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Analysis

The Future of FPSOs in the Bay of Campeche

Wed, 01/25/2012 - 11:45

The Lord of the Seas (Yuum K’ak’Náab) became Mexico’s first FPSO (floating production storage and offloading system) in June 2007. The FPSO is leased from BW Offshore under a contract valued at US$758 million over 15 years, excluding operating and maintenance costs of approximately US$300 million. Measuring 340m long, 65m wide and 31.5m tall, the Yuum K’ak’Náab receives, stores and blends crude oil from the Ku-Maloob-Zaap (KMZ) region in the Bay of Campeche. Since the three main fields in the region hold crude oil with different viscosities – Ku has an API of 22°, while the Maloob and Zaap fields have an API of 12° – the FPSO was designed to create a blend of 21°API, similar to Cantarell’s Maya crude. By bringing an FPSO to Mexican waters, Pemex aimed to reduce investment and operating costs through the multifunctionality of the FPSO, while increasing revenue through early production and the blending of crudes to maximize the economic value of the exploitation of hydrocarbon reserves in KMZ.

For Blue Marine Technology Group, participating in this deal by rendering commercial and preoperative services to BW Offshore placed the company firmly on the map in the Mexican oil and gas industry. “The FPSO is one of the most productive units in the Mexican oil and gas industry and proved to be a great value proposition. It is now a key part of the production infrastructure at Ku- Maloob-Zaap, which is now the largest producing field in Mexico, and as a company we have really profited from the investment,” says Alfredo Reynoso Durand, Deputy CEO of Blue Marine Technology Group. “Despite challenges faced by all parties, the project has been largely successful. Due to high oil prices at the time of the FPSO’s deployment, Pemex paid for the whole project in less than a year.” Since then, the company’s strategy has been to open new markets through alliances that enable it to introduce new technology to Mexico, and is now working on introducing smaller-scale FPSO vessels that are suited for Pemex’s production strategy at its mature shallow water fields.

“After the positive results of the first large FPSO in Mexican waters, we believe that there is a market for smaller- scale FPSOs at fields that don’t have enough oil to justify investing in platform infrastructure, as the FPSO will be able to move to new fields afterwards. We believe that there is a market for at least five to six mini FPSOs, as we call them,” says Reynoso Durand.

Blue Marine’s Deputy CEO believes that Pemex will look at these mini FPSOs as a service, rather than considering the option of investing in such vessels. “We are dealing with Pemex to see what type of contract would be more effective for both parties, given the 2008 reforms and the new contracting model, and the new tools that Pemex has in its legal framework. For us, a production based contract would be much more attractive, but we are still not ready for this as a country. I hope that in the near future we will achieve the introduction of such contracts,” says Reynoso Durand.

Based on Pemex’s front-end loading process, Enrique Westrup Neira, President of CPI Ingeniería y Administración de Proyectos, the company that serves as MODEC’s Mexican partner for the operation of the FSO Ta’Kuntah in the Cantarell field, believes that it is clear that everybody is looking forward to introducing more floating infrastructure into the Mexican sector of the Gulf of Mexico. “Floating solutions have big potential here,” he says. “But the problem that I foresee is that in order to make effective use of these solutions, Pemex needs to plan their use well in advance. Worldwide, demand for floating units is very high, and the number of companies able to provide such units is very low. There are very few companies with the experience, the financial capacity and the management capacity to tailor the ideal package for the Mexican market. ”

When looking beyond shallow water fields where FPSOs and FSOs are currently used in Mexico, it is widely believed that Pemex is likely to utilize FPSOs as early production systems and long-term infrastructure on deepwater fields. According to Oscar Valle Molina, Coordinator of the deepwater R&D programme of the Mexican Petroleum Institute (IMP), FPSOs are the most probable system that will be used, because they have the capability to produce oil in fields where Pemex does not have any current infrastructure. “It’s the same criteria that applied to Brazil. They used the FPSOs as an early production system to take advantage of the exploitation to obtain the funds to support the construction of the permanent systems,” says Valle Molina. To keep all options open, the IMP deepwater R&D unit also focuses on the implementation options provided by spars and semi-submersibles. However, Valle Molina believes that FPSOs are the most likely choice: “For deepwater development, FPSOs are the best option, semi- subs are the second option and spars are the third option.”