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SPE-180795-MS

Offshore Economic Field Development Concept - Step Change


C. N. Prescott, S. Paramsook, W. Mohammed, and F. Mejia, Fluor Corporation

Copyright 2016, Society of Petroleum Engineers

This paper was prepared for presentation at the SPE Trinidad and Tobago Section Energy Resources Conference held in Port of Spain, Trinidad and Tobago, 13–15
June 2016.

This paper was selected for presentation by an SPE program committee following review of information contained in an abstract submitted by the author(s). Contents
of the paper have not been reviewed by the Society of Petroleum Engineers and are subject to correction by the author(s). The material does not necessarily reflect
any position of the Society of Petroleum Engineers, its officers, or members. Electronic reproduction, distribution, or storage of any part of this paper without the written
consent of the Society of Petroleum Engineers is prohibited. Permission to reproduce in print is restricted to an abstract of not more than 300 words; illustrations may
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Abstract
Oil prices have fallen dramatically to the average range of USD $30 to $50 per barrel and are expected
to stay in this average range through 2017 or beyond. Field development costs for deepwater have fallen
but are still a major obstacle to efficient field development and this is not expected to change in the
foreseeable future. A failure to adapt to this new economic reality could seriously impact the industry.
New strategies and concepts are needed to ensure a sustainable deepwater industry, especially for the more
challenging reserves. This presentation will discuss a step change solution to providing a field develop-
ment concept that will be economic in today’s conditions.
New strategies and concepts for deepwater field development will be discussed for a cost-challenged
environment. Partnering and development strategies will be defined, as these will facilitate subsea
development of the most challenged assets and could reduce project cost by up to 30% and to shorten
project schedule by 18 months to 2 years.
This paper will discuss the following:
a. Development strategies to go forward for a cost-challenged deepwater business
b. New development concepts for field development, including processes and equipment beyond
Jules Verne concept
c. New partnership models to allow for economic provision of resources: utilities, water, etc.
d. Standardization recommendations.
Major changes are needed to empower the move to an economic field development concept and these
will be discussed with details showing the future of deepwater development.

Introduction
To understand the problem facing the offshore industry, one can simply turn to the rise in asset costs per
barrel of crude oil. An alarming rise of costs of developments is shown in Fig. 1, the underlying reasons
of which include: well costs almost tripling, pipelay up about 60%, detailed engineering (DE) costs
doubling, costs of subsea facilities tripling and owner’s costs exploding. The net result is reflected in the
asset cost per barrel, which has risen by a factor of 4 in the very short time between 2003 and 2014.
There were two periods of increases in cost of assets: 1) 2004 to 2007 and 2) 2011 to 2014. The first
period of 25% increase of costs has been attributed to an expanding market in the Gulf of Mexico
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Figure 1—Asset cost per barrel, 1996 – 2015.

combined with an active hurricane season in this same area. The 2004 Atlantic hurricane season was the
costliest Atlantic hurricane season on record until surpassed by the following year. More than half of the
16 tropical cyclones brushed or struck the US.
The second 25% increase of costs has been attributed to a regulatory environment that drove an
increase in design changes in the industry, which was spawned by the Deepwater Horizon oil spill that
began on 20 April 2010 in the Gulf of Mexico on the BP-operated Macondo prospect. During this time,
the industry was faced with high, but volatile changes in the price of crude oil, which continued until the
precipitous fall in prices in 2014 as reflected in Fig. 2. The fall resulted from adjustments in the supply
and demand forces in play world-wide.
The high crude oil prices, which created a more profitable environment, have now been replaced with
lower prices. These prices are expected to continue for the foreseeable future. The industry is now faced
with rising costs, project delays, falling prices, declining profits, staff cuts, mergers and currency
uncertainty.
Lower demand for crude oil during the next few years prompted the US Energy Information
Administration (EIA), to trim 2016 US oil demand growth by 80,000 barrels per day (bpd), from 110,000
bpd, and cut its 2016 worldwide demand growth forecast by 90,000 bpd to 1.15 million bpd. The EIA now
expects West Texas Intermediate (WTI) crude oil prices to average $34.04 a barrel in 2016, and $40.09
a barrel in 2017 (Wijaranakula 2016).
SPE-180795-MS 3

Figure 2—Light Crude Oil Stock Chart 10 Mar 2016 (approximate)

Trinidad and Tobago’s economy is still heavily dependent upon oil and gas resources. The main
objective for Trinidad and Tobago’s energy sector is to optimally utilize the country’s hydrocarbon
resources and ensure their efficient administration in order to obtain the greatest returns to the country.
The hydrocarbon industry is a significant contributor to the Gross Domestic Product (GDP) of Trinidad
and Tobago, as can be seen in Fig. 3 (with the hydrocarbon industry highlighted).
The leaders of Trinidad and Tobago reported that with the current situation of low oil prices, the
repercussions for oil exporters like Trinidad and Tobago are clear: significantly reduced revenues, loss of
reserves, capital outflows, sharp depreciation, and reassessment of autonomous risks by investors, which
is intensified by limited diversification of the economy. From 2001 to 2011 there was a reduction of crude
oil exports from Trinidad and Tobago to the U.S. and other countries since their peak in 2006, as shown
in Fig. 4.
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Figure 3—Contributors to GDP, Trinidad and Tobago, 2001 – 2011.

Figure 4 —Export Destinations of Crude Oil from Trinidad and Tobago 2001 – 2011 (approximate)
SPE-180795-MS 5

Over the last decade there has been a decline in the oil production as the country focused the majority
of its efforts on natural gas and gas-based industries. High decline rates of crude oil production and
shortages of natural gas have led to the reduction of supply, which draws attention to the upstream sector.
Shortages of natural gas have proven to be disruptive to the energy sector, affecting the country’s LNG
exports and creating challenges for the petrochemicals sector. Therefore, there is a great need for creative
solutions and innovative methods to increase the oil and gas production in Trinidad and Tobago. As a
result, the country’s offshore energy sector is shifting focus towards deeper waters, since most existing
fields in shallow water are already being exploited.
Deepwater Potential in Trinidad and Tobago
Trinidad and Tobago has been producing hydrocarbons for more than a century. Forty-eight (48) years ago
(1968) was the first commercial oil discovered off the east coast of Trinidad and Tobago. In 1971 there
was the discovery of natural gas off the north coast of Trinidad. This was followed by significant natural
gas discovery off the east coast marine area in the 1990s. Trinidad and Tobago’s MEEI has directed the
international exploration companies’ interest to the deep water located in the East Coast Marine Area
(ECMA) and Trinidad and Tobago Deep Atlantic Area (TTDAA) as illustrated on the Deepwater Block
Energy Map in Fig. 5. Deep water is defined by the MEEI as a depth of more than 1000 meters.

Figure 5—Trinidad and Tobago 2015 Deepwater Block Energy Map (The National Gas Company of Trinidad and Tobago Limited 2015)
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Exploiting the deep water deposits is crucial to the future development of Trinidad and Tobago. The
exploration and production of deep water gas, in particular, may be the long-term solution to the problem
of gas shortfalls on gas supplies to the downstream processing industry. Postponement of deep water
exploration in Trinidad and Tobago due to the weak oil prices may mean that the country will need to
reduce reliance on oil and gas since there will eventually be a depletion of natural resources.
At the annual Trinidad and Tobago Energy Conference 2016 in Port of Spain, Dr. David Rainey
president of Exploration for BHP Billiton indicated that the company will be drilling two wildcat
prospects in their Trinidad and Tobago deep water acreage in 2016, with the possibility of a third well
depending on the outcome of the first two wells (Williams 2016). It has been reported that exploration
activity has already begun, starting with 3D seismic surveys of the deep water blocks awarded during the
most recent 2013 deep water auction. Should the drilling campaign prove fruitful, subsea infrastructure
and processing will become much more attractive at these water depths.
BHP Billiton Trinidad and Tobago President, Vincent Pereira, explains that the company was attracted
to !the two different geological plays! these blocks represent. !The play to the north,! he says, !is an
Oligocene horizon, like the rocks we produce from in our Angostura field in block 2(c) but, hopefully, not
as complex. The blocks off the east coast are a Miocene play, which is more the normal type of play you
have in Trinidad and Tobago.! (Renwick 2015)
Trinidad and Tobago is the leading Caribbean producer of oil and gas and the country’s conventional
offshore facilities and services are well-developed. Trinidad and Tobago can operate as a regional base
for support of the region’s deep water exploration and production activities as countries like Guyana,
Suriname and French Guiana lack the necessary infrastructure. Even Venezuela is contemplating using the
LNG liquefaction facilities in Trinidad and Tobago since a large industry exists in country to take excess
gas capacity from Venezuela.

Need for Step Change


With average crude oil prices expected to remain in the $30 to $50/bbl range for the foreseeable future
due to supply and demand forces, there is a tendency to delay and postpone offshore developments where
the cost to recover the resources is higher and regulations involving their recovery, such as the Arctic and
Ultra-Deepwater, are found. Normally, for a large offshore development, funds needed to develop the
prospect are tied up for approximately 7 years before a return on the investment is realized. Therefore,
these projects, which involve long term return on investment, are often postponed or abandoned in favor
of reserves that can be more easily and timely recovered.
In order to improve profitability in the near future for offshore development projects, there is a need
to make a Step Change in the way projects are being conducted. It is proposed that a minimum of 30%
reduction of costs and a shortening of project schedule by 18 to 24 months be considered. This offshore
economic field development concept can be realized by making some fundamental changes in the way
projects are executed. The first place to start is by reviewing areas for cost reduction in project
accumulated Capital expenditures (Capex) and Operations expenditures (Opex) costs.
Fig. 6 shows the accumulated Capex for a typical project, which is a 10,000 foot sea water (fsw)
DeepStar semi stand-alone production scenario.
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Figure 6 —Accumulated Capex Costs for a Typical Project

For general economics, any Capex cost that can be deferred to incur reasonable Opex increases at a
later time in the project’s life cycle usually improves field economics. This is a well known principle and
operator project teams routinely optimize the balance between Capex and Opex alternatives. Reduction of
initial capital yields one of the largest field economic impacts.
Exclusive of Drilling Completion Capex (40.09%) and Capex Insurance (1.63%), the total remaining
Capex accumulated cost for the Floater, Risers and Subsea is 58.28%; a majority.
Some of the many approaches that can be utilized to drive Capex costs down are provided below:
● Shared Costs (Joint Ventures and Partnering)
● Defer Capex to Opex in areas where 3rd party suppliers (power, water injection) can be used to
establish a utility to supply services over a longer term
● Utilization of standardized equipment with modular add-on capabilities to enable phased project
expansion approach
● Utilization of new and / or existing technology where possible
● Utilization of an alternative to permanent risers
● Consideration for a subsea factory approach minimizing topsides
● Revised installation and transportation methods
● Optimized fabrication and manufacturing processes (that is, drive manufacturers to engage in such
actions).
However striking the Capex and Opex balance will also require more effort on the Opex side as per
the following discussion.
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Referring to the 10,000 fsw DeepStar semi stand-alone production scenario as a guide, most Opex costs
are a small percentage of the total Opex, except for the four largest categories, which represent 86% of
the total. These are categories as illustrated on Fig. 7 are:

Figure 7—Opex Accumulated Cost for a Typical Project

1. Oil transportation to market (46% of Opex)


2. Production processing and platform operating costs (17% of Opex)
3. Major workover of subsea wells (12% of Opex)
4. Operators insurance (11% of Opex)
With the exception of insurance, these higher Opex cost areas are clearly where different approaches,
including new technology, should be most applicable in support of production system routine operations.
Typical Cost Savings
Strategies to Reduce Cost (During Engineering, Fabrication, Transport, Installation, Operations
and Maintenance)
● Joint Ventures and Partnering – Sharing Costs
ΠAlliances between operators and subsea companies will optimize oilfield services, improving
cost structures and economic viability of deepwater developments. The program needs to
cover the entire supply chain–from owner functions to contractors down to vendors.
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● Reducing Topsides Footprint – Subsea Facilities


ΠSubsea Separation
ΠSubsea Storage Tanks
ΠSubsea Power Generation (Reverse Rankine)
● Innovation
● Enhanced Automation and Communications
● Modular Approach – Installations, Operations and Maintenance
● Material Selection
● Using associated gas as the fuel for power generation for the subsea equipment where applicable
and safe to do so
● Monetizing the crude oil produced from these fields.

ΠOptions are early production utilizing FPSOs / FPSOs & Tankers available in the industry on
a lease back basis with 3rd Party Provision, thereby shedding Capex into Opex.
● Monetizing the natural gas produced from these fields.
ΠThe options for getting gas to market include: pipelines, liquefied natural gas (LNG),
compressed natural gas (CNG), gas to solid petrochemicals (GTS), gas to liquids (GTL) and
gas to wire (GTW).
Innovation Companies need to start attacking Capex and Opex costs head on since both place an
emphasis on efficiency. For deepwater oil projects, technology innovations yielded a 2% to 7% reduction
in lifecycle costs, or a savings of $1 to $3 per BOE, IHS said. (IHS 2015)
Automation and Communications By leveraging both higher levels of automation and robust commu-
nication networks to remotely operate their facilities instead, oil companies can reduce OPEX by up to
70% and can reduce CAPEX by 3% to 15% by designing facilities upfront to reflect these lower staffing
levels. (IHS 2015)
Remote Sensing Developments in remote sensing, automated operations and data analytics are not only
making operations more efficient but are also increasing operational reliability and enhancing safety,
especially in higher-risk tasks and locations. An example of Industry moves to improve remote sensing,
a Department of Energy (DOE) funded program to develop and pilot test oil-in-water sensors to be used
in the subsea environment to measure the quality of the cleaned produced water from subsea processing
systems is being conducted with results expected in the third quarter of 2016 of qualified instruments.
Digital Technologies BP’s 2015 Technology Outlook report highlights that sensor technologies in
equipment such as pumps, wells and appliances are increasingly being used in the oil and gas industry.
When connected to data collection mechanisms, these sensors provide real-time information on field
activities. Intelligent wells which are providing updates on well condition from top to bottom are now
becoming a reality, a development that reduces both non-productive time and cost. Together with the rapid
development of data analytics and management techniques, the industry can find oil and gas resources
faster and more effectively and operate refineries and manufacturing plants more efficiently. Digital
technologies also provide a route to faster and better decision-making, boosting safety, productivity and
efficiency. (BP Technology Outlook 2015)
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Standardization Companies need to start shifting focus to standardization since it is absolutely uneco-
nomical to rework adequate designs with these low oil prices. Many industries have already successfully
adopted modular standardization. Standardization can offer very large cost and schedule benefits over a
range of components and concept types. To be used with the best effect, standardization requires effective
planning and a significant level of discipline. Operators are to work with the service companies in order
to standardize equipment, reduce service costs and reduce hardware costs.
There are a few smaller projects where complete project-level standardization is possible, for example,
the standardized !monotower! unmanned platforms used for gas production in the North Sea. For a
floating production, storage, and offloading vessel (FPSO), the oil and gas processing module can use a
standard design template, but it must be scaled to the oil and gas flow characteristics of the particular well.
For power and compression modules the same design and equipment can be reused on many vessels. For
larger projects, such as offshore platforms or floating liquefied natural gas (FLNG) facilities, the focus
moves to replicating modules that make up the project, such as helicopter-landing pads on platforms or
compressor trains in the FLNG facilities. (Jeff, Phaf and Vermeltfoort 2013)
Subsea Facilities There is a trend in the industry to reduce the topside equipment footprint on floating
production facilities and relocate many of the components to subsea processing facilities, Fig. 8 shows the
typical layout of an offshore field development, it must be noted that. This would require the incorporation
of multiphase pumps or wet gas compressors with other types of separation and processing techniques.
This, in effect, lowers the back pressure imposed by the production riser making a more efficient system.
Other advantages of subsea separation and processing which can take many forms including contact
separation, multiphase pumping and multiphase metering are as follows:

Figure 8 —Typical Layout of Offshore Field Development


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● Offers flexibility for field development and enables tie-in to existing infrastructure, also keeping
Capex costs down
● Reduction of risk of damage that can occur in harsh environments, including hurricane prone
regions
● Removes the need for pumping waste products to the surface
● Reduction in size of risers and flowlines
● Reduction of topside equipment count thus minimizing costs and challenges associated with space
constraints offshore.
Subsea Innovation in Separation and Handling Produced Water Recent US Department of Energy
(DOE) grants have funded Subsea Research and Development (R&D) programs focused on subsea
separation and processing of produced water at the seabed to allow cleanliness levels of the produced
water to allow discharge into at the seabed. This work has been done to reduce the costs of handling
produced water by removing it from the flowlines and riser stream in reservoirs facing high water cuts
during its later life, thereby saving costs in both Capex and Opex over the life of the project.
The DOE is currently taking the next step in developing the technology for oil-in-water sensors to be
used subsea in order to determine the quality of the water being discharged at the seabed and subsequently
develop regulatory approved subsea-sensing devices that can be used on a real-time basis. Such instru-
ments are being tested during the Mid-Year of 2016 as part of this program to promote subsea facilities
and its usage.
With this in mind, the industry is expected to move towards leaner topsides and more subsea equipment
as illustrated in Fig. 9.

Figure 9 —Subsea Separation and Processing Innovation Study (RPSEA 2012)


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Common Production Facilities Modular standardization facilities will allow the operators to utilize
common equipment and technologies. This will effectively reduce cost and accelerate project schedules
as companies will not have to rework adequate designs. For the subsea factory operators can utilize one
common production facility as illustrated in Fig. 10.

Figure 10 —A common production facility.

Subsea Factory
As mentioned, there is a move in the industry to conserve costs and improve schedules by the trend to
move many of the components of oil and gas production to the seabed. This move, originated by Operators
interested in technology innovation and cost reduction, has been commonly referred to as the Subsea
Factory. To some degree, the Subsea Factory includes adoption of subsea facilities, standardization of
equipment and an increased view in common production facilities where Owner / Operators work together
to share costs on reservoirs or offshore blocks that may be adjacent or common. Shared processing
facilities can be established and transportation costs can be shared, thus cutting Capex based on production
allocations and Opex through shared facilities.
In the overall Subsea Factory concept, several cost savings initiatives can be realized. Fig. 11 is a
conceptual illustration of a Subsea Factory with minimal topsides facilities and major subsea facilities
coupled with the Common Production Facility solution and subsea separation and discharge of produced
water at the seabed, further minimizing topsides facilities.
SPE-180795-MS 13

Figure 11—Subsea Factory Concept (Economic Field Development Version)

Subsea Factory Concept


In general, the Subsea Factory concept can be explained by the identification of areas where advantages
can be realized with its adoption.
Subsea Separation Subsea separation can be done to achieve the following:
● Separation of associated gas from liquids
● Separation of produced water and solids from crude oil
● Separation of off specification produced water and solids from produced water that is acceptable
for injection back into the ocean.
Subsea Processing Subsea processing can be done to achieve the following:
● Products suitable for the market (oil and gas)
● Produced Water Systems
● Change off specification produced water to a state that is acceptable for injection back into the
ocean
● Current technology does not allow removal of sand or solids at the seabed, although attempts have
been made in the past to inject the sand back into reservoirs with limited success because of the
filter cake that blocks the pore spaces and increases back pressures to the point it is not economical
or practical to continue. Currently sand is returned into the crude oil stream and exported.
Subsea Compression and Pumping Subsea compression of the associated gas can be done where
higher pressures are required to achieve transfer or fulfill some other process requirement. Major projects
in the North Sea are awaiting the start-up of revolutionary subsea compression facilities. Wet gas
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compression currently exists and its use could be utilized in gas injection in early production scenarios.
Subsea pumping of the liquid products can similarly be done for transfer or to fulfill other process
requirements. Electric Submersible Pumps (ESP) are being designed to increase flow in subsea jumpers
from wellheads to flowlines in low pressure reservoirs. ESPs are also being planned to be included in
modular linear separation systems to minimize the subsea foot print and lower costs for these facilities.
Subsea Utilities
● Underwater Hydraulic Unit utilizing seawater. Some materials including but not necessarily
limited to valve actuator materials may have to be changed.
● Alternatively if electric actuated is preferred - then Gas to Wire should be considered more.
● Underwater electrical charging capabilities (see long term ROV/AUV in Operations and Mainte-
nance section below).
Topsides Lead-Out To minimize the cost for topsides load-out, several scenarios can be considered:
● Crude oil load out can be done via a floating monobuoy equipped with a loading arm, quarters and
command and control facilities. Communications and power could also be housed in this floating
facility.
● Alternatively, a leased FPSO or FSO mobilized by a 3rd party contractor may be used to lower
Capex and achieve a fast-track basis to first oil, with costs distributed over the Opex period.
Load-out of gas related products can also be considered on a leased base system from a 3rd party
contractor, when systems are purpose built for Gas to Liquids (GTL) utilizing a captured floating
facility. Load-out of the product would be done with tankers as usual.
Subsea Storage Subsea storage may be used to remove this element from the floating topsides facilities:
● Double containment for Off-Spec Water and Solids
ΠFor subsea processing and cleaning of produced water for discharge into the sea, double
containment structures may be employed for off-specification water until such time as the
alternate processing equipment can be brought on-line, thereby keeping production in play.
● Double containment for Crude Oil
ΠFor subsea processing, the separated crude oil can be stored in double containment structures
to allow accumulation of product between fill-up with crude oil tankers.
Operations and Maintenance For a Subsea Factory scenario, it will be imperative to take an approach
on items that improve reliability and long term usage and incorporate systems that are becoming more
common in the subsea industry:
● Modularization for plug and play systems that can be changed and replaced with spares.
● Real-time remote sensing systems that improve the Operations aspect including more diagnostics
from subsea equipment and more built in testing capabilities to extend maintenance intervals.
● Long Term Submergence ROV (Remote Operated Vehicles) and AUV (Autonomous Underwater
Vehicles)
ΠROV / AUV charging underwater from underwater garages
ΠROV / AUV can be set to automatically attach to charging hub at, say, 15% battery
Typical Project Schedule
A Typical Project Schedule involving development of new technology during the project development can
be seen in Fig. 12. Issues that may arise in a cost-challenged environment and strategies to consider
shortening the schedule and lowering costs are discussed.
SPE-180795-MS 15

Figure 12—Typical deepwater project schedule involving the development of new technology.

Strategies to Shorten this Schedule


● Existing Technology: Generally if existing technology is utilized, then the technology develop-
ment and qualification can be minimized or even removed
● Prototype Development: Manufacturing can be shortened if Prototypes are used in the technology
qualification period
● Standardization: Front End Engineering Design (FEED) and Detailed Engineering can be short-
ened if robust modularized units are built to handle a range of field variables i.e. 5K PSI, 10K PSI,
15K PSI Units built for depths up to 5000 ft, 7500 ft, 10000 ft, etc. rather than custom built for
each project. Studies to be done to optimize these standard designs as well as to confirm if
engineering and design cost savings for standardized units may show value versus customized
units.
● Establishing better control / overseeing of Research and Development, Fabrication, Transport,
Installation, Commissioning and Start Up. One key example of this is to utilize local content where
it is available and said resources are capable.
Local Content Companies can consider the involvement of local content through the following:
● Utilization of students at tertiary education institutions
● Research and studies conducted at local Universities and similar research institutions
● Local fabrication
● Local manpower
Companies can partner with the local Universities to get them more involved in the expansion of the
research and development area in Trinidad and Tobago. This will not only help the organizations, but it
will add significant value to the local talent in the country. Locals will be given the opportunity to assist
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with the design of the subsea factory, which will contribute to the development of the deepwater fields
within Trinidad and Tobago.
Fabrication work for the subsea factory can occur in the local fabrication yards in Trinidad and Tobago.
The Union Industrial Estate in La Brea can be cited as an example as fabrication works for past and/or
ongoing offshore projects in the country have already been completed at this location.
Involving International Contractors Large scale international offshore Engineering, Procurement, In-
stallation and Construction (EPIC) companies can deliver more cost effective results through their ability
to control both onshore and offshore projects from concept to start-up, and create efficiencies through this
integration. These companies may be able to leverage their workforce and fabrication capabilities to work
with the local talent pool to meet the demands of the industry and provide cost, schedule, quality and
safety optimized solutions.

Conclusion
Although the Offshore Oil and Gas Industry is currently in a transition stage involving high asset costs
and low product prices, it is believed that adjustments in the industry services sector together with a
healthy environment for innovation, a new wave change is occurring which will introduce methods and
practices to lower costs and improve schedules to allow profitable developments to occur which will
enhance the industry in a time where supply and demand will only drive a higher need for energy in the
near future.

Acknowledgements
The authors would like to thank the SPE Organizing Committee and the management of Fluor for the
permission to publish this paper and special thanks for the dedicated support from the Fluor Houston and
Port of Spain offices for contributing the material and background research to support the manuscript and
presentation.

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