Speed: a matter of fine margins
For early production facilities (EPFs), speed is everything. Every day of delayed production erodes profit and undermines the investment. If a typical EPF can boast production of 10,000 barrels of oil per day (bopd), then a week’s delay could easily equate to $600,000 of deferred revenue at $60 per barrel (/bbl). A month could defer more than $2.4m while incurring operational costs.
What’s more, EPFs are having their moment. Their sweet-spot is somewhere in the $50-$65/bbl range. At this price-point, they are economic enough to attract the industry’s attention, but any higher and they begin to lose out to more profitable big industry projects.
EPF operators are resourceful and adaptable, but even a small mistake along the supply chain can derail and delay a project at great cost. The race to first oil requires serious investment, backed by experience and expertise in every facet of the project. Take for example, valves.
The additional edge
While some EPF projects might be profitable with relatively little effort, others will demand every possible marginal gain.
Valves make up a relatively small portion of an overall project, but demand exactly this kind of close attention. If they’re wrong or late, the whole project can be held up while the right components are procured.
On the one hand, the need for speed would suggest buying off-the-shelf, ready to ship valves wherever possible. However, on the other, it’s crucial to get it right first time. Even if it’s a case of 90 per cent stock to 10 per cent tailored valves, the ability to get both quickly and reliably is a small detail that the success of the entire project depends on.
Experience and expertise
For operators and suppliers in the EPF space, each project is a learning opportunity.
Developers have become extremely adept at deploying a modular, quick-start design approach to EPFs, allowing them to minimise time to first oil. They have also demonstrated a flexibility and openness to ongoing improvement that is difficult to achieve in larger projects.
Again, this applies right down to the individual component level. A good valve supplier will not just fill an order sheet, but actively engage with the project’s specifications based on accumulated experience. Maybe a different valve here will mean a quicker deployment? Perhaps an adjustment there will mean more reliable production?
A two-way, consultative relationship with suppliers may seem like the slower option, but can make significant improvements on time to first oil, while minimising the chance of delay.
EPFs sound temporary, and are often designed to operate for a few years. However, some end up being semi-permanent installations, capable of 15-year lifespans with careful maintenance.
In fact, there is a trend in some African and Middle Eastern markets for smaller, local operators to use EPF facilities on a longer-term basis to extract the last 10 per cent of recoverable oil in fields. These are typically projects where multinational players with large projects have lifted the majority of the oil, but left behind the final, unprofitable reserves. Using cheaper, more agile EPF facilities, local operators can then turn a good profit from what remains.
In this way, certain EPFs become not just long-term, but late production facilities. A misnomer indeed.
A combination of attention to detail, experience, expertise, and an eye on the future, is essential across the EPF supply chain. It needs to be embedded in the approach to every component, as well as the bigger picture design. Anything less risks running a losing race, missing targets and losing revenue.
James Moir, Group Sales Director at PJ Valves.