Image credits: PEMEX
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Analysis

Expanding Infrastructure Needed for Field Development

By Pedro Alcalá | Wed, 07/21/2021 - 11:46

The infrastructure and facilities utilized for upstream field development in Mexico were significantly impacted by the economic effects of the pandemic: ports were emptier and operated with fewer personnel, while ducts and pipelines administered less traffic while having less access to maintenance and repair services. Even the offshore drilling market experienced a dip in day rates despite drilling activity barely being reduced. 

However, as many new operators transition to field development and production phases, demand for new oil and gas infrastructure has increased. A number of industry trends have contributed to this scenario, while a group of industry players has also risen to the ensuing challenge. 

“The COVID-19 pandemic and the corresponding reduction in oil prices are challenges that few anticipated at the beginning of 2020. Nevertheless, our project execution efforts continue full steam ahead,” Andrés Brügmann, Mexico Country Manager of Fieldwood Energy, told MBN.

Operators’ Needs

As part of the operational continuity that private operators secured after oil and gas activities were declared essential amid the pandemic, more offshore infrastructure than ever before in Mexico was constructed and installed over the past 12 months to support these companies. Brügmann, for example, said the company constructed two fixed production platforms to connect to PEMEX’s Tumut platform. Interconnection to existing PEMEX infrastructure for the purpose of early production commercialization is a necessary transitional step for operators like Fieldwood Energy that had to do everything possible to maintain a project schedule and complete the commissioning of facilities during 4Q20. 

Brügmann acknowledges the numerous challenges that contractors are facing “due to the pandemic, including equipment and permitting delays,” but he also highlighted another key milestone in the path toward the development of infrastructure: agreements with PEMEX. “Finalizing agreements with PEMEX to utilize the Tumut platform and the execution of purchase and sale agreements for oil and gas were necessary to start the early production phase of the project.” By connecting to PEMEX’s offshore infrastructure, Brügmann believes that Fieldwood will be able to accelerate production by two to three years, thus contributing to the production goals set by the Mexican government. 

New infrastructure has also been necessary to comply with new technological and sustainability standards. “We adopted technologies and procedures that minimize environmental impact during construction and installation operations to honor our commitments,” said Brügmann. 

Fieldwood’s adoption of standards issued by the International Finance Corporation (IFC) has demanded more detailed analysis to identify the full extent of environmental impacts caused by the company’s infrastructure and to implement strict mitigation measures. 

Fieldwood selected reel-lay technology for the installation of subsea pipelines, allowing welding, coating and testing activities to be conducted onshore so that once the pipeline is ready, it is spooled on board a lay vessel, hence minimizing environmental impacts offshore. “It is my understanding that we are the first company to use this technology in Mexico. In addition to technology selection, we also hired marine-biologists to supervise installation activities and ensure that habitats of protected species are not disrupted.” 

Shifting Incentives at Ports and Yards

With growing infrastructure needs from private operators, ports and fabrication yards need to balance the new position of these current and future clients when compared to that of PEMEX.  EPC mainstay McDermott spent 2020 building and installing jackets for Fieldwood, building the CASSIA-C platform for BP that will go to Trinidad and Tobago, collaborating with ENI on the engineering and fabrication of the infrastructure for the Amoca field and collaborating with MODEC in its handling of the FPSO that will be doing all the processing for ENI, mainly focusing on building their modules; this is in addition to additional FEED work for a number of these and other operators on both sides of the GOM.

Despite this growth in contracts from private operators, the company has not neglected PEMEX. After all, 2020 saw the post-delivery finalization of the globally renowned Abkatun-A2 project, a platform which is now processing that asset’s production. Alfredo Carvallo, Mexico Director General of McDermott, considers PEMEX a satisfied customer. “It is clear that the company is satisfied with the results. It (Abkatun-A2) was a world-class project, as I am sure PEMEX would agree.” 

However, Carvallo understands that a shift is underway when he looks at the kind of work that now occupies the majority of his Altamira fabrication facilities. “This is a question of cycles. The government talks about the lack of production from private operators in Mexico but they had to go through their exploration phases before they could reach their work capacity.” Projects that began with the bidding rounds that took place between 2015 and 2017 are now entering their field development phase after concluding their own processes of evaluation. 

Meanwhile, Mexico’s oil and gas ports are seeing not only increasing business from private operators but also a demand for new types of services that the events of 2020 made much more relevant. 

Italian engineering, project management and maintenance firm DG Impianti Industriali built onshore facilities to receive ENI’s early production in a relatively isolated section of Tabasco’s shoreline. Now, for a similar early production management project for Hokchi Energy, DG Impianti is now working in Paraiso, close to the Dos Bocas port and its unfinished refinery.  “Our work (with ENI) continues to expand and evolve in various directions. We continue to assist the company with engineering supervision, particularly at its plant in Paraiso, Tabasco. One challenge was to begin early production while the plant was still being built, which we executed successfully,” said Giuliano Cacciatore, Mexico Director of DG Impianti. 

Another example of the new (and newly relevant) types of services that ports could offer to operators are space and connectivity for Remote Operation Centers (ROCs). After weeks and months of lockdowns to contain the COVID-19 pandemic, ROCs became an essential tool to help managers maintain operational continuity. Premium service and technology providers with ROCs of their own enjoyed an enormous advantage over their competitors, just like Fugro with its ROC in Aberdeen.

Shared Stakes on Safety, Maintenance

The fact that more private operators are developing infrastructure and offering opportunities for its future development also brings up questions regarding responsibility and accountability. PEMEX is only now beginning to make up for lost time in terms of infrastructure maintenance and repair contracts that had to be canceled in 2020 because of austerity measures, but the company is acting slower than expected, according to Rodolfo Alfonso Esquivel, Director General of Grupo Roales. “As PEMEX continues to delay its issuing of new maintenance contracts, the need for maintenance in its aging offshore infrastructure will increase on a daily basis,” Esquivel said. The problem now is that when infrastructure is being developed to connect private operators to PEMEX’s oil processing and commercialization facilities, like Fieldwood has done, or when operators go on to develop their own processing and commercialization activities, as ENI has done, it is not always clear how responsibilities for the maintenance of the infrastructure are shared between public and private stakeholders.

Jesús López, Operations and Business Development at Frontera Offshore, offers an answer. The company finished the installation of 24km of cable in the offshore region near Tabasco to support ENI. According to López, a dozen similar projects will be necessary in the next three years only to address the needs of new operators. 

In addition, PEMEX will need to provide repairs and maintenance to around 25 percent of its 2,500km of pipelines and its 320 platforms over the next four years, while building a significant network of pipelines and platforms for developing its fields. López and Frontera’s CEO Brad McNeill believe that the maintenance and repairs need to follow the same safety and technical standards without making any sacrifices on delivery timing, which cannot be achieved without shared safety planning. “Even beyond the pandemic, careful safety planning is key not only to protect all stakeholders but to deliver services on time and on budget. For too long, these aspects have been seen as additional burdens and costs but the opposite is true,” said McNeill. 

The potential negative consequences of failing to address the opportunities in field development infrastructure as carefully as possible in these terms will undoubtedly be unacceptable to contractors, clients, the government and even the larger public. This is illustrated by the recent underwater fire caused by a gas leak off the coast of Campeche. While PEMEX reports there was no oil spill and no environmental damage related to the accident, groups like Greenpeace and CEMDA have called for a more detailed study on the causes and impact of this event.

Photo by:   PEMEX
Pedro Alcalá Pedro Alcalá Journalist and Industry Analyst