Development of Hod
The Hod field was discovered in 1974, with the first development plan submitted in 1980 and a subsea template installed in 1982. After the first well on Valhall proved disappointing and the Storting (parliament) adopted new tax rules, however, the initial proposals were shelved.
Drilling of the first production well on Hod was completed in February 1982, the year after Eivind Hansen had been appointed drilling manager for the field.
Work was then already under way at Kristiansands Mek Verksted on a template with space for 12 wellheads. The Sedco 703 rig had been chartered to drill the first two planned wells. After fabrication and outfitting, the template was shipped to Stavanger by barge. It was then hung beneath the rig by a special attachment system, which eliminated the need for a crane ship out on the field.
Once the rig had moored on Hod in the autumn of 1981, the template was installed and prepared for future drilling.
Development of Hod had been approved as part of the Valhall plans in 1977, but Amoco opted to postpone it in order to concentrate on the main field and the drilling challenges there. The operator decided to delay further wells on Hod until a new plan for development and operation (PDO) of the field had been approved by the government.
Norway’s petroleum tax had been increased several times in the early 1980s, reaching almost 86 per cent (see the article on developments in oil taxation ).
The decline in oil prices accelerated from 1984, and the cost of a barrel of crude roughly halved from 1980 to 1985. Amoco fronted a protest by the Valhall licensees against the tax regime, but failed to win acceptance. Known as “the Valhall affair”, this issue concerned a revised provision that royalties from a field should be paid separately for oil and gas rather than collectively as before. This deprived the oil companies of the opportunity to deduct losses on unprofitable gas production from the gross value of oil from the same field. Arguing that the change was illegal, the companies demanded compensation for their losses. The Ministry of Petroleum and Energy counterclaimed that this was not permitted practice. But a swift and deep slump in oil prices during 1986 prompted the government to offer tax reliefs to the operators as an incentive to develop new offshore fields. Low crude prices meant that the level of activity on the Norwegian continental shelf (NCS) fell sharply. The tax cut gave a big boost to field developments which had not been profitable enough earlier.
Amoco accordingly looked afresh at opportunities for bringing Hod on stream, and its Norwegian engineering department began preliminary work on this in 1987. Project director Asbjørn Tansø visited the small US platforms off Louisiana and became convinced that it should be possible to construct something similar on the NCS. He found that the steel jackets used to support such structures were built virtually in series and stockpiled. They could thereby be bought on the basis of weight and depth without needing to be specially tailored.
Plans and cost estimates were submitted to the managements of Amoco and the other Hod licensees during the spring of 1987, and received their approval. Extensive conceptual studies were launched that autumn at Amoco’s offices in Houston, Texas, and Brown & Root Houston was hired to come up with an optimal way of recovering oil from Hod. The main requirements were to develop an unstaffed platform which could be remotely operated, and to optimise the process in order to obtain the greatest financial benefit.
At the same time, personnel in Stavanger established close and frequent contacts with the Norwegian Petroleum Directorate (NPD), where Øyvind Tuntland was the responsible manager. The aim was to provide information on and secure support for building a normally unstaffed platform. Such installations had not previously been proposed for the NCS, and many people believed they were excluded by the applicable Norwegian regulations.
Robert “Bob” Erickson, the newly appointed managing director of Amoco Norway, was given special responsibility for implementing the plans. Tansø was an important supporter of this work. The collaboration with the NPD, and particularly the personal contact between Tuntland and Tansø, proved to be a valuable process.
It transpired that the regulations posed no obstacle to a development with a normally unstaffed platform. Good practical solutions were found and supported by the NPD.
These cut across the rigid regulations, helping to ensure that the proposed installation could be approved and positioned 13 kilometres from the control station and process facility – including opportunities to blow down the process on Valhall in an emergency. This separation was a key element in the discussions on departing from normal guidelines – in reality, a new regulatory framework needed to be put in place. Although emergency shutdown and depressurisation were on the borderline because of the distance involved, the NPD accepted the proposed technical solutions.
Another important consideration was metering the oil and gas produced from Hod. Strict standards were set for such measurements to calculate tax and divide revenues between the partners. Plans called for production/test separators on Hod to check the wells collectively and individually, with the aid of a bypass line which separated wells being tested from those which were not. Such testing made it possible to achieve a good level of accuracy while also monitoring where production was coming from in the reservoir. Installing a traditional type of metering station would call for a great deal of equipment, which in turn imposed additional space and weight requirements.
Creating more room would mean enlarging the deck area and thereby breaking with the simple structure which underpinned the normally unstaffed platform concept. The support structure would have to be reinforced to cope with the extra weight, while placing the necessary separate processing and metering gear on Valhall also promised to be expensive. Simple arithmetic showed that the government and the partners would gain by accepting a loss of accuracy rather than investing in the more precise metering required by the regulations. Both these difficulties were overcome in a straightforward manner through the good collaboration and contact between the NPD and the licensees.
A less important, if not actually rather comical, requirement in the regulations concerned the size of the sign carrying the platform’s name. Complying with the rules meant that this had to measure 40 by 40 metres to accommodate the necessary information and font size. It was said jokingly that the platform had to be built to hang the sign, rather than vice versa.
The Hod PDO was submitted to the Ministry of Petroleum and Energy in April 1988, with final approval given by the Storting on 26 June 1988. An internal goal that all manuals should be written in Norwegian meant that Hod became the first platform on the NCS to give primacy to the national language. As soon as approval had been obtained, a project team was established at Amoco’s Stavanger office with the director and his staff drawn from this location.
Personnel responsible for execution, construction and procurement were transferred from Houston, with specialists also hired for various assignments. An invitation to tender for detail engineering was sent to six Norwegian and British companies immediately after the Storting assent. A contract was awarded in September to Veritec, a joint venture between Det norske Veritas and Brown & Root. The procurement process began in December 1988, when the first enquiries were sent out. This was to be a fast-track development, with a relatively detailed and specific design in place before awarding fabrication contracts.
As a result, the project team itself had to procure the necessary materials – an unusual procedure for large developments at that time. These purchases would be made available as “company-provided items” to the relevant fabrication sites. A total of 43 procurement orders worth more than USD 12 million were placed.
Fabrication contracts for the jacket and topsides went out to tender during February and March. Although these were two separate jobs, the same yards were placed on the bid list for both. This allowed them (if they wished) to quote for a total package.
Four Norwegian, two British and two Dutch yards were in the running. Heerema Havenbedrijf in the Netherlands won both contracts – which offered opportunities for synergies.
Since Heerema was also able to install the platform on the field, more than USD 1 million could be trimmed from the estimated bill. In addition, the structure was placed in the North Sea almost a month ahead of schedule.
The workforce readying the platform for use could not be accommodated there. Since it was to be operated remotely, only limited cabin facilities were provided.
Personnel accordingly had to be flown by helicopter from the Valhall centre. When weather prevented this, the time was spent preparing six new well slots on the drilling platform (DP).
The bill for that work was met by the Hod project (the workers were offshore regardless, after all), and only the material costs for the slots were charged to Valhall’s operating account – a very favourable financial solution.
With no drilling equipment on Hod, a dedicated rig had to be chartered. The jack-up Kolskaya arrived immediately after the platform was in place and spudded the first production well.
All major investment projects on the NCS are closely monitored by government and media in terms of their apparent results. Three elements in particular are assessed:
- health, safety and the environment (HSE), primarily the injury statistics
- any cost overruns on the original budget specified in the PDO
- delays – in other words, postponements of the planned start to production and full output.
During the year it took to build and install the Hod installation, only two near-misses occurred. Neither of these involved any personal injuries.
The project was originally scheduled to take 24 months from PDO approval to first oil, without any allowance for unforeseen incidents – very fast compared with other NCS developments.
Production from Hod began on 19 September 1990, less than a month after the most optimistic date (24 months and 10 days in all). The approach taken by the project team to the main contracts was undoubtedly the principal reason for this result.
Although the platform with jacket and topsides was installed on the field almost a month early, some delay occurred in bringing it on stream because of laying the pipeline to Valhall.
The steel mill due to provide the pipes ready for installation in 1989 was unable to deliver the material in time for the laying season. All maritime operations related to this part of the project therefore had to wait until the spring of 1990, which meant the offshore period became very hectic.
Calculated in US dollars, the total cost of the project was little more than two per cent above the original budget. However, the dollar fell sharply during 1990 against the payment currencies for a number of input factors.
Taking that into account, the project actually overran its budget by more than five per cent. Regardless of the calculation method used, however, it must be considered a bull’s eye.
Hod proved an almost immediate success. The second well (H2) exceeded all expectations, and changes were needed at the Valhall centre to handle the unanticipated quantities.
While the next two wells were being drilled, the whole project had paid for itself. The field produced twice the expected volume during its first 15 years on stream, and estimated recoverable reserves were raised from 25 to 55 million barrels.
A water injection project was initiated on Hod in 2011, which has also proved successful. At 31 December 2012, total expected oil recovery from the field exceeded 80 million barrels.
Hod has been produced since 2012 through Valhall’s southern flank. All the platform’s production wells have been shut in to await permanent plugging and abandonment.
The licensees are evaluating the future of this field as part of the further development of the Valhall area.
The support structure is a four-leg steel jacket standing about 90 metres high and weighing 1 400 tonnes, including the piles.
With its modules, the topsides weigh 1 000 tonnes in all, measure about 20 by 21.5 metres, and are six metres tall. In addition comes the helideck, positioned seven metres above the upper deck and sticking 14 metres out on the north side.
Since the platform would normally be unstaffed and visited only once every 14 days, reducing the activities which take place there was important.
Installed equipment is confined to handling the wellstream and ensuring that it continues through the pipeline to the Valhall centre 13 kilometres further north.