Dana Petroleum’s flagship Western Isles oilfield development is running late and is now not expected onstream until the second half of 2017.
That’s two years later than originally billed when the project was approved by the Department of Energy & Climate Change in December 2012.
It should have been onstream late Q3/early Q4 this year, based on the original timescale.
Energy Voice’s sister publication, Energy, understands too that the project is massively over the original and apparently very aggressive $1.6billion sanction budget and may come in at around $2billion.
While not denying the information in Energy’s hands, a Dana spokesman declined to comment on them.
It seems that Western Isles has, like many current and past North Sea projects, fallen foul of over-ambitious target setting and for risking construction of the FPSO in China with no prior track record of production ship building in the country. Not only that, it was an engineering, procurement and commissioning contract that was awarded to the Chinese state-owned COSCO yard.
It was through a chance encounter during a trip to Norway last month that Energy’s editor was told that “Dana had reset the clock” on Western Isles and that there were multiple problems.
What was meant is that the company had revisited the construction schedule and re-engineered it. Not only that, the original timeline had also been too ambitious.
The alarm bells apparently started to ring at Dana in Aberdeen late last year, with interventions at the fabrication yard in Qidong put in place early this year in a bid to sort things out.
We were also told that the root cause of the delays and cost overrun lay at the feet of COSL, which won the work, including fabricating the Sevan class floating production and storage unit and building the topsides process systems.
It seems that COSCO took on more than it was able to handle; moreover, it had neither the expertise nor understanding of UK North Sea standards and regulations, particularly when it came to building complex topsides processing systems.
Apparently, Dana has had no issues with the hull, despite its unusual shape. COSCO is well versed in building tanker hulls and a Sevan class FPSO is basically just a giant can-shaped tank fitted with a permanent mooring system. Moreover, it has already built such hulls.
Photographs posted regularly on the Korean-owned company’s website show that a number of modules have been installed atop the hull. The fabrication of process system modules are apparently fairly advanced.
As for getting the production unit to the North Sea, while there are doubtless some in Dana who would rather see Dockwise transport the FPSO to a European location, this is apparently now a low probability.
It seems that it is far more likely the Western Isles unit will be moved using a brand new heavy transportation vessel being built by COSCO to its own account. When completed, the 225m Guang Hua Kou will rank as the second largest heavy-lift transportation vessel in the world and, at 90,000 tonnes the largest ship-shaped example.
Not only that, we have learned that, if the Chinese get the job, then the Western Isles would also be the giant vessel’s maiden cargo. Dana will not have the comfort of the vast Dutch experience that would come with ship hire from sector doyen Dockwise. But price seems to be the only consideration and the Chinese are ultra-determined.
For its part, COSCO Quidong would need to have the Western Isles FPSO ready for departure from Qidong during Q4 2016.
This is because Dana would require the Western Isles FPSO in European waters by around March 2017 to enable final checks and adjustments to be carried out prior to towing out to block 210/24a, 500km north-east of Aberdeen.
It is not clear where the FPSO would be offloaded as there are plenty of candidate locations around the North Sea.
In the UK, they include Lerwick, Shetland, where Premier Oil handled the offload of its Solan field oil storage tank; and Global Energy at Nigg on the Cromarty Firth, which now has deepwater berths designed to accept FPSOs. Not only that, Global has extensive skills, engineering and fabrication resources on site.
One of Dana’s worries has to be that, despite resetting the clock on Western Isles and reinforcing its oversight of construction activities at COSCO, there could still be problems and further delays once the FPSO is offloaded and alongside somewhere.
This has been the fate of numerous Norwegian and UK offshore developments where Far East yards have been used to manufacture the big pieces of kit. Eni’s Goliat project, also based on a Sevan design and built in the Far East, is also late, dogged with problems and under remediation in Norway.
It is said that other current projects face similar issues. It has also been said that it has reached the point where it may ultimately be better to engineer and fabricate entirely within Europe as the cost gap between this part of the world and the Far East is closing.
Now for a quick reminder of the history behind the Western Isles development located in 170m of water and which comprises the Harris (formerly Rinnes) and Barra (formerly Melville) fields. Dana operates the development with a 65% interest, while Cieco of Japan holds the remaining 35%.
It was April 2008 when Dana made a discovery at the West Rinnes structure on block 210/24a.
Discovery well 210/24a-11 encountered excellent quality sands throughout the Brent sequence.
The West Rinnes oil accumulation was found just 5km from the Dana operated Hudson producing oil field and 2.5km from the company’s Melville oil field
A second well . . . 210/24a-11z . . . encountered a full Brent reservoir sequence. That was dubbed East Rinnes.
A detailed set of electric wireline logs were acquired including pressure data and oil samples.
In 2009, Dana was back on location to further appraise Rinnes by drilling South East Rinnes, which also encountered excellent quality sands, as predicted, within the Lower Brent sequence with a full oil column throughout the Brent reservoir and no oil-water contact.
The data from the sidetrack well confirmed a total oil column of over 122m (400ft) true vertical thickness in South East Rinnes area.
Dana was acquired by the Korea National Oil Corporation in September 2010. Having determined priorities, it set about working up what is, in effect, a cluster development.
With much of the site preparation done, most of what remains has to do with sorting out the FPSO, getting in on location and bringing Western Isles onstream.
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