Leader Emerges in Mad Dog 2 Semisub Race
Friday 14 October 2016
One Asian shipyard is believed to have pulled into the lead in the race to build BP’s Mad Dog 2 semi-submersible production platform in the US Gulf.
Industry sources said the UK supermajor has been carrying out an exhaustive tender involving yards throughout Asia and the US but is thought to have zeroed in on Samsung Heavy Industries of South Korea as its bidder of choice on the engineering, procurement and construction contract for the hull and topsides of the 140,000 barrels per day facility.
A formal award by BP would mark a deep-water US Gulf hat-trick for Samsung, which already won contracts to build the hulls of the last two major newbuild fabrication projects — Shell’s Appomattox semi and Hess’s Stampede tension-leg platform — awarded in the region in the last few years.
Samsung has been working alongside Wood Group as engineering subcontractor on the Mad Dog 2 tender, one of precious few big opportunities for oil and gas contractors amid a steep oil-price downturn.
Samsung had been battling against South Korean competitors Hyundai Heavy Industries and Daewoo Shipbuilding & Marine Engineering. It had also faced additional competition from Singapore and China, where a potential range of competitors were working alongside French engineering player Technip to make a play for what could have been its first turnkey semi-submersible project.
BP had been widely expected to pick a contender of choice this month, and then review the final proposal internally and with partners BHP Billiton and Chevron, before a public revelation of the investment decision due early next year. BP declined to comment on the project as Upstream went to press.
However, BHP Billiton told investors this month that the project was progressing towards a final investment decision, with the call expected “in the next six months”.
If approved, first oil is now expected in 2022.
Executives underscored that the partners had been successful in reducing the cost of the project by half since 2013 to below $10 billion, when a Technip-led spar incarnation of the development reportedly saw costs balloon to above $20 billion.
“With significant improvements in capital efficiency, major capital projects like Mad Dog 2 are now economically attractive, even below $50 per barrel of oil,” Steve Pastor, BHP’s president of petroleum operations, said at the recent investor briefing in London.
BHP credited the reductions to the concept change and changes to the field layout, as well as a “markedly” changed contracting strategy with a “much more competitive” approach, executives said.
The wet-tree development is set to include 22 wells, also including a low-salinity waterflood scheme requiring capacity of 280,000 bpd of water and 60,000 bpd of produced water.
After finalising the switch to a semisub designed by KBR and Granherne, the UK supermajor originally approached only the three South Korean fabrication yards for a “one-stop” contract to for the project’s hull and topsides, and appeared to be zeroing in on an award.
However, BP made waves in the industry earlier this year when it threw open the field to numerous contenders as it sought to pull out as much cost savings as possible amid the steep downturn in the oil price.
It contemplated players from China such as Bomesc and CIMC Raffles and the joint venture between engineering contractor Fluor and China’s Offshore Oil Engineering Corporation, in addition to offers from Singaporean players such as Keppel and Sembcorp and US stalwart Kiewit.
It also opened up the field for additional engineering players beyond initial front-end engineering and design provider KBR to vie for work on the project, paving the way for players such as Wood Group Mustang to team up with Samsung on the process.
The second round of offers appeared to have been more to BP’s liking, sources stated.
However, the difference in price between the South Korean yards and Chinese hopefuls was not seen as sufficient for BP to place the major offshore platform fabrication project in China, sources said.
Instead, BP in recent months had returned to the South Korean yards, and possibly the Singaporeans, asking them to shave even more from their prices.