Contracting and Project Strategy to Reduce the Costs

INTRODUCTION The Norwegian oil industry has developed and grown to a significant size from the 1970's through the 80's, and numerous large fields were developed under a business environment with high oil prices. The technological challenges were significant, but the expectation of high volumes of produced oil and increasing oil prices, secured the necessary funding for development of these large fields. Today this situation is dramatically changed, and the low oil price alone would make it uneconomic to develop the new fields. In addition to low oil prices, we are now also facing smaller reservoirs, deeper water and more sever environmental conditions. The general competitiveness of the Norwegian Continental Shelf is challenged. Many initiatives have been launched in Norway to support the necessary improvements in business performance. The Norwegian oil and gas industry together with the authorities have through 1994 worked together in the NORSOK initiative to identify means to save 40-50% in cost and time for development of new fields. The industry has developed new technology. The authorities have been addressing the fiscal conditions and general framework for the oil companies, and several areas of improvement have been identified and to some degree implemented by the Operator. The most important improvements are probably those that are directly implemented in actual development projects, and Statoil/Kvaxner have together some joint experiences that can illustrate how such ideas successfully can be implemented. In the following we will give a brief introduction to specific achievements b-three such projects. The three projects to be introduced are: Sleipner T, Treatment platform. In the Sleipner Vest Development, S1eipner A modifications . Required modifications to the existing platform Sleipner A to import production from Sleipner Vest. Norne Development SLEIPNER VEST Project description (see illustration) – Wellhead platform, SLB – 12 km 20" pipeline – Proows platform, SLT – Bridge connection to existing Sleipner A platform SLA – Upgrading of SLA control and utility systems – Start-up 01.04.97, improved to 01.10.96 – Estimated cost, approx. 1,5 G$ Contract Strategy A traditional contract strategy was selected for the Sleipner Vest development.–Engineering on Fixed Fee + reimbursable manhours–Procurement based on competitive bidding–Fabrication lump sum with preceding engineering completed to a high degree–Installation and offshore completion–All contracts based on competitive international bidding The project was started on this basis, and the engineering work was awarded to Kwemer Engineering for the treatment platform and for overall project integrity. A separate engineering contract was awarded to NRC for the wellhead platform. An initiative was taken by the operator Statoil to reduce cost and execution time, and all parties involved agreed to contribute in such process. Statoil's revised strategy comprised the following main elements:–Reduced lead time–Share Cost savings with parties involved in the process–Focus on action and on end products–Revised Business Processes–Reorganise Project Management Organisation–Optimize further the technical concept andstandards Kværner Engineering and Statoil had been working together since 1991 on the project. Plan for Development and operation was submitted to the authorities December 1991.