Session 46 Phased Deepwater Field Developments - Pros and Cons of Phased Developments

Abstract

In light of the deep industry downturn that started in 2014, there was a drastic reduction in the number of deepwater projects being sanctioned. Among the few projects that were sanctioned, many of them were tie-backs or smaller production facilities that potentially can be built out in phases. There are both pros and cons related to this trend of more phased and smaller developments and the purpose of this paper is to highlight these differences. We identify five pros and five cons. The pros are relatively intuitive, e.g. they lower the initial capex, payback period and overall project risk as you are committing fewer resources into the development project. On the other hand, the potential cons are less explicit and typically only visible longer term, including potentially lowering the long-term value creation, limiting the flexibility for future upside projects through e.g. increased/enhanced oil recovery (IOR/EOR) initiatives or tie-backs. By performing some sensitivities, it is possible to give examples where operators may miss some value creation by choosing phased and/or scaled down development solutions. We have looked at three project examples; Buckskin in the US Gulf of Mexico (GoM), Johan Castberg in the Norwegian Barents Sea and Liza offshore Guyana. For these three examples, the results of the sensitivity analysis suggest that overall value creation could have been increased 4-12% if the operators had chosen concepts with higher capacity. However, this increase is contingent on achiveving 20% savings on the capital expenditure (capex per boe) compared to the original concept. Additionally, these enlarged concepts would have created more risks, but from a subsurface and project execution point of view. As such, the pros may outweigh the cons of choosing a more phased and/or scaled down concepts for these examples. Nevertheless, it is important that the industry makes the proper assessments, including longer-term benefits, before making final investment decisions and not overlook potential value creation opportunities.