Norwegian operator sizes up bigger FPSO for Canadian project as talks with shipyards resume
Norwegian operator Equinor has reignited its stalled Bay du Nord oil project offshore eastern Canada with plans for a larger floating production, storage and offloading vessel that can produce 200,000 barrels per day of oil.
The development was shelved in 2020 due to the impact of the Covid-19 pandemic on a capital intensive project, but two successful exploration wells have since beefed up the estimated crude resource to about 1 billion barrels, and persuaded Equinor to revamp its original development plan for the field.
Excitement about the project has been mounting since June, when Upstream revealed details about the new discoveries.
Al Cook, who heads up Equinor’s international upstream business, later told investors that “Bay du Nord has the potential to become bigger than Bacalhau”, the company’s $8 billion, 220,000 bpd and 1 billion barrel reserves project in Brazil.
Equinor has recently been making approaches to contractors in the engineering and fabrication market about the project, located 500 kilometres off the coast of Newfoundland & Labrador.
Upstream was told by three sources familiar with Bay du Nord that South Korean shipyards Samsung Heavy Industries and Daewoo Shipbuilding & Marine Engineering responded positively to an “expression of interest” released by the operator about the floating production, storage and offloading vessel.
In 2020, before the original Bay du Nord bid process was spiked, Samsung, working with Norway’s Aker Solutions and Kvaerner, was battling with Daewoo, working with UK-based Wood and US player Kiewit, to land a front-end engineering and design plus engineering procurement and construction contract.
Aker Solutions and Norway’s Salt Ship Design are now understood to be carrying out a pre-FEED study for the beefed up FPSO which will have a capacity of 200,000 bpd compared to the original 150,000 bpd vessel.
A FEED contract is said to be planned for award in autumn 2022, but it is not yet clear if this will involve a FEED contest between two or more parties.
However, some well-placed industry sources told Upstream that Equinor is currently shortlisting candidates for a FEED contest and it is expected to pick two candidates to compete for the prized award within a month.
Apart from Aker Solutions, the names of the likely contenders are unclear, with project watchers wondering if Wood and Kiewit will be involved.
Other names suggested for the FEED work include Aibel and KBR.
Engineering houses are watching to see if Equinor will choose the same contracting strategy as before — the FEED+EPC approach — with the operator possibly wanting FEED carried out independently of the EPC contract.
While the previous FEED+EPC approach was led by the engineering houses, Equinor’s emerging contracting strategy could potentially see the shipyards taking the lead.
Further complicating the picture, Upstream understands that Equinor has been in touch with China’s CIMC Raffles yard about Bay du Nord, with the Chinese player’s engineering house Bassoe Technologies doing engineering work.
An Equinor spokesperson said the operator “continues its work to mature the Bay du Nord development in the Flemish Pass basin, including the evaluation of our contracting strategy. There are no specific contract updates to provide at this time”.
Local content is a big issue on projects in Newfoundland & Labrador, with one source suggesting that Equinor is confident these demands could be met by the subsea part of the development.
However, one informed source in the province said the local yards may not be able to handle all the subsea workscope.
Just when Bay du Nord stalled last year, TechnipFMC and a team of OneSubsea-Subsea 7 were fighting it out to land an integrated subsea contract worth between $500 million and $1 billion covering what was then a 30-well system.
A source at Equinor not directly involved in the project suggested the operator will keep its former contractual strategy for the subsea part of the development, but the scope has increased significantly to some 50 wells because it now incorporates the Cambriol and Cappahayden discoveries.
Adding 20 more wells to the subsea architecture would see this contract head into the $1 billion to $2 billion price range.
The vastly bigger subsea systems will also require a commensurately larger turret, which must have a quick connect-disconnect system so the FPSO can move out of the way of approaching icebergs.
Advanced Production & Loading was set to be awarded a contract to build the original FPSO turret when the project was suspended.
Equinor’s partner in Bay du Nord is Husky Energy, while BP is its partner in the Cambriol and Cappahayden discoveries.
A number of sources said BP could influence the contracting strategy and choice of suppliers in the broader outcome.
Located in 1200 metres of iceberg-prone waters, Bay du Nord was seen as a technically and commercially challenging project when it was a 300 million barrel project.
But when the Cambriol and Cappahayden finds tripled its recoverable reserves, its viability was given a huge boost, with Equinor suggesting it is now profitable at $53 per barrel.
Upstream reported this summer that the Bay du Nord FPSO is planned to host production from up to six discoveries including Bay du Nord, Bay du Verde, Baccalieu, Cappahayden, Cambriol and possibly Harpoon.
Mizzen, another Equinor-operated find in the Flemish Pass basin, was not mentioned in an Equinor presentation this summer although two prospects — Sitka and Cambiol Central — close to Bay du Nord were identified with exploration wells on these structures due to be drilled in 2022.
Two sources suggested the project could be sanctioned in 2023, targeting first oil in 2026.
Source: Upstream | This text was excerpted from the media outlet cited on November 4, 2021 and is provided to Noia members for information purposes only. Any opinion expressed therein is neither attributable to nor endorsed by Noia.