Kvaerner has secured a coveted Nkr3 billion ($492 million) contract from Statoil to deliver a pair of steel jackets for two platforms on the giant Johan Sverdrup field off Norway as part of a wider frame agreement that is likely to mean future similar awards.
The deal is a major boost for the domestic contractor, which has overhauled its delivery model to cut costs after losing out on earlier awards to cheaper Asian yards, and is likely to secure the future of its Verdal jacket fabrication yard for which orders had dried up.
Kvaerner will deliver jackets for the riser and drilling platforms to be deployed at the field centre of Johan Sverdrup, which will comprise a total of four facilities, under the letter of intent that remains conditional on a final investment decision by Statoil and its partners in February next year.
The workscope will cover engineering, procurement and construction of the steel substructures – two of the largest and most complex to be built for the field – with delivery of the riser platform jacket due in summer 2017 and that for the drilling facility in spring 2018, in time for scheduled field start-up in late 2019.
The frame agreement with Statoil covers potential further jacket deliveries to 2020, leaving the Norwegian contractor strongly positioned for additional awards under the first phase of the project in which total investments are targeted at up to Nkr120 billion.
Kvaerner is now also firmly in the frame for awards of the accommodation and process platform jacket contracts due to be dished out in mid-2015.
The contractor is already involved in jacket design work on the field as a sub-contractor to compatriot Aker Solutions, which is responsible for the overall FEED.
The frame agreement also includes studies, front-end engineering and design, detail engineering, procurement, fabrication and project management for deliveries of steel jacket substructures to other Statoil-operated fields off Norway.
Statoil chief executive Helge Lund said Kvaerner had come up with a “competitive and forward-looking delivery model” demonstrating that its “cost-reduction measures and increased efficiency do bear fruit”.
The company, which is the acting operator on the field pending a unitisation agreement among licence partners, stated it had “secured critical deliveries at internationally competitive terms”.
“This frame agreement is also a tool for further industrialisation and standardisation, which will be of significance in securing long-term competitiveness,” it added.
Statoil has been actively engaged in talks with local contractors as part of the Konkraft initiative aimed at reducing costs and boosting efficiency, as well as achieving greater simplification of fabrication work, to strengthen the competitiveness of the domestic industry.
Kvaerner said engineering work on the jackets will start later this year with assembly to take place at the Verdal yard from the first quarter of 2016, with about 350 personnel to be employed on the project at peak in the spring of 2017.
Chief executive Jan Arve Haugan admitted the contractor had been evaluating whether to continue with its jacket fabrication business amid a dearth of work that posed the risk of lay-offs at Verdal.
However, he said its two key criteria for maintaining operations at the yard – improved competitiveness and long-term market opportunities – had now been met following the frame agreement with Statoil.
Haugan said the deal had confirmed the contractor’s industry position as a leading supplier of platform substructures.
“The comprehensive improvements we have implemented over the last two years enable us to win and deliver new projects with a reduced cost level, and still maintain sound financial margins,” he said.
Petroleum & Energy Minister Tord Lien underlined the importance of the recent parliamentary pact on electrification of Johan Sverdrup to avoid a further delay that could have hit such awards for local conractors.
Additional facilities are likely to be required in subsequent phases of the field, which is being developed by Statoil and partners Lundin Petroleum, Det Norske Oljeselskap, Maersk Oil and Petoro across production licences 265, 501 and 502 in the Utsira High area of the North Sea.
A development plan for the vast field, located in a water depth of 110 metres, is due to be submitted to the authorities in early 2015.
The field, with estimated resources of between 1.8 billion and 2.9 billion barrels of oil equivalent, is expected to have a production lifetime of 50 years.