In the final hours of 2012, gas began to flow from Norway's Skarv field – with oil following three months later. As well as a significant milestone for BP, this production represents a new era for the town of Sandnessj?en, where project contracts are helping local businesses to thrive
Nature has been kind to the Helgeland region in northern Norway, with its fjords, islands and crystal waters. For those patient enough to sit through the take-offs and touch-downs in small propeller planes at the handful of local airports that dot the journey to the coastal town of Sandnessj?en, the final destination is worth the time and effort. Glancing across the short runway and over the small airport terminal, the Seven Sisters mountain range lies in view, with its seven summits lining the horizon. Locals say they hike – or, more alarmingly, run – all seven in a day. But then again, the definition of ‘a day’ here is flexible. Lying less than 70 kilometres (45 miles) south of the Arctic Circle, in summer, daylight lingers. In late June, the sun never really sets – it rather bobs on the horizon and then rises again. Winter, of course, brings the opposite – hours of darkness, illuminated only by the glare of white snow under a community’s artificial lights.
While the area’s natural assets may seem top of the list for visitors venturing 66 degrees north, there are two events in the calendar that see Sandnessj?en’s small population swell. Both are linked to offshore activities: crab-catching and the oil industry. The former is a serious pastime here, with a long history, while the latter is a much newer arrival. Crabs actually win people medals each autumn, during the town’s world championship event, Krabbefiske. Now in its eighth year, some 150 participants sail out to a predetermined location to see if their chosen bait will attract the largest haul of red claws. The weekend-long festival puts the Helgeland coastline firmly in the spotlight, much to the delight of the championship’s president, Terje Johansen. “We have the most beautiful coast in the world,” he boldly declares, “and people come from all over the country each September to compete. The championships take over the town.” BP is there as well. The company has become the main supporter of this curious sporting event, among its efforts to build lasting relationships in the northern region since the Norwegian Government approved a significant offshore development in 2007. Discovered in 1998, the Skarv field lies 210 kilometres (130 miles) west of Sandnessj?en, and holds an estimated 100 million barrels of recoverable oil and condensate, plus more than 1.5 trillion cubic feet of gas. First gas came onstream from the field minutes before the dawn of 2013, with oil production starting three months later. As BP Norge’s first greenfield project since 2001 and its first in the Norwegian Sea, this represented a milestone for the company and the wider BP group, with around 165,000 barrels of oil equivalent a day (boe/d) now in production.
“We have the most beautiful coast in the world and people come from all over the country each September to compete.”
- Terje Johansen
Locals such as Johansen have been keenly aware of the project since the days it was merely on paper, though. “Originally, people in the community were a little sceptical about oil and gas production activities in the area,” he says. “We asked ‘what’s in it for us?’ and ‘how can we be part of it?’ I’ve followed the project from the start and felt informed every step of the way. As a result, I believe, there is a sense of mutual respect between BP, on behalf of the licensees, and the town.” Business owners at Sandnessj?en’s other recently-inaugurated annual event, the oil and gas conference, agree. Arnt Jakobsen and his family have run the Slipen Mekaniske shipyard in the town since 1909. In 2003, they stopped constructing vessels, due to competition from the Asian markets. “Since then, we’ve conducted repair and maintenance only,” he says. “BP gave us the opportunity to tender for contracts on the Skarv project, by joining forces with three other local companies. Together, we worked to raise standards, establish rigorous processes and supply detailed documentation – and won a contract. We now have five employees based on the FPSO full-time and more than 60 others at the yard on the town’s waterfront. “Sandnessj?en was once a sleepy town – now, there are other oil and gas companies showing an interest in the area, while cranes point to the building activity with two new hotels, a swimming pool and a culture house under way.” This physical evidence of economic growth and anecdotes from locals have now been given academic support in the shape of a three-year study by the Bod? Graduate School of Business at the University of Nordland, which confirms that the development of Skarv has had a positive impact on the region. The so-called ripple effect is worth an estimated 4.5 billion Norwegian kroner (NOK) ($750 million), according to authors Jan-Oddvar S?rnes and Jan Terje Henriksen. Of that total, Skarv contracts awarded to local businesses have been worth around NOK 1 billion ($170 million). To reach that achievement, both BP, as operator, and the region’s companies approached the Skarv opportunities with a new lens. For BP Norge, that meant adapting its established purchase and supply chain policy to devise a more pragmatic strategy that took account of local conditions. From the outset, the company aimed to facilitate local business activity by offering decentralised contracts and supplier development opportunities, at the same time as working closely with the municipality and public policy and funding agencies.
The Skarv project in Norway
Meanwhile, Helgeland vendors and suppliers also rethought their own business structures, often entering into collaboration, to position themselves to win contracts. For example, eight companies established a joint venture, Helgeland V&M, to provide maintenance and modification services to Skarv. Managing director ?ystein Barth-Heyerdahl says: “In this part of Norway, the companies are traditionally small. In 2008, a group of owners sat around a table together for the first time and decided to work together. “Three years later, as a joint venture, we signed a five-year contract with BP worth NOK 20 million per annum ($3.3 million). In 2012 alone, our turnover was more than NOK 120 million ($20 million). We have 660 people employed across the eight companies now. With the Skarv project, there’s a sense in the community that everyone is part of it, because they’ve been included and that’s very special.” A new production asset, such as an FPSO, requires more than technical support. With 100 beds onboard, the vessel is akin to a floating hotel, where people both live and work. As such, while food is, of course, prepared at sea, dirty laundry is returned to shore on a weekly basis.
"With the Skarv project, there's a sense in the community that everyone is part of it, because they've been included and that's very special."- ?ystein Barth-Heyerdahl
While no company in northern Norway had the capacity to take on all the cleaning, catering and laundry services in one contract, BP again decided to split the requirements so as not to exclude local bidders. Situated 300 metres (985 feet) from the onshore supply base, Helgeland Industrier AS (or Hias) won the contract to wash and iron the tonnes of sheets, towels and workwear from the vessel. Stig Toven, Hias operating manager in Sandnessj?en, says the decision to establish a new location for the business back in 2007 has paid off. “We wanted to position ourselves to take advantage of the upcoming oil and gas activity, so secured some farmland to build an operating centre here, very close to the port.” Today, as giant industrial washing machines churn through up to 100 kilogrammes of soiled coveralls in one cycle, some 120 staff are employed at the site, including people with a range of disabilities from a local training programme.
According to the town’s mayor, B?rd Anders Lang?, BP’s decision in 2006 to locate Skarv’s extended operating base in Sandnessj?en – to include supply services, logistics, drilling support, light maintenance and procurement – was a turning point for the entire municipality. “There had been some decline in the area, in population and economic terms – we’d even lost the post office, which is a fundamental service in any community,” he says. “Immediately, at city hall, we started to make plans and took the decision to invest and build a new quay. Soon after it was completed, warehouses started rising there and we needed another quay, and then another. “For me, the development is almost personal, as we’ve spent millions of kroner from the municipal budget. I drive around the quays now and count the number of vessels docked, checking on our investment.” The mayor needn’t worry; the university study also revealed that oil and gas activity in the region has had indirect effects on other industries. For example, the Alstahaug Port Authority has tripled its turnover in the past five years. Air travel has also significantly increased: in Sandnessj?en, passenger numbers have risen from 49,000 in 2006 to 79,000 in 2012, while in Br?nn?ysund – the base where helicopters fly out to Skarv – numbers have also grown from 70,000 to 105,000 in the same period. These increases have also had a knock-on effect on demand for hotel accommodation, with projects now under way to triple capacity in Sandnessj?en and increase the length of the airport’s runway to receive larger aircraft. More people are choosing to make the area their home, as well, prompting plans for 600 new homes. The growing population includes 16 BP staff who work at the onshore operations office, directly supporting colleagues on the FPSO. Many of the team joined the project while the 295-metre-long (970-foot-long) vessel was under construction – the hull and topsides at the Samsung Heavy Industries yard in South Korea, while the turret and mooring system was built at the Keppel Shipyard in Singapore.
Tove Ormevik, site manager at Sandnessj?en, joined BP Norge in 2010 with 18 years’ industry experience. Along with other team members, she lived in South Korea for a year to prepare for the sail-out to Norway and her role involved preparing for operations, by ensuring that the right people gained a deep understanding of the vessel’s systems. “We did the handover process with the commissioning and operations teams, after verifying that all the systems were ready to go,” she says. “Once the vessel was manned, we left the yard in November 2010 and I sailed away on the first leg of the voyage, bound for Singapore. That was an amazing experience; the whole project team stood on the quayside and waved us goodbye.” Some 90 days later, the vessel arrived at Stord Island, Norway, for some additional preparation work, and was on location at the field by mid-August 2011 for the all-important hook-up to the pre-installed subsea risers. Although the FPSO appears to be the star of the Skarv show, around half of the development lies beneath the waves. “We have an 80-kilometre [50-mile] pipeline, more than 40 kilometres [25 miles] of flowlines, 13 risers, five drilling centres and 16 wells, control umbilicals running all the control systems and numerous structures on the seabed,” says Pat McHugh, Skarv project director. “Our nearest drilling centre is about four kilometres [2.5 miles] away and the farthest 14 kilometres [nine miles] away. The architecture associated with all of that kit and the tie-in of our pipeline to the main trunkline that runs through the Norwegian Sea required considerable work and represented half the project.”
"We have an 80-kilometre [50-mile] pipeline, more than 40 kilometres [25 miles] of flowlines, 13 risers, five drilling centres and 16 wells, control umbilicals running all the control systems and numerous structures on the seabed."- Pat McHugh
The FPSO is moored by a geo-stationary turret, a very large circular structure anchored to the seabed, with 15 lines and suction cans, allowing the vessel to weathervane around it. “For safety reasons, we positioned the turret part-way along the hull and downwind of the accommodation block,” adds McHugh. “This, however, decreases the vessel’s ability to weathervane naturally, so we added five large thrusters to the hull. These are used by the control room operators to move the hull around the turret to the optimum position with respect to the environment.” Conditions in this part of the Norwegian Sea can become rather wild in the winter months – so much so that the vessel is designed to withstand three combined potential eventualities: a total loss of power and 100-year storm conditions, while the FPSO is not in the optimal position for the prevailing weather. These factors demanded the highest-strength mooring systems ever installed. The first winter at the field exposed the vessel and its team to a taster of the harsh meteorological conditions. “The weather is not particularly cold, but rather stormy with high winds,” says Ormevik. “In 2011, we had waves up to 30 metres [100 feet] and big movements of the vessel. It performed well, though; onboard, you have to think all the time how you can modify activities to deal with that movement and where you’re storing items.”
Although the crew had to become accustomed to the moored vessel in motion, the FPSO’s systems and processes were already familiar since they had been in effect since the sail-out from South Korea. “To prioritise safety and risk management immediately, we ran an extensive training programme on the equipment and facilities and initiated all the systems on a cold [hydrocarbon-free] vessel since the departure from the yard,” adds Ormevik. That included carrying out the same procedures to obtain a work permit, for example to isolate a piece of equipment, as would be necessary once the vessel was in production. This long period of acclimatisation meant that by the time hydrocarbons were introduced onto the vessel, effective routines were already established. With a similar goal in mind, BP Norge’s new managing director, Jan Norheim, paid a visit to both Skarv and Sandnessj?en within a month of taking on the role earlier this year. “My first impression of the vessel at sea – aside from its scale, which I’d already witnessed at Stord Island – was the energy from the crew, who are very determined in what they want to achieve and where improvements can still be made. “Our priorities for Skarv are clear: to perform safe and efficient operations and deliver our production promises to reach our target of 165,000 boe/d by the end of this year. The field is an important high-margin hub for us, contributing significantly to our production growth from Norway and representing a significant new source of gas to Europe.”
The Skarv field was discovered in 1998, lying 50 kilometres (or 30 miles) south of the Arctic Circle.
There is an estimated 100 million barrels of recoverable oil and condensate in the reservoirs.
The vessel measures 295m (or 970 feet) in length; this is equivalent to four jumbo jets placed nose to tail.
The expected field life is 25 years, with future potential tie-ins to the FPSO, depending on processing and export capacity. Nearby, the Snadd North discovery, made in 2010, is already in test production, while another smaller discovery from 2012, Snadd Outer, is under review. There is still further production potential under consideration from the Snadd South and Gr?sel structures, while exploration will also continue in the area. In the meantime, Norway’s overall oil production figures reached their highest in July since May 2012, with crude output at 1.576 million barrels a day, 8% above the forecast from the nation’s petroleum directorate. The Skarv field will make a steady contribution to the country’s hydrocarbon output for many years to come. But, it’s on a local level that people are most vocal about its significance: “Skarv has meant everything really,” says Mayor Lang?, “it represents a new age, not just for our town, but for the whole region.”