eni s.p.a.

upstream &
technical
services

2013-2014 Master in
Petroleum Engineering and Operations

Operating models in the FPSO business

Author: Ismael Guerrero

San Donato Milanese 13-14-15 October 2014

Master in Petr.Engineering & Operations 2013-2014

Stage Subject
Operating models in the FPSO business

Author Company Tutors

Ismael Guerrero Maurizio Lanzo
Domenico DAcernio

University Tutor
Prof. Francesca Verga
Division eni S.p.A.
Upstream & Technical Services
Dept. FIROP/Floaters Spa

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San Donato Milanese 15-16-17 October 2014 services
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 List of Content

Stage Subject
Operating models in the FPSO business

Project Scope
FPSOs market overview
Reference Scenario Floaters in ENI
Feasibility case study (Owned vs. Leased)
How majors oil companies approach FPSO business.
ENIs operational model
Conclusions

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 Project Scope
Introduction to the floating production units with a special focus on
floating production storage offloading (fpso).

Preliminary Study of the fpso market and related operating models

(leased/operated) put in place by major oil companies.

Synthetic research of main criteria and pros/cons of applicable operating

model.

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 List of Content

Stage Subject
Operating models in the FPSO business

Project Scope
FPSOs market overview
Reference Scenario Floaters in ENI
Feasibility case study (Owned vs. Leased)
How majors oil companies approach FPSO business.
ENIs operational model
Conclusions

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 FPSOs market overview
The FPSO market has a stable demand with a good forecast, characterized by
high complexity and risk, as well as cost overruns and delays in the delivery
time.

Stable demand, good forecast Suppliers

Market forecast for the FPSO segment

Main operators for leased fpso

Increasing complexity Overruns and delays

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 Major Leasers Disciplined bidding
After reporting big losses in 200812 and undergoing a change of senior
management, major leasers are also becoming more risk averse and are
accepting fewer new orders.

BW Offshore, a major leaser, has not signed a new order since 2010 and has
been more focused on renewing its existing contracts. SBM and MODEC are
also more selective about getting new orders. SBM intends to secure its
leadership position in Brazil and Angola and is open to securing projects in
other regions. MODEC intends to grow its FPSO business by focusing on Brazil
and the emerging Africa market.

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 The FPSOs market demand
The market is characterized by fast evolution, stable demand and growing
complexity.
The current trend is based on owned solutions for high complexity, in which
the importance of the top side is fundamental. The leased option trend is
based on low/medium complexity.
The delays in the delivery time impact negatively on the cost.
The strategy of Oil major companies focus on ensuring a major control of
the investments, Operational costs, and transference of the higher risk to
contractors

Future Projects 2014-2021 by Major company

Future Projects

4 4
3 3
2
1 1

BP Chevron Eni Shell ExxonMobil Total ConocoPhillips

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 The FPSOs market supply
The supply is limited to a closed number of qualified contractors, with new
operators entering strongly in the market but with competences and
strategies in the mid term to verify. As well as the low profitability and the
high risk could put out them.
The leaders have adapted commercial selective polices for clients/countries
minimizing risk, forced by the negative results of the last years and
concerns of investors about the sustainability of the market in mid/long
term.
The supply chain has critical elements due to the increasing demand for
complex projects, lack of competences and qualified personnel, cost
overruns, difficulties to control delays, due to lack of project management
and engineering, and increasing relevance on national content

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 List of Content

Stage Subject
Operating models in the FPSO business

Project Scope
FPSOs market overview
Reference Scenario Floaters in ENI
Feasibility case study (Owned vs. Leased)
How majors oil companies approach FPSO business.
ENIs operational model
Conclusions

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 Floating units as critical assets
The floating units are critical elements for the success of an increasing number
of projects upstream & technical services. ENI Field Owned/ Project
Operator/ Leased Capex Production Floating Unit First
Non- Country (M$) KBOPD Operatedby Oil
ENI Owned Project
Operator Project Eni
Field / Capex Production Floating Unit First
Liverpool Bay UK 870 KBO (100%) Y 2013
Operator Leased Country (M$) KBOPD Operatedby Eni Oil
OSI
/ Project
Goliath FPSO Norway 4.281 55,7 (100%) Y 2015
Non-
Operator 36,2 (65%)
Operator
Jangkrik FPU Indonesia 2.323 450 Y 2017
ABO FPSO Nigeria NA 44 (oil) N, BW Offshore 2003
MMSCFD (100%)
OML 125
247,5
OCTP Ghana 2.986 58 (100%) N, Tendering 2016
MMSCFD (55%)
Sankofa (oil 27,4
Mozambique 1 Mozambi 17.069 12,8 MSCMD (100%) Y 2019
FPSO only) (47,22%)
x FLNG que
West Hub Angola 4.615 100 (100%) N, SBM 2014
Owned Coral
NGoma 35 (35%)
Gendalo and Indonesia 1,828 38 (100%) N, Chevron 2017
FPSO
Gehem 2 x FPU 7,6 (20%)
Operator Leased Block 15/06
(IDD) Kutei
East Hub Angola 2.431 80 (100%) N, Bumi 2017 Basin
FPSO 28 (35%) Armada Bouri Slough Libya 567 (50%) N, MOG 2015
OPL 245 Nigeria 4.400 60 (100%) Tendering 2017 Replacement
Etan FPSO 30 (50%) Non- FSO
OPL 245 Nigeria 9.661 150 (100%) Tendering 2019 Operator Heidelberg USA 475 80 (100%) N, Anadarko 2016
Zabazaba 75 (50%) SPAR 10 (12,5%)
FPSO Johan Castberg Norway 3.735 211 (100%) N, Statoil 2018
Glas Dowr Australia 40 (100%) N, Bluewater 2011 SEMISUB 63,3 (30%)
FPSO Kitan Sea Eagle FPSO Nigeria 200 (100%) N, Shell 2003

Aquila Italy NA 4,6 Y 2011 10 (5%)

FPSO Firenze Lucapa FPSO Angola 20% N, Chevron 2018

North Sea UK 76 (100%) N, Maersk + 2001 Vega FSO Italy NA 40% N, Edison 2010

Non- Producer 30,4 (40%) Odebrecht Leonis

Operator FPSO Alba Marina Italy N/A 38% N, Edison 2012

FSO
Kizomba C Angola N/A 100 (100%) N, SBM 2008
Kizomba A Angola 3.200 250 (100%) Y, Exxonmobil 2004
FPSO 20 (20%)
FPSO 50 (20%)

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Kizomba
FPSO
B Angola 3.000 250 (100 %)
50 (20%)
Y, Exxonmobil 2005

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 Floating units as critical assets
The floating units are critical elements for the success of an increasing number
of projects upstream & technical services.

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 ENI executed/ongoing activities
June Oct Dec. Feb. Dec.
2011 2011 2013 2014 2016

FPU Jangkrik
AR1 PTR AR2 AR3
2011 2019
Oct 11 Oct 13 Nov 13 Dec 14

FPSO Kitan (GLAS DOWR) Operations (5+3 years contract-Bluewater)

Q4 2014

FPSO NGoma
Apr.
2017

BLOCK 15/06:East Hub

June Oct Sept. 03/04 Q1
2011 2011 2012 2014 2017

Nigeria OPL-245: Ethan FPSO

AR1 AR2
AR3
Apr 11 Jun12 2019

FLNG Mozambique
Jul 2013 Feb. Dec.
2014 2015

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 Floaters executed/ongoing activities

2023
2013

FPSO ABO Life Extension Life extension

April Dec June Dec

2013 2013 2014 2016

FPSO Ghana (OCTP)

AR1 /
PTR AR3 2023
2012 AR2

Firenze FPSO Operations

June
2015

Goliat
Oct Dec Mar June
2011 2013 2015 2019

FPSO Zaba Zaba

AR1 PTR AR2 AR3
Oct 11 Oct 13 Nov 13 Dec 14

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 List of Content

Stage Subject
Operating models in the FPSO business

Project Scope
FPSOs market overview
Reference Scenario Floaters in ENI
Feasibility case study (Owned vs. Leased)
How majors oil companies approach FPSO business.
ENIs operational model
Conclusions

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 Feasibility Owned vs. Leased FPSO

The key parameters to decide whether lease or own an FPSO are NPV,
Maximum financial exposure and Pay-out time.

The financial situation of the oil major company affects the selection of a
leased or owned FPSO development.

For instance a company with a low portfolio of business willing to achieve a

desired position in the market would try to accept projects with a higher
financial exposure, more risky (political uncertainty related to the specific
country but out of the scope of this report), at cost of making the profit
forecasted in the NPV.

Other that economical and financial aspects has to be taken into account the
technical/operational capabilities of the oil company

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 Production Sharing Agreement (PSA)
The Key Terms for Block Polito are:
Located in West Africa.
First 20 million barrels of oil are tax free

Royalty is based on sliding scale

KBOPD Royalty rate

0-20 0%
20-70 5%*(1-(70-P)/(70-20))
>70 5%
P=PRODUCTION (KBOPD)

Cost recovery (Cost oil)

20% of production after royalty

Taxation
50% Tax oil
50% of tangible capital costs allowable as Investment allowance

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 Production Sharing Agreement (PSA)
Profit split
Typical PSC R factor calculation

R Factor Contractor Share

0-1,2 80%
1,2-2,5 25%+((2,5-R)/(2,5-1,2)*(80%-25%))
>2,5 25%

Government Participation
There is no Government participation of State rights to take a working
interest.

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 Feasibility Owned vs. Leased FPSO
The NPV for the Owned FPSO results 1,725 $mm (IRR 45%) at a cost of
money of 7,8% and maximum financial exposure of 969 $mm, which lead to
get the pay-out time in late-2020.
The NPV for the leased FPSO results 906 $mm (IRR 39%) at a cost of
money of 7,8% and maximum financial exposure of 553 $mm, which lead to
get the pay-out time at the beginning-2021. Both cases evaluated in 13
years period.

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 List of Content

Stage Subject
Operating models in the FPSO business

Project Scope
FPSOs market overview
Reference Scenario Floaters in ENI
Feasibility case study (Owned vs. Leased)
How majors oil companies approach FPSO
business.
ENIs operational model
Conclusions
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 The strategy of the Majors
Oil Major Companies have deloped internal competences to manage the entire
life cycle of the asset with adoption of flexible strategies as function of the
project/country, always giving priority to the ownership and direct
management for high complexity assets and revelant for the business.

FPSO Leased/Owned FPSO-Oil Processing Capacity (bbls/d)

Leased Owned Total

11

8
7
7
6
5 10 5
5
5 5
4 2
4

3 3
2 2 2
1 1
BP Total Chevron Exxonmobil ConocoPhillips Shell ENI

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 Majors strategy Owned FPSOs
The major oil companies keep the ownership and operations of most
of the high complexity FPSOs, with significant exceptions regarding
local regulations (Angola, China)
Oil
Processin Gas
g Processin Oil Storage Water Conv
Current Visible Capacity g Capacity Capacity Depth erte
Field Operator FPSO Operator FPSO Owner FPSO Name Field Country Status first oil (bbls/d) (mmscf/d) (bbls) (ft) Mooring Type d?
Eni Eni Eni Firenze FPSO Aquila Italy Working 2011 12.000 0 700.000 2723 External Turret Mooring Yes
Eni Eni Eni Goliat FPSO Goliat Norway Construction 2014 100.000 140 1.000.000 1125 Permanent Spread MooringNo
Shell Shell Shell Bonga Bonga Nigeria Working 2005 225.000 150 2.042.140 3379 Permanent Spread MooringNo
Shell Shell Shell/Exxon (50/50) CURLEW Curlew, Kyle United Kingdom Working 2002 45.000 116 560.000 301 Internal Turret Mooring -Spread
No Mooring
Shell Shell Shell Sea Eagle EA (OML 79) Nigeria Working 2003 200.000 600 920.000 1230 Jacket Soft Yoke Yes
Shell Shell Shell Anasuria Teal, Teal South, Guillemot
United
A, Cook
Kingdom Working 1996 225.000 65 2.000.000 291 Internal Turret Mooring Yes
Shell MODEC Shell Fluminense Bijupira Brazil Working 2003 81.000 75 1.300.000 2952 External Turret Mooring Yes
ExxonMobil SBM ExxonMobil Serpentina Zafiro Southern Expansion
Equatorial Guinea Working 2003 110.000 50 1.900.000 2799 External Turret Mooring Yes
ExxonMobil/GE ExxonMobil ExxonMobil ZAFIRO PRODUCER Zafiro Block B Equatorial Guinea Working 1996 80.000 60 1.900.000 590 Spread Mooring Yes
ExxonMobil ExxonMobil ExxonMobil Kizomba A Hungo Angola Working 2004 250.000 400 2.200.000 3942 Permanent Spread MooringNo
ExxonMobil ExxonMobil ExxonMobil Kizomba B Kissanje Angola Working 2005 250.000 400 2.200.000 3609 Permanent Spread MooringNo
ExxonMobil ExxonMobil ExxonMobil Erha FPSO Erha Nigeria Working 2006 200.000 - 2.300.000 3998 Spread Mooring No
NNPC Chevron Chevron Agbami FPSO Agbami Nigeria Working 2008 250.000 450 2.300.000 4797 Permanent Spread MooringNo
Chevron Chevron Chevron CAPTAIN Captain A, B, C United Kingdom Working 1996 37.000 - 849.000 341 External Turret Mooring Yes
Chevron Chevron Chevron TANTAWAN EXPLORER Tantawan Thailand Working 1997 50.000 150 1.000.000 242 External Turret Mooring No
Chevron SBM Chevron Frade FPSO Frade Brazil Working 2009 100.000 150 1.500.000 4920 Internal Turret Mooring Yes
Chevron Chevron Chevron Rosebank FPSO Rosebank Lochnagar United Kingdom Construction 2017 100.000 190 1.000.000 3609 Internal Turret Mooring No
Total Total Total Dalia FPSO Dalia Angola Working 2006 240.000 282 2.000.000 4920 Spread Mooring No
Total Total Total Akpo FPSO Akpo Nigeria Working 2009 185.000 530 2.000.000 4593 Permanent Spread MooringNo
Total Total Total Pazflor FPSO Acacia Angola Working 2011 220.000 150 1.900.000 3378 Permanent Spread MooringNo
Total Total Total Usan FPSO Usan Nigeria Working 2012 180.000 177 2.000.000 2625 Permanent Spread MooringNo
Total Total Total CLOV FPSO Cravo Angola Construction 2014 160.000 230 1.800.000 4449 Permanent Spread MooringNo
Total Saipem Total Kaombo Ph 1 Gengibre Angola Tendering 2017 100.000 90 1.500.000 5584 - -
Total Saipem Total Kaombo Ph 2 Mostarda Angola Tendering 2018 100.000 90 1.500.000 5764 - -
Total Exmar Total Farwah FPSO Al Jurf Libya Working 2003 40.000 55 900.000 295 External Turret Mooring No
Total Total Total Egina FPSO Egina Nigeria Construction 2017 220.000 160 2.300.000 5085 Permanent Spread MooringNo
Total Total Total Girassol Girassol, Jasmim BlockAngola
17, Rosa (Future)Working 2001 60.000 90 2,000,000 4593 Spread Mooring Yes
ConocoPhillips ConocoPhillips ConocoPhillips Belanak Natuna Belanak Indonesia Working 2004 100.000 350 1.000.000 295 Permanent Spread MooringNo
ConocoPhillips ConocoPhillips CNOOC Hai Jang 117 Penglai Block 19-3 (Phase
China
2) Working 2009 190.000 2.000.000 82 Internal Turret Mooring No
ConocoPhillips ConocoPhillips/CNOOC CNOOC BOHAI MING ZHU Penglai 19-3 Block 11/05
China Working 2002 80.000 6 1.000.000 101 Jacket Soft Yoke No
ConocoPhillips ConocoPhillips/CNOOC CNOOC Bohai Peng Bo Penglai (PL) 19-3 China Working 2009 190.000 200 2.000.000 92 Soft Yoke Mooring System No
BP BP BP Greater Plutonio Plutonio Angola Working 2007 220.000 400 2.000.000 4467 Permanent Spread MooringNo
BP BP BP Skarv FPSO Skarv Norway Working 2012 85.000 671 875.000 1148 Internal Turret Mooring No
BP BP BP PSVM FPSO Marte Angola Working 2013 157.000 245 1.800.000 6558 External Turret Mooring Yes
BP BP BP Quad 204 FPSO Schiehallion United Kingdom Construction 2016 130.000 220 1.000.000 1230 No

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 Majors strategy Leased FPSOs
The leased FPSOs are spread out mostly for the segment of
low/medium complexity, with oil processing capacity lower than
100.000 bbls/d.

Gas
Proce
Oil ssing
Processi Capac Oil
Duratio ng ity Storage Water Conv
FPSO Visible first n Capacity (mms Capacity Depth erte
Field Operator FPSO Operator Owner FPSO Name Field Country Current Status oil (years) (bbls/d) cf/d) (bbls) (ft) Mooring Type d?
BP Teekay Petrojarl Teekay Petrojarl PetroJarl Foinaven Foinaven, FoinavenUnited
East Kingdom Working 1997 - 140.000 260.000 1706 Internal Turret Mooring No
Chevron SBM SBM LPG FPSO Sanha Sanha Angola Working 15/01/2005 1Y, 9M 125 362.000 223 Turret Mooring No
Chevron SBM SBM KUITO Kuito Angola Working 1999 - 100.000 90 1.636.000 1223 Spread Mooring Yes
CNOOC Chevron CNOOC Hai Jang 113 Bozhong 25-1 China Working 2004 - 190.000 1.800.000 72 SAL Yoke No
ConocoPhillips Maersk+Odebrecht Maersk+Odebrecht North Sea Producer MacCulloch United Kingdom Working 2001 - 76.000 30 560.000 492 Internal Turret Mooring / Yes
Spread Mooring
ConocoPhillips ConocoPhillips MODEC KAKAP NATUNA Kakap KH Indonesia Working 1986 - 25.000 25 760.000 269 CRY Yes
Eni BW Offshore BW Offshore ABO FPSO Abo Nigeria Working 15/03/2003 2Y 30.000 44 880.000 1804 Permanent Spread Mooring
Yes
Eni Bluewater Bluewater Glas Dowr FPSO Kitan Australia Working 10/10/2011 1Y, 1M 40.000 0 650.000 1148 Internal Turret Mooring Yes
Eni SBM SBM N'Goma (ex-Xikomba) Sangos Angola Commissioning 12/12/2014 0Y, 11M 100.000 115 1.700.000 4426 External Turret Mooring Yes
ExxonMobil SBM SBM Mondo FPSO Mondo Angola Working 09/01/2008 2Y 100.000 95 1.600.000 2427 External Turret Mooring Yes
ExxonMobil SBM SBM Saxi-Batuque (KIZOMBA C) Saxi Angola Working 13/08/2008 2Y, 7M 100.000 150 1.600.000 2230 External Turret Mooring Yes
ExxonMobil Exxonmobil Bluewater Jotun A Jotun Norway Working 1999 - 123.000 30 595.000 419 Internal Turret Mooring Yes
Shell SBM SBM Espirito Santo Ostra Brazil Working 13/07/2009 2Y, 8M 100.000 150 1.400.000 7871 Internal Turret Mooring Yes
Shell SBM SBM Stones Stones USA, Gulf of Mexico
C onstruction 01/03/2016 2Y, 8M 60.000 15 800.000 9576 Disconnectable ExternalYes
Turret Mooring
Total Maersk Maersk N'Kossa Haute Mer - N'Kossa
Congo Working 1996 - 65.000 20 1.000.000 393 External Turret Mooring Yes

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 Corporate organization for FPSOs
The strategy developed by most of major oil companies to face the
market has been developing internal competences to operate them,
as well as acquiring the required flexibility to shift strategy according
to the specific country and project HQ detailed
Upstream
organization
International

Upstream
International
Operated HQ organization
Vicepresiden
t Area

General
Production
Manager
Country
General
Manager
Offshore JV organization
Operations
Manager

Technical
Marine
Subsurface Asset Business Support Maintenance
Superintend
elements Integrity Support (Engineering Manager
ent
)
Maintenance
Well Operations Class service
Finance
servicing Surveillance Management managemen
t

Reservoir Control and Special

Inspections
Engineering Procurement Projects

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 List of Content

Stage Subject
Operating models in the FPSO business

Project Scope
FPSOs market overview
Reference Scenario Floaters in ENI
Feasibility case study (Owned vs. Leased)
How majors oil companies approach FPSO business.
ENIs operational model
Conclusions

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 The management of critical processes
The HQ must ensure the management of the critical processes for the
development and operations of Floating units, from the feasibility stage, giving
support support in specific to the development regarding operability and
maintainability, contributing to their development and operations.
Estimation of O&M costs
Evaluation Market analysis

Operability and maintainability

Development Support to the Flag/Class management regarding O&M
Support to tendering for O&M and performance

Aplication of methodologies of operations readiness to floaters

Operation Organizational set-up Support, staffing, training, local content
Readiness

Manning floaters
Operations Technical/Operational Support
Management/Coordination of O&M and contract mgmt support
Shut-down optimization and troubleshooting
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 Critical processes for O&M
The operative model is based on filling the gaps between the specific
processes for the floating unit and the support to the process owner
OPS for customizing the standard ones for their integration with the
naval/process ones.

Process Owner OPS/Prod Floaters

Apply to Floaters
projects Asset Integrity Asset Integrity
ISM/ISPS Flag mgmt
Maintenance Eng/CMMS Maintenance Eng/CMMS
Class maintenance
Operational Review Operational review
Operability/Maintainability Operability/Maintainability
Production Production
Ship coduction
Top side modules Ship/turret maintenance
maintenance Top side maintenance
O&M know-how Floaters know-how
development development

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 Operational model Owned/Operate
For the operated units is needed to support the Joint Venture with the
management of the naval processes
JV/dev JV/Ops
Feasibility Ownership
Contractor
Feed Material supply
EPCI

Overseing construction Operation Readiness

Start-up until PAC

Overseing Production management

commissioning
O&M

Floaters

Strategy O&M (leased vs Coord. O&M/Technical

owned) services/ Asset mgmt

Operability/Maintainability Staffing and training

Hand over management COMPANY (ISM/ISPS)

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 Operational model- Leased
The operational model is based on the support to the Joint Venture
from the development, with the goal of guarantee the availability of
resources with the competences for the management of the floating
unit.
JV/Dev JV/Ops Third party
Feasibility Operation Readiness Owner - Company
Strategy
Feed and support for Production management Manning/Crew Mgmt
tendering

Overseing EPCI and Management of Leasing EPCI

Start-up contract

Local Content Start-up

Floaters

Strategy & support to Technical services

O&M feasibility analysis

Support to tendering for Coord. O&M/Technical O&M

O&M services/ Asset mgmt

Operability/Maintainability Staffing and training

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 HQ Proposed organization
HQs organizational structure must ensure the control of critical
processes for the development and management of the floating
production units from the feasibility studies, supporting in particular
the phase of development regarding the operability and
maintainability, as well as contributing to the development.

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 List of Content

Stage Subject
Operating models in the FPSO business

Project Scope
FPSOs market overview
Reference Scenario Floaters in ENI
Feasibility case study (Owned vs. Leased)
How majors oil companies approach FPSO business.
ENIs operational model
Conclusions

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 Conclusions
The FPSOs are key assets for deepwater offshore

The FPSO supply chain has critical elements such as: project complexity,
few qualified suppliers, and delays/overruns

The main operative models are Leased/Owned; oil major companies tend to
own the high complexity assets keeping the O&M management

Floating production units are key assets for ENI, and in specific FPSOs.

ENI develops offshore competences for well-established

processes/organization that can add value regarless the operating model.

The selection of owned/leased FPSO solution must be evaluated case by

case based on financial/economic reasons, with particular considerations for
the country/project.The technical/operative competences are critical for
managing an FPSO.

Regardless the selection of leased/owned unit, establishment of a proper

operating model to monitor/challenge directly production, which is core
business of any major oil company is much important. The operating model
demand to be efficient and flexible.
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 Acknowledgements

I would thank Eni s.p.a. upstream & technical services

Division Management for permission to present this
work and related results and
FLOATERS/FIROP/INFLO/SPRE/LOGIS colleagues
for the technical support and needed assistance.

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