04-Paul Aston - FPSO Conversion and Utilisation Contracts 000
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Transcript of 04-Paul Aston - FPSO Conversion and Utilisation Contracts 000
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FPSO Conversion and Utilisation ContractsStandard Asia
Offshore Forum
Paul Aston, Partner
7 December 2006
www.hfw.com
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Different type of Offshore
Structures
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Variety of Offshore Structures
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FPSO; Various Component Parts
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Bow Turret FPSO
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FPSO
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FPSO in Field with Platform
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FPSO; Risers and Mooring
Arrangement
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FPSO in Field with Manned and
Unmanned Platforms
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FPSO; Deep Water Usage
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STL / STP
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TLP and Spar
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SPM; Single Point Moorings
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Bow Turret Loading System
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WHY FPSO?
Speed into the field
Marginal fields can be developed commercially because of
improved drilling techniques
Abandonment concerns avoided
Lower Capex
Lower Opex and quicker revenue generation feeds further
investment and development in field.
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Approach to Defining and Coping
with Risk
Who is best able to manage the risk?
Negotiating Position
Consider; How serious the occurrence of the identified risk would be,
The likelihood of that risk occurring.
In upstream contracts important to have regard to terms ofdevelopment contract (license or PSA) entered into by Operator.Operators will expect to pass onto their contractors those risksthey have assumed under documentation relating to services tobe contracted out.
If you cannot manage a risk consider insurance. Obviouslydisaster type risks cannot be managed and are insured out.
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The Risks
Commercial Counterparties
Price/Timing
Economic Issues Risk or Disaster
Financial
Operational Scope of Work
Force Majuere
Insurance Due Diligence/Mitigation
Legal Liability
Indemnities
Financial loss
Protection of Assets/Rights
Legislation
Political
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FPSO Development 5 year plan
Discovery
Concept design
Detailed design and procurement
Execution (Construction)
Hook Up Inshore
Commissioning
Start Up
Sub sea Development
Production Drilling
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Consortium / Project Concerns
Participating Interests
Obligations of Participating Interests
Establishment of an operating committee
Powers and duties of operating committee
Voting Procedures
Establishment of work programs and budgets
Itemization of expenditure
Over expenditure provisions
Revenue split
Capitalization future
Default
Withdrawal by one party
Carried interests and costs.
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Component Parts
Accommodation and Helideck
Offloading and Flare
Process Systems
Blast Walls and Escape Tunnel
Hull
Main Deck
Turret System.
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FPSO; Various Component Parts
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Contract Stages in FPSO Project
Conversion or New Build
Mobilisation and Hook Up
Utilisation
Demobilisation
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Interfaces
Gap between shipyard practices and off shorestandards
Industrial Culture
Country Culture
Company Culture
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Insurance during Conversion.
BAR or SRL? Builders All Risk: Subject to specific terms, conditions and exclusions,
the BAR insurers against all risks of physical loss of or damage to thesubject matter insured caused and discovered during the period of
insurance, including the cost of repairing, replacing, renewing anydefective part condemned solely in consequence of the discovery thereinduring the period of insurance of a latent defect.
Ship Repairers Liability Insurance: Covers shipyards legal liability to payby reason of liabilities imposed on it by law for physical loss of or damage
to watercraft (including an FPSO) in its care custody and control for thenpurpose of re[pair or alteration. The legal liability is normally the result ofnegligence of the bailee (the shipyard) to the property of bailor (theOwner).
BAR; covers all risks of physical loss / damage to the subject matter
insured (unless excluded) including consequences of faulty design. SRL;no coverage without negligence.
BAR; covers all latent defects. Covers damage to unit and any othersproperty / personal injury caused, if lines part and unit breaks away fromrepair berth. SRL no coverage for latent defect without negligence.
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Conversion Contract
1 Ensure that Yard BAR covers faulty welds
2 Ensure Yard insurance Include coverage for Faulty Design or
Defective Part
3 Contract out of the QA/QC systems
4 If use Buyers insurance then Yard should be named as a Co-assured
with rights to proceed directly against underwriters and have
administration of claim.
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Points of Concern during
Conversion
Condition of Vessel on arrival Defects or problems discovered during conversion
Details of Works
Standard of workmanship
Supervision and Testing
Change Orders
Suspension
Termination Delays
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Scope of Works
DRAWINGS;
APPROVED FOR CONSTRUCTION DRAWINGS.
Delays in obtaining AFC Drawings? Who is responsible?
Effect on Timeline?
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TPS/OFE/BDE
Technical Purchase Specification (TPS). Not just for rigs but
also relevant to other building projects where specialised
equipment has to be sourced from third party such as FPSOContracts. Whether Owner or Yard is responsible for
procurement, Yard needs to be involved with supplier.
Owners Furnished Equipment (OFE). There will still be anecessity for the Yard to approve which supplier or
manufacturer is chosen and whether that equipment will
integrate into the design of the Vessel. Whilst Buyer pays Yard
has to ensure:
That Buyer orders equipment that is compatible with the overall design,
That Buyer orders the equipment in time, according to TPS
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TPS/OFE/BDE
Buyers Designated Equipment (BSE). Buyer tells Builder
what equipment to procure and he gives Builder funds in
advance to pay. (If not Builder exposed before first
installment paid.)
Builder has to get involved in the procurement andapprove jointly with Buyer the suppliers. He must also
Check that equipment is ordered on time;
Check that it is compatible for design;
Attend Factory Acceptance Tests (FAT).
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Procurement Owners Equipment
Tendency by some Owners to treat Yard as a fabricator, rather than aspecialist; but when things go wrong stick the Yard for all delay and design
problems. These responsibilities have to be expressed clearly.
Close coordination with Class. Failure by Owner to do this can hold up projectlater on. Yard should not assume Owner is doing this on OFE.
Incorporate the procurement schedule into the Building Contract where thereare significant Buyers items/supplies.
Prioritisation, that is, arranging for most important items to be procured anddelivered first.
Yard attendance at FATs.
Storage and maintenance of Owners Supplies. Need to be adequatelyprotected. Who insures?
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Change Orders
Owners Modifications
Contractors Modifications
Regulatory or Class requirements
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Utilization Contract
Day rate on Hook Up Not flow of Oil ! Scope of responsibility
Quality of Oil
Day Rate Capital Cost Element
Hire Element
Escalation and Inflation Linking
Deductions Net Loss of Time or Period?
Total or Partial
All or any one service Define Critical Systems and make special provision.
Maintenance generally
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Utilization Contract
PURCHASE OPTION Exercisable within limited period
Owner to have continuing management duties
SUSPENSION Partial or Total?
How Long For? Suspension Rate
TERMINATION With Cause Without Cause
Mutual Consent
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Demobilization
Lump sum.
Repairs to Unit.
Demucking / Sludge removal
Cleaning up bad chemicals. Mercury
On site debris.
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Consequential Damages
Damages in English Law for breach of contract falls into two
categories:
Direct loss; which is recoverable from the party in breach; and
Indirect loss; which is only recoverable if it was reasonably
foreseeable at the time the contract was entered into.
Courts generally interpret consequential losses as falling within
second so that an exclusion of such loss will not necessarily
extend to loss of profit, loss of production, etc, as such loss may
be held to constitute a part of direct loss.
(BHP Petroleum and Others v British Steel Plc (1999) I Lloyds Rep 387)