New Method for Cutting Offshore Unit Construction Costs

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By MarEx 2015-07-22 09:58:52

Variations in owner, operator and regulatory requirements during engineering and construction phases at South Korean shipyards present a huge challenge for operators and drive up costs. DNV GL has kicked off a joint industry project (JIP) with Hyundai Heavy Industries (HHI), Daewoo Shipbuilding and Marine Engineering Company (DSME) and Samsung Heavy Industries (SHI) that will establish a new international standard for offshore oil and gas projects. The results could potentially cut project costs by 15 percent, or approximately USD 500 million for a typical TLP (tension leg platform) project, for example.

The JIP aims to develop common and global best practices for components and equipment to reduce the number of, and variations in, requirements to the minimum necessary. The JIP is also supported by Korea Offshore and Shipbuilding Association (KOSHIPA) and the Korea Marine Equipment Research Institute (KOMERI) to address this issue. Other oil companies and engineering firms are still welcome to join the project.

“Unfamiliar specifications and processes are today resulting in re-work, delays and misunderstandings and add thousands of engineering hours to projects,” says Arthur Stoddart, DNV GL’s new Regional Manager for Korea and Japan. “The implementation of a standardized approach will be an opportunity to significantly reduce the general cost level of offshore projects without compromising on quality or safety.”

According to the JIP partners, standardizing even the simplest components at this early stage will deliver huge cost savings. “The full cost of a typical TLP project, for example, is typically around $3,500 million. Although the project partners have not yet published estimates, we at DNV GL expect to see savings in the region of $150 to 250 million for this type of project, which is up to seven percent of the total project cost. The full standardization potential is more than 15 percent of the project cost.”

The JIP will initially focus on simple components and equipment, such as tertiary structures and bulk materials for construction, piping and electrical and instrumentation engineering. Next year, the scope will be extended to complete modules and equipment packages. The project will consider industry standards, company standards as well as maritime rules and approaches for standardization, as all methodologies will be reviewed to ensure the most effective and efficient means are applied.

“We hope this will lead to standardization that helps to reduce design periods and minimize design changes,” said JongBong Park, senior executive vice president and chief operating officer of HHI’s offshore and engineering division. “Other potential benefits include reduced material costs resulting from lower material purchase, manufacturing and testing expenses. A shortening of the material purchasing lead-time would be expected as more materials could be held in stock. Surplus materials could be used in other construction projects.”

Elisabeth Torstad, CEO of DNV GL - Oil & Gas, says: “Using international standards more widely in offshore oil and gas projects has the potential to significantly reduce cost levels. This will also lower the risk of project overruns without compromising on quality or safety.”