Recent and Future Developments in Facilities Engineering By Kenneth E. Arnold

1. Recent and Future • Developments in Facilities Engineering • By • Kenneth E. Arnold • Paragon Engineering Services • July 13, 2004 Paragon Engineering Services, Inc.

2. History • Job of a Production Facility • Facilities Engineering Today • Emerging Process Technology • Project Management Technology

3. Separator and Tank, Titusville, PA

4. Oil & Gas Journal (June 24, 1937)

5. First Test of Horizontal Two Phase Separator, 1940

7. Offshore Field, 1940s

8. Offshore Platform, 1950s

9. Facilities Engineers • After World War II demand for: • Offshore facilities • High pressure gas production • Produced water treating • Heavy Oil Steam Floods • Led to: • More complex facilities • “Mechanical,” “Facilities” and “Construction” Engineering Departments introduced

10. Facilities Engineering (1950s to 2000) • Money is made by discovering and exploiting reserves • Reservoir engineering and management are critical • Surface facilities are a necessary evil • This means: • Facilities engineering as recognized specialty didn’t even begin until 1960s • Recent emphasis on “core competence” led to elimination of facilities training and R&D efforts • Increased reliance on Engineering Companies to develop and implement design

11. Facilities Engineering Today • But… good corporate citizenship puts emphasis on: • Safety • Environment • Design • Larger, more complex projects • Ten years ago – Hundreds of $1MM to $25MM projects • Now several $500MM – $2B projects • Facilities cost is becoming a large part of total field development cost • A $4.2B North Sea Field Development • Drilling - $1.0B 23 % • Topsides - $2.0B 47% • Hull - $0.8B 20% • Commissioning • & Operations Support - $0.4B 10%

12. Facilities Engineering Today • Construction • Project cycle times significantly impact project profitability • Construction options limited • Construction execution plan critical to meeting profitability

13. Emerging Process Technology • Improved Separator Internals • Use of CFD • Centrifugal Devices • Oil and water treating • De-oiling Hydrocyclones • De-watering Hydrocyclones • Multiphase Technology • Meters • Pumps • Absorption and Contact Towers • Improved Packing • Co-current Flow in Pipes

14. Emerging Process Technology (Continued) • Subsea and Downhole Systems • Direct Water Injection/Disposal • Direct Gas Injection • Reduce Backpressure • Stranded Gas and Alternatives to Flaring for Associated Gas (Especially Offshore) • CNG Transportation • Gas to Methanol • Gas to Middle Distillates • Gas to Hydrates • Gas to Power

15. Analysis of Operating Weights 75,000BOPD-GOM • Total Equipment Weight 5,832 tons • Excludes: Deck Structural Weight, Drilling Rig, Future Waterflood • Savings Possible by Eliminating Need for All: • HP, IP and LP Gas/Liquid Separation 2.6% x 1.5 = 3.9% • Bulk Oil/Water Separation 2.5% x 1.5 = 3.8% • Oil Treating 8.0% x 1.5 = 12.0% • Produced Water Treating 2.2% x 1.5 = 3.3% Total = 23%

16. Choosing the Proper Technology – Innovative Process Technology • Each has applications and limitations depending on project specifics • It takes a knowledgeable engineer to apply this known technology correctly • New technology will help us reduce costs • There is no “magic bullet” process concept that will results in a significant decrease in facilities costs • But…. The way in which we manage a project has a potentially large impact on cost

17. Best Practices Ind. Average Disasters -25 0 25 50 World Class Best Practices Cost Asset Growth Ref: Ed Merrow – IPA Cost Consistently Better -6% 10% 30% Underrun Overrun Managing Upstream Oil & Gas Producing Assets 17

18. Best Practices Ind. Average Disasters World Class Best Practices Schedule Slip Ref: Ed Merrow – IPA Schedule Consistently Better 4% 10% 37% -25 0 25 50 75 Underrun Overrun Managing Upstream Oil & Gas Producing Assets 18

19. Best Practices Ind. Average Disasters Underrun Overrun World Class Best Practices Schedule Slip Ref: Ed Merrow – IPA Operability Consistently Better 80% 73% 38% 10 35 60 85 110 Managing Upstream Oil & Gas Producing Assets 19

20. Project Management Technology A Project Requires: • Basic Concept and Plan of Execution • Efficient Design • Appropriate Choice of Equipment • Simplicity • Procurement Plan • What to Buy • Where to Buy it From • Management of Interfaces • Quality Control • Expediting

21. Project Management Technology (Continued) • Construction Plan • Contractor vs. Owner Supply • Managing Owner Supply • Site Management Between Contractors • Management of Interfaces • Safety Management • Quality Control • Expediting • Startup and Commissioning Plan • Mechanical Completion • Instrument Check-out • Initial Fall of Chemicals, etc. • Purge • Closeout

22. Developing Project Management Technology • 1980s Engineering – Emphasis on Developing Training Materials and Automating Selection and Sizing of Equipment • Facilities Bookware Series (tutorials and sizing programs) • “Typical Facility Concept” (logic diagrams and standard P&ID modules) • 1980s Design • AutoCAD – 2D • 1990’s Engineering – Emphasis on Cost Estimating and Material Control • Automatic Time Entry and Billing • Estimating Tools and Databases • EMAC Procurement and Tracking Systems • 1990s Design • PDMS

23. 1.0 (AutoCAD) 0.9 (PDMS) Drafting Engineering (PDMS) 0.8 0.7 (PDMS) 2 1 4 3

24. Project Management Emphasis Today • Integration of Work Processes • ISO Certification • Codify work processes • Assure consistency • Audit • Full implementation of PDMS as design tool for all disciplines • Link in Engineering Work Processes (VPE) • Link in Smart P&ID (VPID) • Link in procurement and material control (VPRM) • More efficient design • Use design models for more effective human factors, operability and maintainability reviews

25. Project Management-The Future • Utilize work processes, standards, “typicals” to automate and reduce engineering man-hours/ton. • Link multiple locations: design, fabrication, operations, maintenance. Take advantage of knowledge where it is. • Use database to help schedule maintenance, reduce operating costs and manage change. • Create a real time life cycle database.

26. Conclusions • We’ve come along way • There are exciting new technologies becoming available • We have to use them wisely • New process technologies will surely help reduce costs and increase capabilities • Large impacts are possible by applying developing project management technologies

27. How Does SPE Help Keep Facilities Technology Current • Publications • Conferences and Symposia • Forum Series • Applied Technology Workshops • Technical Interest Groups

28. Types of Meetings • Annual Technical Conference and Exhibition (ATCE) – F & C Programming Committee • Regional Meetings & Symposia – Region plans and manages under SPE Meetings Policy. Held periodically • Applied Technology Workshop (ATW) – Limited attendance focused on latest applications of a specific technology. One or two days with no formal papers. • Forum Series – Brings together experts on specific topics to focus on future aspects. Usually one week with no formal papers • Section Meeting – Held on periodic basis for benefit of section members. Often scheduled for lunch or dinner. • Joint Meeting – Offshore Technology Conference

32. Future Programming • Facilities and Construction Committee • Local Chapter Facility Study Group • Facilities and Construction Volunteer Database

33. Future Programming • Join SPE • www.SPE.org • Choose facilities and construction technical discipline • Work with local section to develop F & C programming • Work with Local Section to encourage more F & C membership – operators, vendors, consultants and contractors • Volunteer to help with SPEI programming – Email me your interests Karnold@paraengr.com • List your interests (Level 2 of TIL) and your expertise (Level 3 of TIL)

34. SPE’s Technical Interest List • Process Systems and Equipment - 22 Sub-Categories • Gas Utilization - 3 Sub-Categories • Measurement and Control - 6 Sub-Categories • Electrical Systems - 9 Sub-Categories • Pipelines and Piping Design - 6 Sub-Categories

35. SPE’s Technical Interest List • Material and Corrosion - 5 Sub-Categories • Solids Handling and Control - 5 Sub-Categories • Platforms and Floating Systems - 13 Sub-Categories • Subsea Systems - 5 Sub-Categories • Facilities Operations - 7 Sub-Categories • Facilities and Construction • Project Management - 7 Sub-Categories

36. Conclusions • The Facilities and Construction specialty is important • This is a field that is growing in importance and complexity • SPE has programming in place to help F & C engineers • SPE wants to expand this programming