At long last, an FPSO for the U.S. Gulf 
   Some five long years have passed since the U.S. Minerals Management Service approved controversial rules and regulations governing the use of floating production, storage and offloading systems (FPSOs) in the Gulf of Mexico. But wait no longer. The Gulf has its first  serious taker.
   Last year two “ultra-deepwater” projects emerged as likely candidates for the first-ever FPSO operation in the Gulf, or for that matter, in U.S. territorial waters: the Shell-operated Perdido Regional Development project in Alaminos Canyon and the Petrobras-operated Cascade-Chinook project east of Alaminos in Walker Ridge.
   The Shell group recently opted for subsea pipelines that initially would transport oil and gas to shore from three significant Lower Tertiary discoveries: Great White, Tobago and Silver Tip.
This left the Petrobras group as the only remaining serious pursuer of an FPSO-based production system, which gained MMS “conceptual” approval earlier this year. Petrobras said it would use six technologies that have never been applied in the U.S. Gulf, including FPSOs with disconnectable turrets, which allow them to be removed in the event of hurricanes or other storms, oil transportation by relief vessels, submerged pumps, self-sustainable risers, torpedo piles, and polyester anchoring lines.


   FPSOs and shuttle tankers are considered to be a cost-effective means of collecting and transporting offshore oil where pipeline infrastructure is too costly or technologically not feasible to construct. Therefore, Cascade and Chinook evidently are too distant from the Gulf’s massive subsea pipeline system to warrant the expense of a separate oil line that would tie into the existing system in shallower waters.
   Petrobras hasan extensive FPSO track record in Brazilian waters dating back to 1979, where some 15 units were in operation earlier this year and another nine in the construction state. Petrobras’ conceptual plan also called for the installation and operation of an FPSO at water depths of about 8,202 feet. In the first phase, two subsea wells at Cascade and one at Chinook, each with a measured depth of 26,900 feet, would be interconnected.
   However, it was only recently that Petrobras and partners Devon Energy from Oklahoma and France’s Total put their plan in into motion, signing separate contracts with BW Offshore providing an FPSO and with Overseas Shipholding Group (OSG)  providing two  shuttle tankers to  transport the oil to shore.
   OSG, a worldwide provider of energy transportation services, 
announced Oct. 5 that it signed a definitive agreement to charter two converted, 46,000 dwt Jones Act tankers to Petrobras subsidiary Petrobras America, likely marking them the first U.S. flagged shuttle tankers to transport oil from deepwater drilling projects in the U.S. Gulf.


The future Petrobras tankers are two of a dozen product tankers OSG has ordered from Aker Philadelphia Shipyard. OSG said it  expects to deliver the converted shuttle tankers to Petrobras in the first quarters of 2010 and 2011, roughly a year shy of Petrobras’ initial 2009 startup plan. OSG noted that 11 of the 12 ships it ordered from Aker already have been chartered  to major oil companies and refiners.
   “Being awarded the first contract to provide Jones Act shuttle tanker services for ultra-deepwater projects in the U.S. Gulf of Mexico is very exciting for OSG,” said Morten Arntzen, OSG’s president and chief executive officer. “We look forward to collaborating with Petrobras and their field partners in this ground-breaking project.”
   He said OGS’ aggressive newbuild program “positions us to serve that market and increases our presence in Jones Act trades.”
   Norwegian oilfield services company BW Offshore said its contract to provide the Petrobras group with an FPSO is valued at roughly $740 million.
   “The contract is for a total of up to eight years including optional periods of up to three years after the end of the first five fixed years,” BW Offshore said in a statement, adding that the contract will generate an annual EBITDA (earnings before interest, taxes, depreciation and amortization) contribution for BW of about $80 million in the fixed period and $70 million in the optional periods.


 The FPSO will be installed and begin production on the Chinook-Cascade fields in the first quarter of 2010, BW said.
Petrobras has a 50% interest in Cascade and a 66.7%
interest in Chinook. Devon holds a 50% stake in Cascade, while Total E&P USA holds a 33.33% interest in Chinook. Cascade and Chinook, in addition to being the first U.S. project to use an FPSO,  also would be among the first offshore fields to produce from the Gulf’s emerging and highly acclaimed Lower Tertiary 
zone. The Lower Tertiary was a major driver in the Oct. 3 Central Gulf of Mexico oil and gas lease sale, which produced an eye-popping $2.9 billion in high bids. This vast play stretches from Walker Ridge through Keathley Canyon and into  Alaminos Canyon. Geologists now believe this deep zone could hold billions of barrels of recoverable oil.
   MMS adopted FPSO guidelines only after addressing safety issues, including the potential for oil spills and other environmental disasters associated with FPSOs and shuttle tankers operating in open waters far from shore.

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