Risk management for deepwater projects receives OTC focus

Risk management from both an operator and service provider perspective was the focus of a special press conference held on Tuesday, 6 May at the 2008 Offshore Technology Conference (OTC). The multidisciplinary panel may have represented different parties, but all agreed that the unprecedented risks facing deepwater projects require a targeted team approach to minimize negative impacts.

Uri Nooteboom, Vice President of Offshore Field Development for INTEC Engineering, set the stage for the major topics the panel would address. Panel participants from major engineering service companies and operators would present how project risks for deepwater projects are managed, as well the industry's experience and relative success in managing these risks.

James Pappas, Global Technology Coordinator for Devon Energy Corporation, began with his company' development strategies for managing risks over the entire life cycle of a project. "There are risks associated with every stage of an offshore project, from initial identification of an asset to the completion stage," Pappas said. "Generally, those critical decisions made during the beginning stages of a project have the greatest influence on a project's cost and schedule."

Pappas reviewed Devon's project management methodology, which includes a five-step process designed to measure and manage strategic risks of a new project. The methodology includes an identification of clearly framed risks; a selection of alternative plans with potentially lower risk; a definition stage that examines the economic impact different alternatives will have on project costs; an execution stage that includes gathering and analyzing predefined metrics; and an evaluation stage that benchmarks the particular plan's performance against objectives and competitive plans.

"In each stage, a risk assessment team (which may include evaluators outside of the company or industry) and project managers communicate on the risks and rewards of a given plan and potential mitigation strategies," said Pappas. "Every company involved in a project must understand the balance between risk and reward, and know how to implement the right risk mitigation strategies."

Chevron's approach to deepwater risk management was presented by Randall Kubota, General Manager-Subsea for Chevron. "Our industry has dealt with risk since Spindletop. Onshore or offshore, every project has similar risk attributes [economic, project timeline, geopolitical] and similar cost categories [drilling, construction, production]. Of course, with deepwater projects the impact of these risks and costs is much greater."

Kubota described the technical challenges and inherent risks of deepwater projects, including drilling through unpredictable salt bases, scaling subsea production systems for deep water, and designing production structures to withstand severe metocean (wind and wave) conditions. "There are many geopolitical risks as well, and deepwater operators must plan for these. To mitigate these kinds of risks, the company must be able to demonstrate technical leadership, ensure added value, and deliver on promises such that the host country recognizes them as a partner of choice."

The offshore oil and gas arena has a proven record of effective risk management, and Kubota said that this successful track record came from the realization that "managing risk is not a single decision, and it must be priority one from day one."

David Brookes, Chief Engineer of Subsea and Floating Systems for BP, gave his company's view of the threats to subsea production growth. "Cost inflation and lead times for subsea production projects have doubled or tripled in the past few years, and we are concerned about a continuing shortage of qualified people with the right skill sets who can design and operate the increasingly complex subsea processing systems required."

In order to deal with the risks associated with these threats, BP has made standardization of processes, designs and equipment a priority on new deepwater projects, and has developed a subsea reliability process. "This process borrows heavily from other reliability models in the automotive and aerospace industries," Brookes said, "and has been progressively applied on projects over the last five years."

The BP reliability process consists of 12 stages, from concept to operations, and follows the American Petroleum Institute reliability process API 17N. It includes incorporating failure data and lessons learned into a project's design, and requires stronger quality assurance processes to counter the trend of greater outsourcing of certain equipment to sub-suppliers.

During the question-and-answer session, all panelists agreed that the goal of any risk management process is not to capture every conceivable risk, which is impossible, but rather to learn from new setbacks as they arise and incorporate them into the process. "We as an industry are forced to utilize processes like API 17N on the go and learn from them as the project develops, due to the high demand for oil and gas," Pappas said.

When asked about how the offshore oil and gas sector can reasonably balance speed of new project development with judiciousness, Kubota said, "People talk about improving speed to market for these projects, but you need the right data and the right people. These two things allow you to move as quickly as possible."

Pappas agreed, adding that "it is important to move quicker, but there have been problems. We've learned that if a risk mitigation strategy is in place, followed, and expanded to incorporate new learnings, it saves everyone time and money."

Ted Moon is the Technology Editor of JPT Online. He brings information on emerging technologies, R&D successes, new field applications, updates from SPE papers about recent innovations, and more. If you have a question or suggestion for future article topics, email Ted at teched@spe.org.