippages to the overall project
schedule; EPC contracts tend to focus on capital costs
(CAPEX) rather than life of field cost; contracts won on a
lowest fixed price basis can lead to a defensive relationship
between the operator and the contractor rather than a
collaborative one so that any changes and amendments can
only drive the overall contract price upwards. As a result the

project can take longer to complete, the solution can be less

innovative than originally planned, installed cost to the
operator can be higher than originally forecast, and operating
costs (OPEX) can be higher than planned over the life of the
facility. However, the EPC approach is well understood
within the oil and gas industry and therefore remains the
predominant contracting model for full field development
facilities.
Development Economics. When formulating their field
development plans, operators need to include allowances for
the risks to the project. Based on these traditional approaches,
these allowances will include factors for risks due to the lack
of real production information on the reservoir and wells, risks
of project schedule and cost overruns, and risks of
uncertainties surrounding project CAPEX and OPEX costs.
With higher oil prices and maturing/declining assets, many
operators are now turning their attention to more difficult
development opportunities.
These include fields where
difficulties, and hence additional risks, have previously been
identified associated with the reservoir, produced fluids and/or
local infrastructure, which have meant that the development of
the field has been considered as uneconomic or marginal.
Based on the traditional field development approaches, with
the additional allowances for these additional risks in the field
development being included in the opportunity assessment,
many of these projects have therefore failed to meet the
operators economic targets necessary for approval to proceed.
Use of Leased Operated Production Facilities
Oilfield service companies have traditionally provided
facilities and manpower to the operators on a leased, operated
and maintained basis. Typical services include exploration
testing, appraisal testing, development well clean-up, well
unloading and in-line production testing, combining the use of
fit-for-purpose equipment with qualified, experienced
operations personnel. By applying these traditional well
testing services to EWTs, operators have also been able to
access a cost effective solution to obtain early revenue from
sale of the crude produced during the EWT as well as
providing information on how the well performs over an
extended period.
Furthermore, utilising production facilities provided on a
similar leased, operated and maintained basis but contracted
over a longer period of time has offered operators an
alternative model for managing their risks on projects where
traditional approaches have failed to provide a workable
solution to a field development need.
Key Features. Key features of this leased operated approach
to production facilities are as follows:
Use of fit-for-purpose production facilities rather than over
prescriptive project specifications
Use of readily available equipment where possible

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Flexibility is built into the facility process design

the equipment prior to the commencement of operations

Fast track mobilisation to provide early cash flow; for

example, the equipment is modularised to reduce time
required on-site for installation, hook-up and
commissioning activities
Reduced CAPEX at the project front-end; payments being
deferred with revenue from production being used to cover
OPEX
Service often supplemented, where appropriate, by support
and logistics infrastructure, further reducing operator frontend CAPEX commitment
Information gathered on the real world performance and
productivity of the wells, enabling informed decisions to
be made on the future of the field
Flexible contracting arrangement which allows an early
demobilisation, contract extension or facility purchase, as
appropriate, to meet the evolving field life plans
The service company will reuse equipment on future
contracts; equipment costs can therefore be shared over a
number of contracts during its design life
The operators exposure to project and capital risk is
minimised.
These features can be built into the overall field
development model, enabling evaluation of the leased
operated approach to production facilities and comparison
with the development economics offered by a traditional EPC
approach for the facilities.
Contractual Models. The scope of work and type of
equipment required for a project will depend on the
characteristics of the individual project, but will generally fall
into the following categories:
Reusable Equipment. Equipment which can be provided
for the project but which can also be reused on future projects
by the service company. This equipment has innate value to
the service company making leasing viable for the service
company and economically attractive to the operator. The
equipment:
Would be designed and built to the service companys own
industry accepted fit-for-purpose specifications
Would be suitable for use over the intended contractual
term, but may be either new, built for the specific contract,
or used, from the service companys own inventory
This equipment would be offered at a suitable lease rate for
the required contractual term with, as appropriate:
Lump sum fees for engineering work and mobilisation of

A clause allowing early termination of the contract by the

operator during the contractual term
A clause allowing extension of the contract by the operator
at the end of the contractual term
A clause allowing purchase of the equipment by the
operator at the end of the contractual term.
Non-Reusable Equipment. Where the scope of the project
requires equipment which would not be readily reusable by the
service company at the end of the contract, this equipment
would typically be provided on a reimbursable basis. A target
cost for this element would be agreed at the commencement of
the contract and used as a basis for risk/reward adjustments of
the project management fee, providing alignment of both
service company and operator objectives on the project.
Project Specific Work Scope. Where the scope of the
project requires work specifically for the project (e.g. civils
work scope), this would typically also be provided on a
reimbursable basis. A target cost for this element would be
agreed at the commencement of the contract and used as a
basis for risk/reward adjustments of the project management
fee, providing alignment of both service company and
operator objectives on the project.
Project Management. Where non-reusable equipment
and/or project specific work scope are required, project
management of these elements would be covered by a project
management fee based on a percentage of the value of these
elements, with a risk/reward clause to allow adjustment of this
fee based on the schedule achieved compared with the target
schedule and the actual costs compared with the target costs.
This arrangement aligns the objectives of both the service
company and the operator on the project, ensuring that the
most economical overall project solution is acheived.
Operations and Maintenance.
Personnel would be
provided to operate and maintain both the reusable equipment
and the non-reusable equipment over the required contractual
term. Costs associated with spare parts for the reusable
equipment would be included in the lease rate for that
equipment. Costs associated with spare parts for the nonreusable equipment would typically be provided on a
reimbursable basis.
Facility Demobilisation.
Unless purchased under a
purchase option clause, reusable equipment would be
demobilised at the end of the contractual term with a lump
sum fee payable, as appropriate. Non-reusable equipment
would typically be demobilised and any other clean-up
activities carried out on a reimbursable basis with appropriate
project management fee, as appropriate.
Enhanced Field Development Economics. The use of leased
operated production facilities as detailed and on the

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SPE 93507

contractual basis given above should be considered early in

the process of formulating the field development plans to
enable the operator to gain the most benefit. The traditional
EPC approach to production facilities commits the operator
early in the field development, effectively limiting their
choices to either developing the field with major capital
expenditure or not developing the field at all. By contrast, the
leased operated approach allows the operator to consider
sequentially taking up options to move the field development
forward, one step at a time, without the major CAPEX
commitment of the EPC approach.
Using leased operated facilities should therefore be
considered as a phased developmental approach which enables
the operator to make rational decisions based on the known
facts as the development moves forward. Evaluating this
approach can, however, cause problems when using traditional
economic models. As indicated by Claeys and Walkup1,
typical discounted cash flow (DCF) techniques (including
typical decision analysis or Monte-Carlo simulation) capture
only part of an asset's value and exclude the significant value
derived from the management options inherent in the asset.
For example, methods such as valuing the asset based on
Net Present Value (NPV) taking into consideration the likely
outcomes and cash flows (income and expenditures) required
for the development do not account for the changing
conditions, new information and flexibility open to the
operator after the initial go or no-go project decision is
taken. Hence, the NPV is static and, if initial evaluations lead
to a negative NPV, the recommendation would be that field
development does not proceed. Using such techniques to
evaluate a phased developmental approach based on leased
operated facilities does not, therefore, show any benefit in the
economics of the field development model.
By contrast, utilising a real options approach enables the
operator to value the flexibility inherent in the use of the
phased development model provided by leased operated
facilities. Galli et al2 have proposed the application of real
options to reservoir evaluation whilst Coopersmith and
Cunningham3 have reviewed the concepts associated with
valuing information and proposed the use of real options in
such areas as selecting a development concept. Hence, by
allowing that management decisions taken as the field
development proceeds enable the course of the development to
be modified at each stage taking into account lessons learnt as
well as unexpected market developments, this could lead to
consideration of a number of next steps ranging from halting
the development (or mothballing until more favourable market
conditions are achieved) to accelerating development to take
full advantage of the upside identified by the early
development experience and/or market upturn.
Considering an operator evaluating development of an
asset based on a traditional EPC approach (see Figure 1).
Where this evaluation gives a negative NPV the
recommendation would be that the field development does not
proceed. If the NPV is close to zero then the field would be

considered marginal and the decision on whether to proceed or

not would be a difficult one to take.
Alternatively, using a phased approach based on leased
operated production facilities gives the opportunity to allow
re-evaluation of the developments progress during the
development process. For example, the decision could be
taken to proceed based on a limited production scenario with
an EWT. The cost of this phase can be estimated, with
allowances made for early termination in case of failure.
Potential income from the produced crude can also be
included in the economic model.
Subject to the success of the EWT, a rational decision can
be taken on whether or not to proceed further, and at what
speed to expand the production facility, so that at each stage
during the field development options are valued based on:
Stopping further development
Expanding to the next phase of development (e.g. EWT to
EPF, EPF to temporary facility, etc)
Expanding more aggressively to a larger phase of
development (e.g. EWT to permanent facility).
The value of the asset should then be considered using a
real options approach based on these possible phases with
their associated rational decision options (see Figure 2).
Value can then be taken for reduced risks at each stage due to
the availability of real production information on the reservoir
and wells, better understanding of project schedule and cost
issues, and other uncertainties surrounding project CAPEX
and OPEX costs.
In addition, the operator should take advantage of the
phased timings of project cash flows built into the real options
evaluation. For example, by utilising leased operated facilities
the initial CAPEX investment is low, whilst production is
achieved fast-track, providing early cash flow (see Figure 3).
By contrast, the all-or-nothing EPC approach necessitates a
longer schedule to first oil and greater initial CAPEX.
However, many operators are more used to field
development solutions utilising large scale, high CAPEX,
owned and operated facilities, so that this approach has not
always been considered. Assessment of the NPV of an
operators asset has therefore often been restricted by the
limited available information and the limited range of
perceived methods of developing the field. However, with
increased pressure to reduce both development risk and cost,
dynamic analysis based on a sequential investment model as
presented in this paper provides a more efficient method for
operators to both obtain better well data and to bring their
fields on-stream so that, ultimately, the analysis can show that
a project is in fact viable when developed using a phased
leased operated approach, even if the overall project NPV
appeared marginal or even negative when evaluated using the
more traditional methods.

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SPE 93507

Phased Field Development Solutions

Based on evaluation of the field development economics
utilising real options as proposed, the availability of leased
operated facilities can be applied as part of the phased field
development plan, and therefore incorporated into the field
development economic model, on the following basis, as
appropriate:
Well Testing. Well tests are carried out early in the field
development process for evaluation and appraisal. Process
equipment comprising choke manifold, test separator and
ancillaries is transported to and installed on the site (onshore
or aboard the drilling rig/platform/vessel), well testing duties
are carried out with the produced fluids being burned (oil and
gas) or recombined and sent for further treatment. At the end
of the well test the equipment is demobilised.
For well testing operations across a number of offshore
fields/facilities the full well test spread of equipment can be
installed on a supply boat as a permanent or semi-permanent
installation. The supply boat is reclassified as a mini-FPSO
with enhanced facilities to allow storage and/or export of the
produced crude for sale. With use of a larger vessel, gas
compression facilities may also be added to enable well testing
in sensitive environments and export of produced gas where
feasible. Such multi-purpose well testing vessels have been
successfully utilised in the Gulf of Mexico, but the same
approach can also be applied elsewhere, including onshore by
using readily mobile modularised production facilities.
This enhanced well testing facility is easily adapted for use
on longer term operations; hence, subject to successful results
from the well test, a decision can be made to extend the
contract for the facilities to carry out an EWT, or move
straight into an early production scenario.
Commercial Basis. Well testing services are carried out
on a leased operated basis. The basic well test spread may be
supplemented with additional process equipment to separate
and process the produced fluids. This additional process
equipment would also be leased, but with additional
engineering and mobilisation covered by lump sum payments,
as appropriate.
Oil produced during the well testing
operations can then be sold, providing early cash flow to the
operator and paying for the additional process equipment.
Subject to successful results from the well test, the contract
for the facilities can be extended, with additional equipment as
necessary, to carry out an EWT or early production scenario.
Extended Well Testing. EWT equipment can range from a
conventional well testing equipment spread to a modularised
production facility designed to provide separation,
stabilisation, storage and/or export of the produced crude for
sale, with gas being either flared or processed (with
compression facilities where necessary) for sensitive
environments and export of produced gas where feasible.
Based on a core of stock equipment (possibly
incorporating well test facilities already mobilised to the site),

the EWT facility is configured to provide a flexible, modular

system that can be quickly hooked-up and commissioned, and
then operated across a broad operating range over an extended
period of time. The facility is transported to and installed on
site (onshore or aboard the drilling rig/platform/vessel), the
EWT carried out and the equipment demobilised afterwards.
The EWT facility is easily adapted for use on longer term
operations; hence, subject to successful results from the EWT,
a decision can be made to extend the contract for the facilities,
supplemented as necessary, and move straight into an early
production scenario.
Commercial Basis. EWTs are carried out on a leased
operated basis, with lump sum fees for engineering and
mobilisation. Oil produced during the EWT is sold, providing
early cash flow to the operator and paying for the process
equipment.
Subject to successful results from the EWT, the contract
for the facilities can be extended, with additional equipment as
necessary, to proceed to an early production scenario.
Early Production. Facilities required for early production
will typically be designed to provide separation, stabilisation,
storage and/or export of the produced crude for sale, with gas
being either flared or processed (with compression facilities
where necessary) for sensitive environments and export of
produced gas where feasible.
EPFs, like EWT facilities, are based on stock, fit-forpurpose process packages which are then tailored to meet the
needs of each individual project. However, they are still
flexible and modular in design, allowing quick hook-up and
commissioning, and then operation across a broad operating
range over an extended period of time with maximum
production up-time and minimum environmental impact.
The EPF is transported to and installed on site (onshore or
aboard the drilling rig/platform/vessel), production operations
carried out for the required period and the equipment
demobilised afterwards. However, subject to the success of
the EPF, it is also possible to incorporate these facilities into
the full field development plans, either on a temporary/semipermanent or permanent basis, with the facility contract
extended or a purchase option exercised as appropriate.
Commercial Basis. An EPF is carried out on a leased
operated basis, with lump sum fees for engineering and
mobilisation. Oil produced by the EPF is sold. Gas produced
by the EPF is either flared or processed, in which case it can
also be sold. Sale of produced hydrocarbons provides early
cash flow to the operator and pays for the process equipment.
Subject to successful results from the EPF, the contract for
the facilities can be extended (or a purchase option exercised),
with additional equipment as necessary, to provide either a
temporary or permanent production facility.
Temporary Production.

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To meet specific temporary

SPE 93507

requirements (existing facility problems, new facility delays,

etc.), facilities similar to those required for an EPF can be
deployed on a temporary or semi-permanent basis. By
utilising stock, fit-for-purpose process packages which are
then tailored to meet the needs of each individual project,
these facilities can be mobilised both economically and on an
extremely fast-track schedule to meet the operators temporary
production requirements.
The temporary facility is transported to and installed on
site (onshore or aboard the drilling rig/platform/vessel),
production operations carried out for the required period and
the equipment demobilised afterwards. However, should it be
necessary it is also possible to incorporate these facilities into
the full field development plans on a permanent basis, with the
facility contract extended or a purchase option exercised as
appropriate.
Commercial Basis. A temporary production facility, like
an EPF, is carried out on a leased operated basis, with lump
sum fees for engineering and mobilisation. Oil produced by
the facility is sold. Gas produced by the facility is either
flared or processed, in which case it can also be sold. Sale of
produced hydrocarbons provides early cash flow to the
operator and pays for the process equipment.
Subject to successful results from the temporary
production facility, the contract for the facilities can be
extended (or a purchase option exercised), with additional
equipment as necessary, to provide a permanent production
facility.
Permanent Production. For operators developing marginal
fields where the anticipated field life is short, facilities based
on stock, fit-for-purpose process packages can be used to
overcome economic limitations which would otherwise make
the field uneconomic. In these cases cash flow can be critical,
and the risk profile problematic, so that a leased operated
facility for which the contract can either be extended (if results
are better than expected) or terminated early (if results fail to
meet original targets) offers an attractive alternative field
development solution.
The production facility is transported to and installed on
site (onshore or aboard the drilling rig/platform/vessel),
production operations carried out for the field life and the
equipment demobilised afterwards.
Commercial Basis. A permanent production facility, like
an EPF or temporary facility, is carried out on a leased
operated basis, with lump sum fees for engineering and
mobilisation. Oil produced by the facility is sold. Gas
produced by the facility is either flared or processed, in which
case it can also be sold. Sale of produced hydrocarbons
provides early cash flow to the operator and pays for the
process equipment.
Subject to successful results from the permanent
production facility, the contract for the facilities can be
extended or a purchase option exercised.

Case Studies
Whether driven by commercial or technical constraints,
contractual requirements or field development uncertainties,
operators are now realising the benefits of this approach. In
some cases this may be for production operations during field
evaluation and extended well testing, it could be as the first
step of a full field development or as a longer term full field
development solution. In each case the flexibility offered not
only gives a cost effective next step to achieve production
from the field, but also gives additional information from the
production operations that can be utilised to further develop
the value of the asset.
The following case studies give an outline of some typical
solutions already provided on this basis:
Shell Soroosh (see Figure 4). Shell Exploration BV was
selected by the National Iranian Oil Company (NIOC) to
develop the Soroosh and Nowrooz oil fields located 120 km
offshore Iran in around 30-40 m water depth. When
completed, Shell anticipates that the two developments will
produce at a combined peak rate of 190,000 bbls/day of oil,
with the Nowrooz field producing via facilities to be installed
on the Soroosh field. This is one of the biggest single offshore
oil and gas conversion projects undertaken in the region for
several years.
The overall field development plans included an early
production phase requiring fast track mobilisation of a
production unit to the field. Not only was the schedule for this
aggressive, but a solution was needed that would meet the
projects economics over the short 20 months required
operating life of the facility.
To execute the project, Expro Swire Production Limited
acquired the ex-Mansal Muna Mobile Offshore Production
Unit (MOPU), renaming it ESP 1 and mobilising it to Dubai
for conversion. The vessel was re-certified, machinery zero
houred, marine system modifications made and the vessels
accommodation module refurbished. Meanwhile, the process
system also received substantial modifications including both
upgrades and additional process modules to handle the
Soroosh well fluids and operating requirements, plus the
addition of an 8 MW power generation module to provide
power for the ESPs. The resulting system has a crude oil
production capacity of 100,000 bbls/day and a water injection
capacity of 50,000 bbls/day.
To facilitate initial stand-alone operations a temporary
wellhead deck structure was fabricated and installed to support
four well caissons from the MOPU, with a bridge giving
access and support of flow lines, cables and instrumentation.
The structure would later be built into the fields Northern
wellhead platform, once this was installed on site.
As a result Shell was able to achieve production from the
Soroosh field earlier than would otherwise have been possible
and without the significant investment of an owned and
operated field infrastructure. The conversion work was
completed fast track in less than 32 weeks, with the MOPU

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SPE 93507

then sailing out to the field location. The full contract to

supply, install and operate the MOPU was carried out by
Expro Swire Production Limited on a turnkey, leased,
operated and maintained basis, including demobilisation of the
facility at the end of the contract once the permanent field
infrastructure was installed and operational.
Tuscan Ardmore (see Figure 5). Tuscan Energy, with
partner Acorn Energy, is redeveloping the former Argyll oil
field, now known as Ardmore. The field was the first to be
brought on stream in the UK offshore sector back in 1975,
producing 100 million barrels of oil via a floating production
facility (FPF). However, the FPFs limited water handling
capacity and insufficient provision for artificial lift meant that
the field became uneconomic and ceased production in 1992.
Innovative thinking and the latest available technologies
were applied to formulate the field redevelopment plan, with
key features being speed of development, management of risks
and overall project economics. Previous development data
and production history were available providing proven oil
accumulations with multiple reservoir horizons. Tuscan
selected a jack-up based development scheme using proven
technology, but capping well CAPEX through turnkey
contracts and minimising facilities capex through leasing
contracts. The jack-up solution would also enable drilling and
production operations to be combined, whilst minimising
decommissioning liabilities.
Wells, drilling and completions are provided from ADTI.
Four new wells have been drilled, with electrical submersible
pumps (by Baker Hughes Centrilift) being used to provide
artificial lift of the well fluids to the production facilities.
The leased, operated and maintained facilities are being
provided by:
Rowan Drilling: The Rowan Gorilla VII jack-up
configured as a mobile offshore production and drilling
unit
Expro International: Production facilities
Alba Power: Power Generation
Ugland Nordic Shipping: Export system comprising export
flow line, twin Single Anchor Loading (SAL) and shuttle
tankers.

responsibility, together with access to financial upside in the

project. As a result first oil was achieved ahead of schedule
on 27 September 2003.
Moni Pulo/Brass Abana (see Figure 6). In December 1997 a
seminar was held to discuss potential field development
options for the Abana Field, located offshore Nigeria at the
mouth of the Calabar River. Following the discussions a
number of plans were tabled, including:
A Floating Production, Storage and Offloading (FPSO)
vessel exporting crude via shuttle tankers
A shallow water Floating Production Facility (FPF)
exporting to a Pipeline End Manifold (PLEM) or other
local offloading facility.
The FPF was selected to provide safe repeated offload
operations in shallow inshore waters, low operational and
conversion costs and a fast track mobilisation schedule. An
export route was also negotiated to the nearby OPL98 block
FPSO.
The contract to provide the FPF including installation,
commissioning and operation was placed by the field owners
(Moni Pulo and Brass Exploration Ltd) with Expro based on
an innovative contracting strategy, which gave the necessary
flexibility and incentive to meet the cost estimate and schedule
targets. This divided the scope of work as follows:
Procurement and conversion of a newly constructed dumb
barge into an FPF including mooring system and all
topsides facilities, except for the process equipment, to be
supplied on a reimbursable basis against mutually agreed
target costs and schedule. The project management fee for
this scope of work included a risk/reward element related
to Expro performance on the target reimbursable cost and
schedule.
Provision of the onboard process equipment, including
facilities for oil processing and water injection, supplied on
a leased basis, together with operation and maintenance of
the FPF, associated wellhead structures, process equipment
and management of all other associated third party
services. This contract is again performance driven, with a
risk/reward element linked to performance of the facility.

The production facilities were purpose designed and built

as modular units. Design production rates are up to 60,000
bbls/d across a range of water cuts from a maximum of 40,000
bbls/d of oil to 40,000 bbls/d of water. The modules were
engineered, constructed and shipped to the installation yard
within 10 months.

Finally, the contract also includes the provision of full

support and logistics services for the facility via Expros bases
in Nigeria. This provides Moni Pulo/Brass with the complete
field production and support service necessary for
management of such an operating facility without the need for
the significant investment and time that would be required for
development and operation of their own facility and in-country
support infrastructure.

The relationships developed between Tuscan and the

contractors were key to the success of this fast track
development.
The contractors were given considerable

This contractual model fully aligned the goals of both

Moni Pulo/Brass and Expro to deliver the FPF at the lowest
cost, in the least time, and to maximise revenues from

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SPE 93507

continued reliable oil production meeting the strict export and

discharge requirements. The conversion of the FPF was
achieved within a record 20 weeks, with first oil from the
installed facility achieved in March 1999, within twelve
months of initial contract award. Total production from the
facility is now approaching 20 million barrels of crude oil,
delivered with an uptime in excess of 98%, and the contract
has now been extended so that the FPF will continue to
operate on the field until at least 2009.
Lundin Petroleum Isis (see Figure 7). In 1996 Coparex
Netherlands B.V, Atlantis Technology Services and ETAP
acquired interests in the Isis field, located 150 km offshore
Tunisia. Their development plan included an initial phase
requiring three horizontal subsea wells with umbilical
controlled trees and flow lines connecting to flexible risers and
producing oil to a Floating Production Storage and Offloading
(FPSO) vessel.
The contract for provision of the FPSO was placed with
Victoria Oilfield Development Ltd (subsequently acquired by
Brovig-RDS), who would use their own Tripod Catenary
Mooring System (TCMS) to moor the vessel. Their scope
included the supply, installation and commissioning of the
FPSO followed by its lease, operation and maintenance based
on a minimum four year contract term. Expro would supply
the process topsides elements of this scope, again including
their lease, operation and maintenance, together with the
associated onshore management and logistics support
organisation. By utilising this turnkey approach and leasing
the operated facilities, Coparex was able to limit risk exposure
and minimise facilities and support infrastructure capex.

Once on site the final testing and approval of the vessels

safety systems could be completed and, within 24 hours, well
fluids from the first production well, Isis 8, were delivered to
the FPSO. These were followed two days later as the second
well, Isis 7, was opened up.
The contracts for delivery, operation and maintenance of
the process topsides were performance driven, with
risk/reward elements linked to delivery and performance of the
facilities. By aligning the goals of the field owner (the field
has since been acquired by Lundin Petroleum) and the facility
providers, the Isis project demonstrates that fit-for-purpose
topsides can be engineered, constructed and installed fast track
without the traditional lead times of an EPC type project.
Furthermore, since start-up the overall production uptime has
exceeded 98%.
References
1. Claeys, J. and Walkup Jr., G.: Discovering Real Options in
Oilfield Exploration and Development paper SPE 52956
presented at the 1999 SPE Hydrocarbon Economics and
Evaluation Symposium, Dallas, Texas, 20-23 March.
2. Galli, A., Armstrong, M., and Dias, M.A.G.: The Value of
Information: A Bayesian Real Option Approach paper SPE
90418 presented at the 2004 SPE Annual Technical Conference
and Exhibition, Houston, Texas, 26-29 September.
3. Coopersmith, E.M. and Cunningham, P.C.: A Practical
Approach to Evaluating the Value of Information and Real
Option Decisions in the Upstream Petroleum Industry paper SPE
77582 presented at the 2002 SPE Annual Technical Conference
and Exhibition, San Antonio, Texas, 29 September-2 October.

Brovig-RDS purchased the Northia shuttle tanker for the

project, renamed it Ikdam and converted it into a 600,000 bbl
capacity FPSO at Malta Dry Docks.
Construction of Expros 30,000 bbls/day process topsides
and 3 MMscfd gas compression modules was completed in
five months from order placement to completion of the mock
hook-up, before delivery to Malta for installation on the
FPSO. This required concurrent mobilisation in four countries
with an aggressive fast track delivery.

Figures
Figure 1: Traditional EPC Facility Field Development Economic Model

Traditional (EPC)
Field Development
Plan

Facility Options
Capacity
Timing

Variables
Production Rate/Profile
Field Life
Product Price
Income
Project Schedule
CAPEX
OPEX

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Economics
NPV

SPE 93507

Figure 2: Phased Leased Operated Facility Field Development Economic Model

Facility Options
EWT (Yes/No*)
Phase Term/Timing

Facility Options
EPF (Yes/No*)
Phase Term/Timing
Phased
Field Development
Plan

Facility Options
Temporary Facility
(Yes/No*)
Phase Term/Timing

Variables
Production Rate/Profile
Field Life
Product Price
Income
Project Schedule
Phased CAPEX
Phased OPEX
Infrastructure CAPEX
Infrastructure OPEX
Phase success

Economics
Real Options Value

Facility Options
Permanent Facility
(Yes/No*)
Phase Term/Timing

Facility Options
Stop Development

Figure 3: Typical Operator Cash Flow Comparisons

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* It may be decided to miss certain phases

(e.g. no EWT, go straight to EPF).

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SPE 93507

Figure 4: Shell Soroosh

Figure 5: Tuscan Ardmore

Figure 6: Moni Pulo/Brass Abana

Figure 7: Lundin Petroleum Isis

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