This article was originally published on LinkedIn on March 21st, 2016.
A Mobile Offshore Production Unit (MOPU) is a movable platform, or structure, that is used in offshore well production. Structures such as a jack-up drilling rig, semisubmersible drilling rig, or ship hulls, are often used for platforms. Related acronyms in the industry are FPSO, FPU, FPO, MOPSU, etc., which are all movable and support production equipment, and therefore are considered forms of MOPUs. Being portable, a MOPU is potentially a more feasible and inexpensive oil producing unit for some offshore locations. It is an efficient unit that performs the same duty as the conventional permanent platforms. According to some reports, there are approximately 380 MOPUs in use, or in construction, today.
MOPUs are being utilized in all water depths; shallow water, mid water and deep water. The water depth is one criteria which limits or determines the asset, or structure, required for the production platform. Another criteria which is a determinate for the structure required for production, is the field characteristics. The field characteristics are a driver of the production system, or equipment, which must be installed on the platform. The more processing required, the more systems. The more systems that are required, more weight and a larger footprint is required. The infrastructure available in the area of the field has an impact on what production systems may be needed for the field. Lack of existing infrastructure will require solutions for storage and transporting the oil or gas to market.
A MOPU can be a newbuilding, or it can be a conversion of some other asset that is a suitable platform for the production systems. The economics of a newbuilding versus converting or repurposing some other asset are dependent on several main factors. These main factors would be the platform construction costs vs conversion costs, the platform installation costs, as well as the decommissioning costs.
Factors favoring MOPU conversions;
- A shorter schedule to first oil or gas is favorable for cash flow reasons. A conversion can be carried out in less time that a newbuilding, creating a shorter cycle from initial investment to first production. Which translates to a shorter breakeven period.
- A conversion can be done at a lower cost than a new building, having the advantage of lower upfront investment costs.
- There is currently a favorable market for acquiring surplus drilling units for conversion.
- The lower oil price we are experiencing demands lower cost solutions.
- Project risk is generally lower in slow times versus rushed times, as projects can be carried out with smaller project teams and less stressful schedules.
- Due to the shorter project time, a conversion has an advantage on leases where the lease expiration date is a critical concern.
- For jack ups and semis, the ease of relocating the production platform to another lease may have financial advantages, by having the production platform costs amortized over two production locations, or to develop fields in phases.
- MOPU’s typically have lower abandonment costs, particular jack ups and midwater semisubmersibles
There are cost factors for the overall investment of field development that are unrelated to the choice of newbuilding vs conversion. These factors would be the process system required or topside construction costs, the infrastructure for transporting product to market, and the field development strategy
Surplus Drilling Units
The drilling business is currently experiencing two conditions that will affect the length of the current down cycle. The main condition is the low oil price driven by oversupply of oil. The second issue is a severe overbuilding during the last up cycle, which will deter offshore drilling units from being financially successful until after the price of oil returns to the level required to motivate offshore drilling again. When analyzing the favorable market for acquiring surplus drilling units, it is interesting to look at the statistics reported by Clarkson in the Oil and Gas Journal in January this year. “The global rig fleet stands at 1,018 units, of which 771 are estimated to be available, but only 560 are actively drilling”. This puts 310 surplus units available in January, and we see that more units are being removed from availability. This is the inventory of the surplus units available for repurposing into alternative investments from drilling, and it is at its highest level in the history of offshore drilling. In this inventory, there are many units that are relatively well maintained and in good condition. These are the units that would be good investments and should be preserved and not allowed to deteriorate due to a potential long down cycle in the drilling industry.
Gulf Copper and Manufacturing Inc.
Gulf Copper has played a leading role in MOPU conversions in the US Gulf of Mexico. The largest project being the delivery of the Veer Prem in October 2010. The Veer Prem was previously a Bethlehem Jack Up drilling rig. The drilling package and related equipment was removed from the rig deck, making room for a 50,000 bopd processing package. The package consisted of three modules and three Solar Compressors. The largest module was 1000 tons. Gulf Copper did a complete rebuild of the accommodations with a new design for a 30 man crew, adding a gymnasium and a safe room. The legs and mat were refurbished and strengthened for the increased deck load of the production module. Steel renewal and strengthening totaled 700 tons of steel. The overall project was 300,000 man hours. The video below gives a visual of the project progression, it can be found on the Oriental Energy Resources web site.
Gulf Copper Dry Dock and Rig Repair is located on a deep-water ship channel in Galveston, Texas. This location is well positioned for this type of conversion and conveniently located near a growing stock of surplus drilling rigs on the Texas and Gulf Coast. Gulf Copper and Manufacturing is available to assist with contacts for surplus Drilling Rigs and Engineering services. Feel free to contact any of the following:
Kyle Durden | Manager of Special Projects
Gulf Copper & Manufacturing Corp
14825 St. Mary’s Lane Suite 200, Houston, TX 77079
O: 281-752-4835 | C: 281-639-4662 email@example.com
Leonard Hale | Vice President
GC Energy Services
14825 St. Mary’s Lane Suite 200, Houston, TX 77079
O: 409.641.2508 | C: 409-682-8645 firstname.lastname@example.org
Founded in 1948, Gulf Copper & Manufacturing Corporation, an employee-owned company, repairs and refurbishes marine vessels and offshore rigs and fabricates ancillary components. The company operates strategically located shipyards, dry-docks and fabrication facilities along the U.S. Gulf Coast. Gulf Copper serves the oil and gas, marine transportation, refining, petrochemical markets in addition to the United States government.
GC Energy Services is a division of Gulf Copper. GC Energy Services provides global project support with structural welding, high pressure and low pressure pipe welding, SS welding and passivation, electrical services, scaffolding, non-destructive testing services (NDT), quality assurance services, and inspections.
Leonard Hale, PMP