The best way of defining the well intervention market, specifically the light well intervention (LWI) market, is when well operations and maintenance (except drilling) are carried out on a live well without a riser.
Well intervention is used to increase the productivity and lifespan of wells and has been proven to add years to a well’s productive life. Typically, these types of operations have been performed from a drilling rig, but in an effort to reduce costs, LWI methods using a monohull vessel have been in development for some time. The benefits of this method include being able to move quickly from one well to another, which reduces production downtime, and also the lower dayrate costs of a monohull vessel compared to a drilling rig (especially for deep water).
New technology developers nearly always expect the market to rave over their new products, but oil companies have been apparently reluctant to back unproven technologies, which has led to several companies bankrupting themselves in the process.
The most recent casualty has been UK-based Expro AX-S, which recently entered administration after spending the past two years and an estimated US $200 million trying to fine-tune its AX-S system, which it had fitted to the subsea vessel Havila Phoenix. Expro had recently secured its first major contract in the LWI market, but it was too little too late. BG Group had awarded the company a rolling contract with the potential for an extended intervention campaign, which was due to start in October this year. This was not soon enough for the Aberdeen-based company, which had been paying approximately $90,000 to $100,000 per day for the vessel and other extras such as ROVs, with roughly half just being for the base vessel. The vessel has now been returned to Fugro-TSM, which is chartering the vessel from Havila Shipping but has yet to decide upon its future.
The administrators KPMG are seeking buyers for Expro AX-S (the Expro Group is unaffected), and there are several companies out there who might be interested in taking on the system, which has the selling point of being able to work in deeper water than most other LWI systems. One such company is Cameron, which has been trying to enter the market but has until now found it too capital-intensive. It may now find this opportunity more favorable as the AX-S system is a fair way along its testing phase and apparently nearing operational readiness with its BG contract award.
Other potential buyers include rivals such as FMC Technologies, Helix Well Ops, Baker Hughes, and Schlumberger, all of which already have their own systems. There also are plenty of other subsea engineering companies out there who have an interest in the intervention market.
Recent market developments indicate that this casualty will not have a major impact on the competition as they already have begun their expansion programs in recent months, mostly on the back of contracts with major oil companies.
Statoil has contracted Aker Solutions and Eide Marine Services for newbuild semisubmersible intervention vessels, which will work with the Norwegian operator for eight years after delivery plus six years of options. The state-owned oil company also has extended its contract with Island Offshore for the Island Frontier (which uses an FMC Technologies intervention system) for a further five years in direct continuation of its current contract.
Helix, through its Well Ops subsidiary, has contracted Sembcorp to build a new version of its current semisubmersible unit Q4000 at a cost of $385.5 million, due to enter the market in 2015. Helix also has purchased a drill-ship, Discoverer 534, from Transocean, which it will convert for well intervention duties at a cost of $180 million, including the vessel cost, intervention tower, and conversion. Those vessels will be focused on the market in the GoM, while for Helix’s European and West Africa division it has added the Skandi Constructor to its fleet for three years starting from 1Q 2013, giving it time to build and test an intervention tower for the vessel.
Aker Solutions, apart from its newbuild semisubmersible vessel for Statoil, is looking to consolidate its position in the LWI market after it recently secured a contract with Total E&P Angola to provide intervention services for two years using the vessel Skandi Aker, which had been seeking a long-term contract for some time. Another of Aker’s vessels, Skandi Santos, has been working for Petrobras installing subsea trees and will continue with the Brazilian major for a few more years. Its other vessel, the Aker Wayfarer (a sister ship to the Skandi Aker), has not had an intervention tower installed yet, although Aker maintains that this is the plan for the vessel.
Aker has been working on the construction vessel spot market mostly and has managed a fairly consistent utilization level, although its current work scope is coming to an end with no future commitments. It may be more willing to move the vessel into the intervention market now that Aker has secured the $250 million contract from Total E&P Angola.
Barriers to entry
Any newcomers into the LWI market will have to compete with these three players who all have long-term contracts in place, as well as Eide Marine Services. The latter has managed to break into the market with its own eight-year contract to supply a hybrid design Category A LWI vessel for Statoil, although whether the company has the ability to maintain its market position remains to be seen.
There are many companies out there that may have the technology to enter the LWI vessel market. The question is whether they have the capital and cash flow to prove their technology before they are awarded a long-term contract by a major company or if they can convince smaller oil companies to take the risk of backing them.
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