Last year saw the world’s listed oil companies slash production by 2.4% as a result of the falling price per barrel, with key players continuing to redirect investment in an effort to stay profitable. A similar picture was seen in the gas industry. As more of the major operators make a move to differentiate their assets, the need to improve production efficiencies and cut expenditures is growing rapidly.
Of course, many operators are cutting their losses and turning to decommissioning in an attempt to reduce expenditures, improve cash flow and protect profit margins. In the North Sea alone decommissioning expenditure has risen by $62 million since 2014, with more than 100 platforms expected to be removed by 2025, according to Oil and Gas UK. It’s an issue that impacts the industry. Global offshore driller Seadrill scrapped 44 floating drilling rigs last year alone due to reduced activity and persistently low prices.
Decommissioning older rigs that require significant investment to upgrade and maintain is economically sensible. It can save enormous open-ended costs and improve operational efficiencies. However, dismantling a three-year-old rig, for example, which on average costs $650 million and involves lengthy planning and commissioning phases, isn’t a viable option. Decommissioning a considerable number of rigs also limits a company’s fluidity and ability to react quickly to market needs and, more importantly, capitalize on opportunities (i.e., a rising oil price).
Both the cold- and warm-stacking of unused offshore drilling rigs is a sustainable alternative, particularly for advanced and latest generation rigs in key markets. However, for those who experienced the last significant downturn in the 1980s, the prospect of cold-stacking might not be seen as an attractive option either. Rigs were welded shut and inadvertently left to rust, which then cost millions of dollars to remobilize or, in some cases, eventually abandon. Despite hesitations, few operators will want a repeat of that scenario and will make efforts to safeguard their $500 million to $600 million investment by protecting the integrity of the asset.
A cold-stacked rig, which can reduce operating costs by $3 million to $9 million per year compared to warmstacked rigs’ approximate operating costs of $30 million to $90 million per year, requires adequate preservation to protect critical components of the asset. While rigs are moved to safer hurricane-free waters closer to shore, failure to protect their operating systems and structures such as high and low voltage switch gears, critical parts storage, thrusters, engine rooms, power level controller instrumentation and accommodations, can jeopardize their integrity and lengthen the reactivation process. Not only would this cost more and take longer, but it will impact the company’s ability to be flexible and meet demand quickly, and in some cases it also could result in decommissioning.
Most of the drillers and operators have been hesitant to cold-stack rigs in view of these potential risks and expenses as well as limited industry experience in successfully long-term cold-stacking advanced latest generation deepwater floaters. As a result, warm-stacking tends to be the major mode of operation by the operators for unused rigs despite costing about 10 times more. However, recently some top drillers have successfully implemented a cold-stacking mode, which has enabled tremendous reduction in their operating costs, improved profitability and bottom-line performance.
Modular power and heating, ventilation and air conditioning (HVAC) technology play a vital role in protecting infrastructure and operating systems. Addressing this need properly and implementing preservation strategies effectively could create a savings of nearly 90% (e.g., $5 million preservation costs compared to $40 million to repair damaged assets) during reactivation. It also could reduce reactivation time by about three months and create potential revenue of about $36 million (assuming a $400,000 day rate).
Planning process
Scoping studies and surveys are critical to evaluating the needs of a project, including HVAC, temperature control and power strategies, thereby determining where conditioning is needed and outlining the most effective temperature control and dehumidification system designs. Cold-stacked rigs are typically put away for an extended period of time— two to five years compared to six months for warm-stacked rigs—so identifying and mitigating long-term risks is a fundamental part of the planning process. Both temperature and humidity control have been identified as key parameters for the sustainability of long-term corrosion protection and asset preservation during cold-stacking.
Corrosion, condensation and freezing are major issues on a cold-stacked rig caused by the high level of salt and humidity in the air, which impact a range of different components and in turn jeopardize full operability. By using a variety of heating, cooling and dehumidification equipment, it is possible to control conditions within internal spaces. This not only ensures air spaces between machinery and pipelines remain dry but also prevents corrosion damage and moisture absorption into electrical cables and fittings.
Temperature control equipment will perform to varying levels of effectiveness depending on the geographical or seasonal climate in which the rig is located, including the consequential ambient temperature and relative humidity. For example, the optimal cold-stacking solution in the North Sea might not be viable for the Gulf of Mexico or tropical climate conditions. A key example of why scoping studies are vital to assessing the effectiveness of an operation and justifying the need for these bespoke systems can be seen with the deployment of desiccant dehumidifiers and heaters in colder climates and mechanical refrigeration equipment in warmer regions, which temper the space rather than add heat. This, in turn, creates a 35% to 40% reduction in required power capacity and a subsequent fuel cost saving.
Scalable and efficient onsite energy and HVAC equipment is crucial, particularly if the climate changes or when capacity needs increase as the rig is reactivated. Bringing the rig back online within three months rather than six creates a great opportunity to not only start producing sooner but also reduce costs. Adopting modular systems allows greater flexibility. Capacity can be increased or reduced quickly to meet changing demand and improve cost efficiency. Modular generators also allow main engines to be shut down, again creating a significant fuel and cost saving. However, perhaps more importantly, using a number of small engines rather than one big one helps to avoid economical redundancy and improves reliability and efficiency.
Reliability is a key priority, particularly as cold-stacked rigs are typically unmanned. If a disruption were to occur and potentially jeopardize the capabilities of HVAC equipment in the process, it could take weeks to resolve the issue. Contingency planning, identifying potential issues and taking steps to mitigate the risk of this occurring is crucial. Adopting a modular power strategy reduces this risk—if one generator breaks down, others can continue to provide capacity demand. However, backup generators should be in place.
Remote monitoring plays a key role in identifying inefficiencies or signs of equipment malfunctioning while also diagnosing maintenance needs before an actual disruption occurs. Engineers in Aggreko’s Remote Monitoring Center can access performance data from power and HVAC equipment operating on offshore rigs to ensure maintenance needs are quickly met. This approach also reduces the number of engineers required on the rig, which has obvious health and safety benefits.
Another critical factor on cold-stacked offshore rigs is prevention, ranging from controlling the environment to preserve equipment and protect against corrosion to planning ahead for disruptions and putting contingency strategies in place. Protecting investment and the integrity of the asset through adequate power and HVAC systems is an operational priority. It provides a key advantage in ensuring the business can react quickly to market demand and opportunities but also avoids decommissioning and potentially scrapping a $600 million rig.
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