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Reducing Subsea Equipment Capex

The primary driver for all projects regardless of size should be disciplined spending. This is especially true in light of the recent market downturn. However, regardless of market conditions costs should be minimized for any project. One of the most powerful tools for reducing subsea equipment capex is with equipment standardization, yet it is one of the least used.  System designs should target meeting requirements and avoid exceeding requirements. Focus should be on must-have designs instead of nice-to-have designs.

Equipment Standardization is likely an overused term that has been a topic of discussion for decades. However, few operators in the industry have effectively applied this concept. The advantages, benefits and limits have been much deliberated, but mostly on a theoretical basis. There are few arguments that design consistency across multiple projects can produce benefits; the design one and build many principal works if adhered to. However, this needs to be implemented on a broad scale for it to pay notable benefits. If the entire industry were to adopt this thinking, the cost and delivery benefits would be significant. Realistically, standard designs may not be applicable for all cases, but if these designs applied to say 80% of projects, they would be greatly effective in reducing subsea equipment capex is with equipment standardization.

Some efforts have been put forward to set some industry guidelines on standardization that would help bring benefits for the entire industry. For example, the International Association of Oil & Gas Producers (IOGP) has promoted standardization for subsea trees through their JIP 33. Initial efforts agreed on standardization for metallurgy and quality of tree forgings as well as the functional requirements for trees. One result has been drafting of a Supplementary Requirements for API 17D. Subsequent work achieved agreement between IOGP members on a standard tree configuration for Vertical Mono Bore trees. This is only scratching the surface of what needs to be done and this work will only have an impact when operators start buying trees using these standards. More needs to be done.

Much time and effort has been put into preparing industry design guidelines though organizations such as API and ISO. This effort has been widely supported by the entire industry including operators and equipment suppliers. The purpose has been to provide guidelines for designing and building equipment that meets acceptable industry standards and delivers safe operation. Yet, many operators have developed their own guidelines and requirements. This has had negative impact on cost and delivery of standard components by making them custom designed and manufactured for one operator. The question is why? Are industry standards not suitable? Why have and support industry standards if they are not suitable?

The equipment suppliers design and build to industry standards and provide their standard products based on these guidelines. This can reduce engineering time and costs. It allows suppliers to develop stocking plans that improve delivery times and further reduce costs. Why not use supplier’s standard products if they are designed to acceptable standards at lower cost and faster delivery?

Here are some thoughts on applying standard designs:

  • Avoid preferential engineering. Use designs that meet the minimum requirements and avoid designing to meet individual preferences. Does it make sense for every project to use equipment that is custom designed and built for that project only? Does it make sense for each operator to have requirements that go beyond industry standards?
  • Optimize designs. Simplicity in meeting requirements leads to lower cost and faster deliveries. Instead of adding “nice to have” features. Consider only what the “must have” features are.
  • Work with supplier standards. Suppliers are the experts on their products and use industry design guidelines to develop their standard products. These meet industry minimal requirements and are more cost effective.
  • Use configuration standards rather than buy components; buy systems.
  • Establish supplier agreements based on standard products that will facilitate stable pricing and consistent deliveries.

Use “Limit State Design” philosophy to minimize design costs:

  • Design to meet minimal requirements set by accepted industry standards.
  • Design to be fit for purpose, meaning that designs will do what they are designed to do without exceeding minimum accepted design requirements.
  • Meet Industry standards instead of surpassing standards. Industry standards are in place to provide guidelines for designing equipment to perform specific functions in a safe manner. Using specialized requirements likely surpass industry standards. However, value added may not surpass value lost.

Standardization can be a powerful tool for reducing subsea equipment capex and improving delivery times of equipment. However, it must be used as a common practice for it to be effective. As an individual operator, standardization can pay benefits. Yet, for a greater impact the entire industry needs to adopt this philosophy. Design standards will help guide the industry toward implementing equipment standardization, but the real change will come when standardization is used globally.

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Oil & Gas, Oil and Gas Expert Advisory Group, Subsea

Ron Ledbetter Senior Consultant / Subsea Team Lead

Mr. Ledbetter has over 41 years of Oil and Gas Industry experience in the Subsea Engineering discipline. His extensive experience encompasses design engineering,...

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