Erasmus University Rotterdam

MSc in Maritime Economics and Logistics

2005/2006






Station Keeping for Deepwater Mobile Offshore
Drilling Units; an Economic and Operational
Perspective



By



Capt. Lambros Klaoudatos









Copyright MSc Maritime Economics & Logistics
2
AcknowIedgements

would like to express my gratitude to the following individuals who provided
valuable feedback and perspectives during the course of this research.


Mr. Marco Beenen, GustoMSC
Mr. Rigo Bosman, Royal DSM N.V.
Capt. Avery Brott, Senior DPO, GSF Jack Ryan
Mr. Chris Condon, Marine Supervisor, FPS Thunder Horse
Capt. an MacKay, Master, GSF Jack Ryan
Capt. Andy Potter, Master, SBX
Mr. Mark Riemers, SPT Offshore
Dr. Jaap-Harm Westhuis, GustoMSC


My thanks to Professor Arie Aalbers at TU Delft University for his guidance,
feedback and assistance from the outset of the research.

A special debt of gratitude to my wife and family, for their unconditional support
and understanding always.



















3
Executive Summary
This paper investigates the very specific issue of station keeping for Mobile Offshore
Drilling Units as it applies in the rapidly growing deepwater sector of the offshore drilling
industry. This issue has gained renewed interest because the successful use of
synthetic fibers for mooring applications in deepwater, has offered an alternative
approach for station keeping in an area that was previously considered exclusively
dynamic positioning territory. Though a very specific issue, the implications are
significant to an industry that is undergoing rapid growth and currently building
significant numbers of new MODUs.

The paper introduces all the aspects related to the issue so a reader with limited
knowledge of the subject can understand the elements involved. Explanations are given
into the different types of drilling, the equipment involved, the current market conditions
for this equipment and an idea of what future expectations hold. Furthermore with the
ability to choose between DP and mooring in deepwater a detailed comparison is made
of several alternatives, involving Semis and Drillships in DP, pre-installed and direct
moored scenarios. Cost models are developed and then analyzed to show the
difference between these scenarios. Amongst these scenarios are also a few
hypothetical models such as mooring drillships in deepwater to determine what the
economics of such an operation might be. The economic perspective is however only
one aspect of the complex decision facing operators today in the offshore industry.
Frequently operational issues may override the most economic approach. To this end
operational issues are also examined and brought into context.

The analysis reveals that dynamic positioning and mooring offer a distinct opportunity
when applied to particular types of drilling projects. Dynamic positioning offers cost
advantages on drilling programs with short duration wells, with frequent moves over
longer distances. This station keeping method when coupled with a monohull like a
drillship, offers greater logistical capability providing a versatile platform for exploration
drilling even in remote regions. Mooring with synthetics and in particular when pre-
installed, offers a somewhat different picture than DP, having more favorable
economics for a program with longer duration wells, and less frequent moves taking
place over shorter geographic distances. These characteristics along with the industry's
greater confidence in the reliability of mooring to maintain station lend themselves to
more sensitive and time consuming development drilling programs.

The analysis showed that MODU day rate is the single largest cost factor in the station
keeping equation. The new synthetic fiber mooring technology allows rigs of lower day
rate that were previously not capable of greater water depths to be deployed in
deepwater projects at great cost advantage. The research also shows and argues the
case that a drillship when outfitted with both DP and mooring systems, it offers the most
versatile MODU capable of development and/or exploration drilling under favorable
economic and operational terms.

4
TabIe of Content
AcknowIedgements......................................................................................................... 2
Executive Summary......................................................................................................... 3
TabIe of Content............................................................................................................... 4
List of Figures .................................................................................................................. 6
List of TabIes.................................................................................................................... 7
Abbreviations................................................................................................................... 8
1 Introduction.............................................................................................................. 9
1.1 Methodology .................................................................................................... 10
2 The Offshore Industry ........................................................................................... 13
2.1 Exploration & Development ............................................................................. 14
2.2 Semisubmersibles ........................................................................................... 16
2.3 Drillships........................................................................................................... 19
2.4 Mobile Offshore Drilling Unit Market................................................................ 22
2.4.1 Demand; Record Day Rates.................................................................... 23
2.4.2 Supply in the Long Term; New Construction Boom................................ 27
2.4.3 A Shipping Cycle in the Offshore Market? .............................................. 29
2.5 Anchor Handling Tug Supply Vessels (AHTS)................................................ 30
2.5.1 AHTS Market ........................................................................................... 32
3 Station Keeping...................................................................................................... 34
3.1 Mooring Systems ............................................................................................. 34
3.1.1 Conventional mooring.............................................................................. 35
3.1.2 Taut Mooring & Catenary Mooring .......................................................... 36
3.1.3 Anchors.................................................................................................... 37
3.1.4 Pre-nstalled Mooring (PM)..................................................................... 44
3.1.5 Synthetic Fibers ....................................................................................... 45
3.1.6 Monohull Mooring .................................................................................... 50
3.2 Dynamic Positioning ........................................................................................ 53
3.2.1 DP Theory................................................................................................ 53
3.2.2 Dynamic Positioning System Class......................................................... 54
3.2.3 Positioning Systems and Reference Sensors......................................... 56
3.2.4 Main Engines, Machinery and Power Management ............................... 59
3.2.5 Vessel Construction................................................................................. 60
3.2.6 Thruster Assisted Mooring....................................................................... 60
3.2.7 Manning ................................................................................................... 61
4 The Economic Perspective - Cost EIements & CaIcuIations............................ 63
4.1 Mooring System Cost Model ........................................................................... 63
4.1.1 Environmental Loading Condition Requirements.................................... 64
4.1.2 Mooring Line Selection ............................................................................ 64
4.1.3 Anchor Selection...................................................................................... 66
4.1.4 Mooring System Cost Calculation ........................................................... 66
4.2 Operational Cost Models ................................................................................. 68
4.2.1 DP Semisubmersible ............................................................................... 70
4.2.2 Semisubmersible Pre-nstalled Moorings................................................ 73
4.2.3 Semisubmersible Moored Directly........................................................... 77
4.2.4 DP Drillship .............................................................................................. 80
4.2.5 Drillship Pre-nstalled Moorings............................................................... 83
5
4.2.6 Drillship Moored Directly.......................................................................... 87
4.3 Basis Drilling Program Results........................................................................ 91
5 CaIcuIation AnaIysis.............................................................................................. 93
5.1 Number of Wells .............................................................................................. 93
5.2 Duration of Each Well ...................................................................................... 95
5.3 Average Distance between Wells.................................................................... 98
5.4 Water Depth................................................................................................... 100
5.5 Fuel ................................................................................................................ 102
5.6 MODU Day Rate............................................................................................ 104
5.7 AHTS Day Rate ............................................................................................. 107
6 The OperationaI Perspective.............................................................................. 109
6.1 Availability ...................................................................................................... 109
6.2 Drilling Package............................................................................................. 109
6.3 Exploration or Development .......................................................................... 110
6.4 Weather.......................................................................................................... 110
6.5 Capacity ......................................................................................................... 111
6.6 Reliability........................................................................................................ 112
6.7 Time ............................................................................................................... 113
6.8 Preference ..................................................................................................... 113
6.9 Maintenance .................................................................................................. 114
6.10 Newbuilding/Conversion................................................................................ 114
7 ConcIusions ......................................................................................................... 116
References.................................................................................................................... 119
Appendix 1.................................................................................................................... 130
Appendix 2.................................................................................................................... 131
Appendix 3.................................................................................................................... 132
Appendix 4.................................................................................................................... 133
Appendix 6.................................................................................................................... 135
Appendix 7.................................................................................................................... 136











6
List of Figures
Figure 1: Deepwater Oil and Gas production forecast Source: CERA (July 2005), FP 13
Figure 2: Deepwater Oil and Gas production forecast Source: CERA (July 2005), FP 15
Figure 3: Semisub classifications Source: Mark Childers............................................... 17
Figure 4: The Eric Raude, 5th Generation harsh weather winterized Semi Source:
Ocean Rig........................................................................................................................ 18
Figure 5: The CUSS , Source: Global Santa Fe ............................................................ 20
Figure 6: DP Drillship Glomar Jack Ryan Source: Global Santa Fe .............................. 21
Figure 7: Worldwide DP fleet comparison and deepwater areas. Source: Exxon Mobil 23
Figure 8: New harsh weather offshore regions ............................................................... 26
Figure 9: Deepwater MODU (>3000ft) Demand Forecast. Source: Fearnley Offshore. 27
Figure 10: Deepwater MODU (>7500ft) Demand Forecast. Source: Fearnley Offshore28
Figure 11: number of MODUs orders reported 1954-july2006. Source ODS-Petrodata
nc..................................................................................................................................... 29
Figure 12: 17000 BHP AHTS Asso Ventitre Source: Vic Gibson ................................... 31
Figure 13: AHTS Day Rates over 6000bhp Source: Workboat ..................................... 32
Figure 14: Comparison of Taut and Conventional Moorings Source: BP ...................... 36
Figure 15: Conventional Drag Embedded Anchor installation Source: Vryhof............... 38
Figure 16: Suction Pile installed with ROV connecting mooring line. Source: Shell ...... 40
Figure 17: VLA drag embedded anchor. Source: Vryhof................................................ 41
Figure 18: nstallation process of SEPLA. Source: Univ. of W. Australia....................... 42
Figure 19: nstallation of SEA. Source: SPT Offshore.................................................... 43
Figure 20: Mooring Line buoyancy comparison. Source: Honeywell ............................. 46
Figure 21: Weathervane capability with traditional monohull mooring. Source: Author. 51
Figure 22: Dynamic Positioning Control Loop Source: Nautronix .................................. 54
Figure 23: Active Deepwater MODU fleet composition, Aug. 2006 Source: Rigzone.... 81
Figure 24: Basis drilling program results......................................................................... 92
Figure 25: Effect of Total Number of Wells on Grand Total............................................ 93
Figure 26: Effect of Duration of Each Well on Grand Total ............................................ 96
Figure 27: Effect of Distance between Wells on Grand Total ......................................... 98
Figure 28: Effect of Water Depth on Grand Total ......................................................... 100
Figure 29: Effect of Fuel Cost on Grand Total .............................................................. 102
Figure 30: Effect of MODU Day Rate on Grand Total .................................................. 104
Figure 31: Basis Drilling Program Grand Totals MODU Rates Being Equal ................ 106
Figure 32: Effect of AHTS Day Rate on Grand Total .................................................... 107
Figure 33: Semi that broke loose from mooring during hurricane Katrina. Source: Times
Picayune ........................................................................................................................ 111








7
List of TabIes

Table 1: Specifications of environmental conditions used in determining mooring system
requirements.................................................................................................................... 64
Table 2: Estimated mooring line prices used in calculations.......................................... 65
Table 3: Estimated prices of submersible buoys used in synthetic pre-installed systems
......................................................................................................................................... 65
Table 4: Estimated Anchor Prices used in Calculations ................................................. 66
Table 5: Synthetic moorings, cost per leg....................................................................... 67
Table 6: Synthetic moorings, total system costs............................................................. 68
Table 7: Day rates for DP Semisubs on contract Dec. 2005, Source: Fearnley Offshore
......................................................................................................................................... 71
Table 8: Day rates for Deepwater Semisubs on contract Dec. 2005, Source: Fearnley
Offshore ........................................................................................................................... 74
Table 9: Day rates for Deepwater Semisubs on contract Dec. 2005, Source: Fearnley
Offshore ........................................................................................................................... 77
Table 10: Day rates for DP Drillships on contract Dec. 2005, Source: Fearnley Offshore
......................................................................................................................................... 81
Table 11: Day rates for DP Drillships on contract Dec. 2005, Source: Fearnley Offshore
......................................................................................................................................... 84
Table 12: Day rates for Deepwater drillships on contract Dec. 2005, Source: Fearnley
Offshore ........................................................................................................................... 88
Table 13: Basis drilling program results. Full calculation available in the appendix ...... 91
Table 14: Effect of Total Number of Wells on Grand Total ............................................. 94
Table 15: Effect of Total Number of Wells on Total Contract Period.............................. 95
Table 16: Effect of Duration of Each Well on Grand Total.............................................. 96
Table 17: Effect of Duration of Each Well on Total Contract Time................................. 97
Table 18: Effect of Distance between Wells on Grand Total .......................................... 99
Table 19: Effect of Distance between Wells on Total Contract Time ............................. 99
Table 20: Effect of Water Depth on Grand Total........................................................... 101
Table 21: Effect of Fuel Cost on Grand Total ............................................................... 103
Table 22: Effect of MODU Day Rate on Grand Total.................................................... 105
Table 23: Basis Drilling Program Grand Totals MODU Rates Being Equal ................. 106
Table 24: Effect of AHTS Day Rate on Grand Totals ................................................... 108








8
Abbreviations

ABS American Bureau of Shipping
AHV Anchor Handling Vessel
AHTS Anchor Handling Tug/Supply Vessel
BOP Blowout Preventer
BP British Petroleum nc.
BV Bureau Veritas
CAPEX Capital Expenditures
DGPS Differential Global Positioning System
DNV Det Norske Veritas
DP Dynamic Positioning
EDS Emergency Disconnect Sequence
ERN Environmental Regularity Number
FMEA Failure Modes and Effect Analysis
FPS Floating Production System
FPSO Floating Production Storage and Offloading
ft Feet
GSF Global Santa Fe
HPR Hydro-acoustic Position Reference System
HMPE High modulus polyethylene
IMCA nternational Marine Contractors Association
IMO nternational Maritime Organization
LMRP Lower Marine Riser Package
kts Knots
LOA Length Overall
MODU Mobile Offshore Drilling Unit
MRU Motion Reference Unit
MDO Marine Diesel Oil
OPEC Organization of the Petroleum Exporting Countries
OPEX Operational Expenditures
OSV Offshore Supply Vessel
OTC Offshore Technology Conference
PCR Performance Capability Rating
PMS Power Management System
ROV Remotely Operated Vehicle
SEA Suction Embedded Anchor
SEPLA Suction Embedded Plate Anchor
USD US Dollar
VLA Vertically Loaded Anchor
VRU Vertical Reference Unit






9
1 Introduction
The offshore drilling industry is more than 50 years old now, and has been
characterized by great technological innovation enabling resources to be tapped in
ever increasing water depths, moving from derricks erected on piers extending
from shore to ultra-deepwater drillships capable of drilling in open oceans in 12,000
feet of water depth. t is incredible that this progress in technical ability has
occurred in a relatively short time period, and indeed today the offshore industry
represents one of the most technologically advanced, innovative and lucrative
maritime sectors.

The purpose of this research is two fold, firstly to introduce readers to the offshore
industry, and the deepwater sector in particular. This is an industry that in recent
years has gained a lot of interest due to historically high oil and gas prices and the
subsequent surge in demand for Mobile Offshore Drilling Units (MODUs) as oil
companies seek to produce known reserves and explore for new ones. Little is
really understood about this industry in the mainstream, people often mistakenly
referring to "oil rigs as platforms. There is also little understanding between the
different types of activities that take place offshore such as the difference between
development drilling and exploration drilling, the implications this may have on the
choice of assets and the different operational challenges to be dealt with. The first
chapters of this paper will focus on introducing many of the specific vessels,
concepts and technologies involved, so that the second and primary focus of the
paper can be more fully understood and appreciated.

The second purpose of this paper is to revive the industry debate over the means
of positioning MODUs offshore. Fundamentally there are two ways to position a
MODU over a well site. Mooring using some form of passive physical connection to
the seabed or using dynamic positioning which actively uses a vessel's propulsion
to counteract environmental forces and maintain position. Dynamic positioning is
not a new technological innovation, indeed it has been around since the 1960's as
the primary means for positioning in deeper waters where a conventional mooring
system became too heavy to sustain itself. However, the debate has gained new
life with the introduction of new mooring technologies such as synthetic rope that
has proved to reliably and safely position MODUs in exceedingly deeper water.
Furthermore, the boom in MODU day rates has triggered a new wave of MODU
newbuildings, introducing more State-of-the-art dynamically positioned (DP)
drillships and 5
th
Generation Semisubmersibles. This adds another dimension to
the debate as synthetic mooring technology could see older rigs compete with
these new vessels for deepwater drilling programs. Additionally as fuel cost
continue to surge, it's interesting to see what impact a moored passive system has
on the bottom line compared to a DP solution.

The idea of using synthetic mooring to bring Semisubmersibles into deeper waters
without using DP is generally known within the industry and is increasingly gaining
acceptance amongst operators for their deepwater operations. However it is still far
from normal practice and not much has been said with regards to applying this
mooring technology to a drillship even though similar technology is already used to
10
moor monohulls for Floating Production Storage and Offloading (FPSO)
applications. At first glance there is the potential for savings on DP operation costs
in a rising fuel and day rate environment while still enjoying the versatility that a
drillship has to offer. This is an area that will also be touched upon in this research
and hopefully shed some light if there is any merit to considering this scenario.

These questions do not have a straight forward economic answer as there are
many operational and technical variables that greatly affect the type of MODU to be
employed and ultimately the positioning means to be utilized. What may apply and
make sense for one geographic location, may indeed not be viable for another.
This research will present economic analysis of the various positioning scenarios,
and also provide insight into how other factors may ultimately make other
alternatives more attractive or even necessary.

1.1 Methodology
n recent years the demand for energy is reaching unprecedented highs and
having a profound effect on price levels. This naturally has a domino effect on the
offshore industry which is today seeing a tremendous boom in demand and
activity. This surge in offshore activity has triggered a significant new boom in
MODU orders many of which are DP drillships or high end Semisubmersibles.
This boom is particularly dramatic in the deepwater sector increasing the existing
MODU fleet with 10,000ft water depth capability by nearly 70% over the next 3
years and more orders being announced every month.

This research started from the curiosity of the author into why this newbuilding
wave included so many DP MODUs, particularly drillships especially during a time
of high fuel prices and in the face of new technology such as synthetic moorings
that offered an alternative in deep water. This question ultimately deals
specifically with the economic and operational issues surrounding the means by
which a Mobile Offshore Drilling Unit maintains station while working on a well.
Ultimately the research question became;

Which method of station keeping for MODUs makes the most sense in
deepwater taking economic and operationaI considerations into account?

During the investigation of this research the author received many questions from
individuals with traditional shipping backgrounds into the particulars of the
offshore industry, which although is a maritime sector services a very particular
and separate niche market. For this reason the author wanted to approach the
subject in such a way that a person with limited knowledge of the industry but with
a general maritime background could follow the reasons for the question and
subsequent attempts at answers.

Accordingly in Chapter 2 a very brief overview of the offshore industry is given,
explaining the different types of drilling activity, and the various vessels involved
in such operations. Furthermore a review of the current market for such vessels is
11
given as well as an indication of future demand and areas of growth in deepwater
activity. Jack-ups are also a type of MODU however it is a bottom bearing unit
and as such limited to the shallow water market which is not relevant to this paper
and thus will not be discussed.

n chapter 3 the focus is narrowed specifically to the issue of station keeping
explaining the two basic options available, mooring and dynamic positioning.
These two different approaches are at the heart of the question and an
understanding of the elements involved as well as the options that exist within
each option is essential. This review of the two approaches deals not only with
technical aspects but also casts light on the relevant economic issues of
individual elements within each option.

With an understanding of the elements of station keeping in the offshore industry,
chapter 4 introduces and explains six MODU cost models that will be used for the
economic evaluation of various positioning alternatives. The section goes into
great detail to explain the different assumptions made and the reasons behind
these choices. n providing these detailed descriptions a clear picture is gained as
to how the various operations occur. At the end of this chapter a basis case from
an operator's perspective is established the variables of which will be analyzed in
order to understand what the impact is on the overall economic picture.

n chapter 5 a detailed sensitivity analysis of the basis case is presented on the
major variables affecting the economics of positioning and any general
impressions that can be discerned from this analysis. Building on the economic
picture Chapter 6 brings the analyzed variables into context with operational
issues considered as well.

Finally conclusions are reached which are based on the research material
presented and the cost models developed. These models are based on the best
operational data available to the author directly from industry sources. Additionally
some limited perspectives are offered based on personal professional experience
in industry.

During the information gathering stage of the project extensive literary sources
such as industry journals and conferences were consulted on the various
technical issues, market conditions, and forecasts. A very valuable source of
information and wealth of perspectives came directly from industry, the author
being very fortunate to have access to, or interviews with the following people;

Capt. Andy Potter, Master of the SBX 1, with over 10 years experience in
the offshore industry including semis, drillships and dive support vessels.
Capt. an MacKay, former Master of the GSF Jack Ryan, with over 25
years experience in the offshore industry on every conceivable type of
vessel.
Capt. Avery Brott, Senior DPO aboard the GSF Jack Ryan, with over 10
years experience in the offshore industry on semis and drillships.
12
Mr. Chris Condon, Marine Supervisor aboard BP's Thunder Horse FPS,
with more than 10 years experience in the offshore industry.
Mr. Marco Beenen and Dr. Jaap-Harm Westhuis of GustoMSC, a design
firm with extensive experience designing MODUs for the offshore
industry.
Mr. Rigo Bosman of Royal DSM, manufacturers of the synthetic fiber
Dyneema.
Mr. Mark Reemers of SPT Offshore, a leading offshore contractor
specializing in suction piles, anchors and self installing platforms.

The author is indebted to the above mentioned individuals who were a great
source of information, interesting discussion, and a reality check for the
hypothetical scenarios presented later in this work.

t is important throughout this research for the reader to keep in mind that the
perspective of the client or operator as it is referred to throughout the paper is
taken. Furthermore the economic evaluation focuses on operational costs and
some capital costs. The subsequent income directly from these expenditures
cannot be determined because the drilling activities only form part of the overall
process required for to generate income from online wells.

























13
2 The Offshore Industry

The offshore industry has evolved tremendously from its humble beginnings some
50 years ago. t represents a vital element of the global energy infrastructure, and
with demand forecasted to double or even triple in the next 50 years, this industry
will play a pivotal role in meeting these needs. ndeed the deepwater sector is one
of the last remaining frontiers, with oil and gas companies having only begun
exploring about half of deepwater basins around the world and already the
equivalent of around 90 billion barrels has been found. Geologists predict that
well over 180 billion barrels remain to be discovered. Today deepwater accounts
for approximately 5% of the 84million barrels produced worldwide per day and
expected to supply 9% by 2010. Presently major investment in the exploration
and development of offshore oil and gas fields is taking place around the world in
such places as the Gulf of Mexico, the Caribbean Sea, Alaska, Newfoundland,
Mexico, Brazil, Venezuela, West Africa, the North Sea, the North Atlantic around
Greenland, the Barents Sea, the Caspian Sea, Western Australia, Malaysia,
ndonesia, New Zealand and the South China Sea.


Figure 1: Deepwater OiI and Gas production forecast Source: CERA (JuIy 2005), IFP

t is important to recognize that not everything in the offshore industry is an oil rig
or platform, two terms that are very much abused and often used incorrectly. This
is a multifaceted industry, requiring a vast array of activities to build and maintain
the massive and expensive infrastructure. Apart from MODUs used to drill the
wells, there are other vessels performing many different functions. These include
seismic survey vessels for evaluating prospects, offshore supply vessels to
provide logistical support, anchor handlers for mooring operations and towing,
pipe laying vessels to tie in wells to production facilities and also tie these facilities
to shore, shuttle tankers moving crude ashore from production facilities and dive
14
support vessels to monitor and work on subsea equipment. Beyond that there are
a host of key offshore activities performed by production facilities either fixed or
floating of many different configurations which initially treat crude and get it
moving ashore.

n all of these distinct activities the industry is generally characterized and defined
by the water depth in which operations are taking place. These definitions change
over the years as technological advances bring greater capability. Today, all
activity in water depths greater than 4000 feet is generally referred to as
deepwater; some also make the distinction of Ultra deepwater which is generally
anything around 3,000 feet or more. Currently the upper limit for the latest
generation MODUs is around 12,000 feet, but very few are actually outfitted to
work at these depths without additional equipment and/or upgrades. Today there
are about 101 active MODUs worldwide that can operate in water depth in excess
of 3000ft. This fleet is made up of 29 drillships and 72 semisubmersibles.

For the drilling market, shallow water activity out to about 450 feet is serviced by
bottom bearing jack-up rigs which are towed to location by tugs and then "jacked
up by the unit's own large legs. For water depths beyond what jack-ups can
reach, semisubmersibles and drillships are used, the capability and sophistication
of which generally increases with water depth.
2.1 Exploration & Development
Fundamentally there are two steps involved in the industry. The first is to find the
oil & gas and the second is to get it out of the ground and ashore in an
economically viable way.

nitially Seismic surveying techniques are used to map out geological structures
that are most likely to contain petroleum reservoirs. Once promising areas have
been identified a decision is made to drill an exploratory well to verify the actual
existence of petroleum and to obtain more data as to the size and quality of the
well. Using directional drilling techniques many side tracks can be drilled from a
single well to explore various parts of the formation geologist may be interested
in. An exploratory well's primary purpose is for data collection but can be drilled in
such a way that it can later be re-entered and used for producing the well if it
should prove worth developing.

Once a reservoir has been proven and its size and quality appear to be
economically viable to produce, a decision is made to kick off the development
phase of the reservoir. First the original exploration wells have to be completed or
new production wells drilled in the optimal locations. A completed well basically
means that it is capable of delivering crude oil or gas. Unlike an exploratory well,
completed wells have a special production liner which is inserted in the well bore,
perforated at the appropriate depth and fitted with special screens to allow ingress
of petroleum but not sands. Finally, a completed well must be fitted with a device
called a Christmas tree, or simply a tree on the wellhead. This is a subsea device
15
that allows the well to be regulated via umbilical connections from an eventual
production facility.


Figure 2: Deepwater OiI and Gas production forecast Source: CERA (JuIy 2005), IFP

Even after wells have been completed they are not connected to anything and
therefore still not online. The final phase of development involves the installation
of a new production facility for the wells to be connected to, or the connection of
the newly completed wells to an existing facility. f located some distance away
the wells must typically be connected to a central manifold linked by pipeline to
the facility. Offshore production facilities in the past were quite often installed
permanent structures resting on the sea bottom. Today modern production
techniques include specially designed or converted production vessels (FPSO),
mobile production units, semisubmersible, or spar shaped structures that are
tethered or moored to the sea floor. t is worth mentioning that while exploratory
wells can be drilled in very deep water the technology to produce and put these
wells online is always lagging slightly behind but rapidly catching up.

While the installation of a pipeline and production facility has nothing to do with a
MODU, completing wells, installing trees and manifolds does. The decision on
selection of what type of MODU to be used and whether DP or moorings is used
on a particular well is very much affected by the type of operation being
contemplated. Typically Semisubmersibles have been used for development
drilling, while drillships and particularly DP drillships have almost entirely been
used on exploration drilling projects.




16
2.2 Semisubmersibles

The Semisubmersible, which is often referred to as a semi-sub or just a semi, is a
term used to characterize a floating vessel of special construction that partially
submerges itself and is extensively used in the offshore industry. Semis offer a
very stable work platform in various environmental conditions and as such, this
hull design is used not only for drilling but other functions also such as heavy lift
cranes, floating production systems, worker's accommodations, work-over units,
dive support, and pipe laying. Converted semis are even being used for very high
tech applications such as launching rockets to deploy commercial satellites, and
housing to a large missile defense X-band radar.

n drilling the origin of the Semisubmersible is largely attributed to another earlier
class of mobile drilling unit simply called a submersible. t was a platform looking
unit with columns used in water depths of up to 80ft which was flooded and
allowed to rest on the bottom. t was then re-floated for transit to a new location.
n 1961 Shell Oil Company became the first to operate a submersible, the Blue
Water Rig No.1 as a semi-submersible having noted the stable qualities of the
unit in a semi-submerged condition allowing it to work in deeper waters.

Today semi-subs usually consist of twin pontoon hulls with transverse bracing
and columns rising up from the hulls to a box shaped deck structure supporting
the accommodation and drilling package or any other payloads desired. Many
variations exist, with some older conversions having a triangular or even
pentagonal shape. n the pontoons and columns are numerous ballast tanks
interconnected by a network of pipes and pumps. When working on a location
these tanks are flooded with seawater in order to fully submerge the pontoons
and bring the unit down to its working draft, providing a very stable work platform.
n order to move the unit again the vessel is ballasted back up to a transit draft
with the pontoons usually on the surface. The unit may also need to ballast up to
an intermediate survival draft on occasion in order to cope with particularly harsh
weather events.

n terms of positioning initially Semis were moored to the bottom with
conventional chain and anchors later evolving into chain/wire mooring
combinations as water depth increased. Mooring spreads varied by design some
having as few as 4 or as many as 12 legs, but 8 is the most typical today.
Dynamic positioning solutions may also be installed on semis featuring powerful
tunnel or azimuth thrusters. However they almost always retain anchor winches
for mooring even where full DP capability exists. Some semis may also
alternatively have limited DP capability to assist the mooring spread only.

The displacement and hence size of semis also varies significantly and has a
major impact on the variable deck load, the capacity available for the various
equipment, bulk materials, drilling fluid, riser, drill pipe and other items carried on
deck. At this point it's important to just mention that semis are characterized by
rather limited variable deck load. This requires careful monitoring and planned
17
from the operator so that only what is needed for immediate operations is kept
onboard. This makes semis somewhat dependant on reliable logistical support.

n most cases Semis have limited propulsion if any and need to be towed
between wells by powerful tugs or anchor handling vessels. Since this method is
very slow, typically 2-4kts depending on environmental conditions, for longer
repositioning between regions a semi may be loaded aboard a heavylift vessel
(also called a semi-submersible but a monohull in this case). Some of the latest
dynamically positioned semis are however capable of relatively high transit
speeds of around 9-10kts. This is a significant consideration when selecting an
asset as it directly impacts the mobilization/demobilization costs.


Figure 3: Semisub cIassifications Source: Mark ChiIders

Drilling semi-submersibles and indeed all mobile offshore drilling units are often
characterized by generations to categorize their general capabilities in terms of
technical specifications. These included criteria such as operational water depth,
deck loads, drilling equipment, positioning systems and environmental operating
capability to name a few. The latest 6
th
generation semisubmersibles which
predominantly focus on harsh weather capability are just now starting to emerge
in shipyards as part of the new boom in MODU construction while many of the
earliest 1
st
generation semis have already been scrapped. Semisubmersibles
generally undergo heavy modifications during their service life. Many semis built
as 2
nd
generation have been upgraded to the latest 4
th
and 5
th
generation and
compete against new builds in these categories while most 3
rd
generation semis
18
were largely built in category, very few having upgrades or extensive
modifications. Figure 3 in this section gives an idea of the characteristics of each
existing generation.

There are many elements that characterize the performance capability of a semi,
but certainly water depth capability is a significant benchmark, and largely
determines how other components of the semi are configured. Furthermore
deepwater drilling activity is starting to move into very harsh and cold regions of
the world. Semis have to be specifically designed to cope with harsher sea states
and wind conditions, as well as being winterized not only to protect workers from
the elements but to ensure that machinery continues to operate in sub-zero
temperatures.


Figure 4:The Eric Raude, 5th Generation harsh weather winterized Semi Source: Ocean Rig

When making a direct comparison to drillships, semis are considered to be more
stable with better motion characteristics. They offer better station keeping ability,
optimal crew size and lower overall operating costs. However as already
mentioned semis generally suffer from slow transit speeds and lighter variable
deck-load capability increasing mobilization costs and limiting operations to areas
where extensive logistics support is available or can be organized.

Due to their sophisticated design semis have traditionally been more expensive to
construct than drillships, the only other type of drilling unit capable of working in
similar water depths. n recent years however the latest drillships have also
significantly increased in construction cost. The latest order for a double hull
drillship placed with Daewoo ship yard in South Korea for Transocean reached
$650 million. By the same token the massive 6
th
generation harsh weather,
winterized Aker H-6e Semisubmersibles are being delivered turnkey for a price
tag of around $600 million per unit.
19

Semisubmersibles today form the backbone of the worldwide MODU fleet
servicing the deepwater drilling sector. They can be found operating in all regions
around the world, including the land locked Caspian Sea. They service a wide
range of water depths from as shallow as 500 feet all the way down to 12,000
feet. The designs have proved to be versatile remaining commercially competitive
years after they are built, despite the rapid changes in the industry towards
deepwater through impressive and substantial upgrades. Today the worldwide
deepwater fleet of semisubmersibles capable of operating in more than 5000ft
stands at around 46 units. There is little doubt that semis will continue to be the
mainstay of the deepwater sector with more than 3 times the number of new
semis on order than drillships.

2.3 Drillships

Drillships are the only other category of MODU along with semisubmersibles that
can operate in the deepwater market. They are monohull vessels of a more
familiar merchant vessel form with a drilling package installed. n fact early drilling
vessels like the Submarex were largely based on converted merchant or surplus
navy vessels and mostly moored with 4 to 8 anchors, or even lines to mooring
buoys.

The first drillship with a moonpool, (an opening in the center of the vessel though
which drilling operations can take place) capable of drilling oil wells appeared in
1956, the so called CUSS of the CUSS group. This was a joint venture between
Continental Oil Co.(Conoco), Union Oil(Unocal), The Superior Oil
Co.(ExxonMobil) and Shell Oil Co. formed to explore technology for offshore
drilling. t was recognized early on that monohull vessels moored conventionally
with anchors was a cost effective means of drilling offshore but were very
vulnerable to environmental forces on the beam. Even with enough holding power
in the mooring system, the motion characteristics with seas on the beam were
such that drilling operations had to be frequently suspended.

n 1957 the converted World War surplus vessel CUSS 1 was moored on
location in 350ft of water and began testing an innovative birdcage structure
guided by wires onto the wellhead a method that would form the basis for
deepwater drilling technique into the next century. n 1961 the vessel was fitted
with four steerable propellers controlled by a primitive system thus ushering in
one of the first attempts at dynamic positioning for station keeping. The system on
the CUSS was fitted with a hydro acoustic system for position reference, using
sound ranging from beacons lowered to the seabed. Using these upgrades the
CUSS was able to drill a series of experimental wells in up to 3,500ft of water
while maintaining position an acceptable radius over the well.

Later the same year, the shell Oil company launched a small core drilling vessel
the Eureka, which was a much more seaworthy vessel than the CUSS and had
20
the first automatically controlled dynamic positioning system onboard. The Eureka
proved surprisingly successful and capable of drilling in over 4000 feet water
depth even in quite adverse weather conditions.

Dynamic positioning however was considered too risky of a technology for oil well
drilling and in 1962 came the first purpose built drillship the Glomar delivered to
Global Marine nc with conventional mooring of the bow and stern. n 1963 the
Discoverer was launched, another moored drillship that featured the first turret
system around it moonpool amidships. This allowed the vessel to be moored with
anchors while still keeping it's head, or stern into the weather with the assistance
of a bow and stern tunnel thrusters. Over the years more drillships appeared, but
it wasn't until 1971 with the Sedco 445 that the first purpose built dynamically
positioned exploration drillship appeared. She was also fitted with anchor winches
fore and aft so that she could be conventionally moored if needed.

Figure 5: The CUSS I, Source: GIobaI Santa Fe

Perhaps the most famous drillship is the Glomar Hughes Explorer, supposedly
built by the reclusive entrepreneur Howard Hughes to mine manganese nodules
off the ocean floor in the Pacific. n reality it was an undercover CA operation
called the Jennifer Project to recover the missing K-129 Soviet submarine which
sank some 750nm off Hawaii. By all accounts in August, 1974 this dynamically
positioned drillship was able to successful recover large parts of the sunken
submarine in 16,500 feet water depth.

The drilling downturn of the mid-1980's saw interest in dynamic positioning and
deepwater capability largely evaporate. Drillships that avoided being scrapped,
21
laid up or sold to other industries were almost exclusively moored in shallow
water operations.

The classification of drillships into generations as used for semis is not as
prevalent but is sometimes encountered in the industry. Typically, the capability of
a drillship is again defined by the water depth it can operate in which also dictates
the outfitting of the vessel. Some of the earlier vessels built in the 1970's are still
very active in the industry today, many of them featuring DP and conventional
mooring or conventional mooring only. Newer construction drillships have been
built exclusively with DP capability. Just as with Semisubmersibles, the
capabilities of these vessels vary greatly, with many older units having been
heavily modified and upgraded to remain competitive in the deepwater market.
Today there are approximately 24 active drillships worldwide which have the
capability to operate in water depths exceeding 5000ft.

The latest Drillships are not only built with the current maximum ultra-deepwater
thresholds in mind, but also increasing drilling packages efficiency like introducing
dual-activity derricks to cut down the duration of a well program. Double hull
construction has also made its way into drillships to cater to an increasingly
environmentally conscious and regulated industry. Furthermore some vessels
are being specifically designed for harsh weather conditions and winterized to be
able to operate in emerging markets in parts of the world characterized by
extreme weather. This is in fact an area of weakness often associated with
drillships which have poorer motion characteristics than semis and must alter
heading to deal with heavy weather conditions.


Figure 6: DP DriIIship GIomar Jack Ryan Source: GIobaI Santa Fe

22
Drillships are typically used for shorter duration exploratory wells, are favored
over semis when operating in remote regions with limited logistics support due to
their much higher variable load capability and deck space. Additionally these
vessels can transit at 10-12kts, considered rather fast in the drilling industry,
especially when compared with a semi under tow, leading to lower mobilization
costs and quicker turnaround between wells in a sequential drilling program.

Eventually some considerations like availability, length of contract and safety
record which have very little to do with the technical specifications and capability
of the drilling unit may be the deciding factor.

2.4 Mobile Offshore Drilling Unit Market

n the offshore industry, drilling contractors negotiate their services with
exploration and production companies either under a day rate contract or a
turnkey contract.

The majority of contracts are the so called day rate contracts. This is simply a
negotiated agreement for a specific fully manned unit over a defined period of
time, during which it must maintain the stipulated performance levels in exchange
for a daily hire payment called a day rate. The contracts clearly define
performance benchmarks that must be met to avoid penalties typically in the form
of down-time or a reduction in day rate. t is also common for a certain amount of
down-time allowance to be built into the contract, typically 24 hours in a month.
While anything can be negotiated, operational cost items such as fuel, logistics
support, and mooring costs are typically for the operators account. n the
deepwater sector, units are typically secured on long term contracts lasting
several years, with options for extensions; however, this is largely driven by
market conditions.

Fundamentally a drilling contractor is in the business of drilling a well, not
necessarily chartering out rigs and therefore may also be willing to undertake
projects on a so called turnkey or fixed price basis. n a turnkey project, the
drilling contractor for a fixed price will drill a well, to the clients specifications in a
given time period. The contractor takes on the risk of operational cost and
overruns, but does not take on any of the exploration risk or payoff. Turnkey
contracts typically have a bonus/penalty structure for the delivery time of the
completed project. Unanticipated overruns or well control situations can have
disastrous financial consequences to the contractor, while early completions are
generously rewarded. A contractor may use his own rig for a turnkey project but
can also go out and operate another contractor's rig on a day rate contract to
complete the project.

23
2.4.1 Demand; Record Day Rates
The MODU market in 2006 shows very strong worldwide demand with utilization
of available rigs at virtually 100% in every geographic region for every type of
unit. Day rates have reached record breaking highs with further increases
expected. Oil majors and drilling contractors alike have been reporting record
profits, which is further increasing spending in 2006 and budgets for 2007.

The record results in 2005 have also had adverse affects in terms of the
industry's image worldwide, with the public and regulators questioning
seemingly "obscene profits. n the United States this was particularly
pronounced as oil majors were largely seen to be taking advantage of the
devastation left in the wake of Hurricane Katrina and Rita.

None the less the industry is set for another record year in 2006 with current and
forecasted demand for MODUs outpacing supply in almost every major
geographic region with offshore activity. As the markets differ by region it is
worth looking at them each individually.


Figure 7: WorIdwide DP fIeet comparison and deepwater areas. Source: Exxon MobiI




24
2.4.1.1 The GuIf of Mexico
The backlog of contracts for the US Gulf is at an all time high, with only five
floaters (term used to describe any non bottom bearing MODU) showing
availability in 2006. Pending contracts or extensions on these units will push
availability for a semi and/or drillship into 2007 at the earliest. A number of units
will be moving out of the region during the year but vessels moving into the Gulf
are expected to keep the supply relatively stable. The continued strong demand
for floaters will ensure that rig availability will remain non-existent in 2006,
except for the odd negotiated sub-charter.

Not surprisingly this market environment has been pushing day rates to
unprecedented highs. As of Jan 1
st
, 2006 the highest day rate for a drillship was
around $475,000 for the Discovery Spirit with 10,000 foot water depth rating.
The highest day rate for a semi was $407,000 on a 4 year contract, for the
Noble Danny Adkins with 12,000 foot water depth capability currently under
construction in Singapore. The highest day rate for a Semi actively drilling in the
US Gulf is $365,000 for the Ocean Baroness. t is worth noting that Ocean
Baroness was built in 1973 but has been heavily upgraded to a 5
th
Generation
semi capable of working in up to 8,000 feet water depth.

There are a number of floaters on contract well below current high rates that are
expiring in 2007, and it is expected that these rigs will be inline for significant
rate hikes for extension or new contract work. n 2005 rigs coming off contracts
saw day rate increases on the order of $50,000 to $100,000 per day depending
on capability and specifications. This is expected to continue into the
foreseeable future.

2.4.1.2 The North Sea
The North Sea region with exception of the Norwegian sector had seen a
significant drop in activity in recent years; however 2005 saw a tremendous
resurgence in the region and the market is now as strong as anywhere else in
the world. The deepwater activity in the North Sea is largely serviced by
semisubmersibles given the harsh weather conditions with only a few drillships
available worldwide that can operate here. Availability for 2006 is again limited
and forecasts for 2007 show a shortage for floaters. However there are
concerns about a UK government announcement increasing the Supplementary
Corporation Tax (SCT) rate by 10% which isn't expected to have any effect in
the near term with most rigs already on contract, but this may affect demand in
the long run.

n terms of day rates this is the only region in the world with a contract for a
floater at $500,000 that will commence in 2007. Generally the contracted day
rates as of July 2006, for high spec deepwater units needed in this region range
from $330,000 to $465,000, with current bids ranging around $350,000 to
$400,000. Norwegian Sector contracts generally obtain a slight premium due to
the regulatory environment.
25
2.4.1.3 Asia/Pacific
Just as in other regions the rig market for 2005 performed strongly with equally
strong expectations in 2006. n the deepwater sector there is a known current
shortage of about 5 semisubmersibles for Southeast Asia and overall no
deepwater availability until 2007. Two semis coming off contract in the region in
August and September 2006 already have commitments in place; however there
are two laid up drillships in the region that could be re-activated in 6 months
time. A shortage of deepwater units is also forecasted for later in 2006 in ndia,
China and Japan, with Australia experiencing more balanced conditions.

n terms of day rates, many of the semis and drillships operating in this region
are older generation units with more limited water depth capabilities hence
fetching around $150,000 with new fixtures for more capable deeper water units
at around the $200,000 range.

2.4.1.4 West Africa
This region has had a very active deepwater sector for many years and not
surprisingly is experiencing the same strong performance and rig shortages as
in other regions. All semis and drillships in the region are under contract with no
availability in 2006 except for negotiated sub-charters. The forecasted shortage
by the end of 2006 is expected to reach 3 to 5 semisubmersibles despite 3
semis scheduled to reposition into the region by year's end as Shell,
ExxonMobil, and Total dramatically increase their drilling activity in the region.

The day rates here are also solidly driven by the same supply shortage story.
Older generation Semis of shallower water capability are earning around
$230,000 with more capable higher spec units earning around $320,000 per
day. There are also a number of the latest generation ultra deepwater units
working in the West Africa region fetching impressive day rates in the $450,000
to $500,000 range.
2.4.1.5 Latin America
The deepwater market in Latin America is predominantly in Brazil with some
semis also working in deeper waters off Mexico. Availability in this region is non-
existent with all units tied up until mid-2008. Two drillships will be leaving the
region in 2006 however Petrobras and other operators have signed contracts
that will bring 5 deepwater units into the region for contracts commencing over
the next couple years. n the waters off Mexico, only one of seven semis
working in the area is due for contract renewal in 2006 and expectations are that
this market will remain balanced.

Day rates in the region are relatively low given that Petrobras, the national oil
company of Brazil and a major player here, negotiated most of its contracts for
deepwater units early in 2005 avoiding the dramatic rise in rates that occurred
later that year. Petrobras negotiated a maximum day rate of around $220,000
26
for a rig that would in today's market fetch around $400,000. By comparison
Shell contracted two less capable rigs late in 2005 for around $260,000.

2.4.1.6 The Arctic Ocean; A New Frontier

Figure 8: New harsh weather offshore regions

The offshore Arctic regions near Greenland, the Barents Sea and Sakhalin are
emerging as major exploration and development areas with an estimated 75
billion barrels or nearly 25% of global undiscovered reserves. n the waters off
Norway and in the Barrents Sea, 41% of wells drilled have proven oil & gas
reserves and it is expected that more than 300 exploration and development
wells will be drilled in this region over the next 15 years. Even more interesting
are the Russian regions in Shtokman and the Kara Sea where only 50 wells
have been drilled. Energy analysts expect that this area will be heavily explored
and developed over the next 15-30 years with as many as 2,700 wells to be
drilled. This would keep some 15 rigs busy for 30 years alone.

These regions are characterized by harsh weather conditions not only in terms
of sea state but also wind and air temperature. This places an added challenge
on operations and requires MODUs that are capable of handling high
environmental forces as well as being properly winterized to protect personnel
and equipment. The Harsh weather MODU market is dominated by semis;
however there are a few active drillships that can deal with these conditions as
well as 2 more being built for Stena Drilling at the moment. There are only 16
MODUs worldwide that can handle this kind of environment, of which 3 are
currently under construction and even fewer actually fully winterized. Aker last
year announced its intention to enter this market with the creation of Aker
Drilling and orders for 2+2 of a massive new Aker H-6e harsh weather
winterized DP Semi design. With limited yard capacity for high spec MODUs
over the next 3 years a supply shortage scenario is expected, and day rates for
harsh weather, winterized vessels could reach the $600,000 day rate range or
more.

27
2.4.2 SuppIy in the Long Term; New Construction Boom

The present rig supply deficit worldwide has spurred a new build construction
boom and is headed for levels that haven't been seen in 2 decades. t has already
surpassed the last boom experienced in the late 1990's which saw the first re-
introduction of drillships since the downturn of the 80's with some 16 new state-of-
the-art DP drillships. This represented a more than 40% increase to the worldwide
fleet of drillships.

As of July 2006 there are 33 deepwater MODUs on order including options, many
of which have been placed in the last six months. Specifically there are 8 DP
drillships and 25 semisubmersibles of various configurations on order
representing a total cost exceeding US $15 billion. Of these orders only 9 are
being constructed against firm contract commitments the rest being built on a
speculative basis. Many orders have already changed hands, like those for
Smedvig and Mosvold going to Mr. Fredriksen's new company in the drilling
arena, SeaDrill.


Figure 9: Deepwater MODU (>3000ft) Demand Forecast. Source: FearnIey Offshore


At the same time more is being invested to make older units competitive with
major upgrades either underway or planned on 4 drillships and 8 semis, while
minor upgrades are already taking place on 12 other semis including 1 being
winterized for Arctic conditions.
28

Given all the new building and conversion activity, shipyard space is at a
premium, with some work taking place at yards that have not undertaken offshore
construction in over a decade or with little previous experience. Singapore's
Keppel FELS group, SembCorp and Jurong, a subsidiary of Sembcorp, have a
large share of the Semi orders with 14 units scheduled for delivery between now
and 2011. China is strongly emerging in shipbuilding with offshore specialty yard
Yantai Raffles capturing 8 orders for semis of which 5 are options. Furthermore
the two Bingo 9000 semis being completed in Singapore's Jurong shipyard had
their hulls built at Dalian New shipyard in China. Korea has the enviable position
of being the only country building drillships with 6 on order at Samsung and 2 at
Daewoo. Daewoo additionally has firm orders for 5 semis. The only new building
deepwater units on order outside Asia are the 2+2 Aker H-6e 6
th
generation harsh
weather Semis to be built at Aker Stord yard in Norway for US $600 million each.


Figure 10: Deepwater MODU (>7500ft) Demand Forecast. Source: FearnIey Offshore

The situation is particularly interesting in the ultra deepwater fleet. Today there
are 13 active DP drillships and only 2 active semis that are rated and equipped for
10,000ft. This exclusive group is about to receive a significant boost in the coming
3 years with 8 new drillships and 17 semis currently under construction with
similar capability.

While record profits in 2005 have lead to widespread speculation of further
consolidation and mergers amongst drilling contractors in 2006, the opposite has
taken place with several new companies emerging in the rig order frenzy. t
29
remains to be seen however if they will actually operate their ordered rigs upon
delivery or sell them at a premium to an established contractors before then.

2.4.3 A Shipping CycIe in the Offshore Market?
MODU Orders 1954-JuIy 2006
0
20
40
60
80
100
120
140
160
180
1
9
5
4
1
9
5
8
1
9
6
2
1
9
6
6
1
9
7
0
1
9
7
4
1
9
7
8
1
9
8
2
1
9
8
6
1
9
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0
1
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9
8
2
0
0
2
2
0
0
6
Year
N
u
m
b
e
r

o
f

R
i
g
s

Figure 11: number of MODUs orders reported 1954-juIy2006. Source ODS-Petrodata Inc.

Drawing a parallel with the rough 7 year cycle in shipping, looking at the graph of
MODU construction for each year since 1954 it's interesting to note peaks that
roughly fit a similar trend. We notice spikes around 1957, 1965, 1975, a
tremendous boom in1981, the devastating effects of which dampened the
industry until the late 90's with a peak around 1998 and the current boom kicking
off in 2005. n fact one may venture to say that the "normal cycle in the offshore
drilling industry could indeed be slightly longer than 7 year shipping cycle due to
the even greater capital intensive nature of the units being constructed, and the
longer lead times required to build vessels that are technologically more
complicated than average commercial vessels.

The current boom in speculative construction has fueled concern as to whether
the industry is overextending itself and setting up for another deep downturn.
Going into the 1980's expectations were nothing but promising into the
foreseeable future, with high oil prices at around $40 per barrel, new offshore
tracts becoming available for lease and a US government deeply concerned
about energy security. The drilling unit construction boom of the early 80's would
prove to be a false start, with OPEC increasing production realizing that it was
pricing itself out of the market, and consumers finding energy substitutes to oil in
their daily consumption. By 1986 despite the political situation in the Middle East
the price of oil collapsed to $10 per barrel. At the same time exploration drilling in
the US continental shelf was meeting little or no success, while vast deepwater
30
reserves that had been discovered were not worth developing with the market at
$10 dollars a barrel. The drilling industry subsequently went into a deep
recession, many drilling contractors going bankrupt.

Today, political unrest and uncertainty continues in the Middle East and indeed in
other key oil producing areas around the world. Along with near capacity
production this helps to fuel concern about stable supply levels. On the other side
of the equation there is strong demand worldwide, particularly due to energy
thirsty emerging nations like China and ndia. With these elements present the
economics for strong performance in the offshore sector seem to be in place for
the foreseeable future. What should be disconcerting though is the velocity of
demand for rigs, which has inevitably led to the recent unprecedented increase in
day rates. While most drilling contractors feel comfortable with their forecast for
rig demand in the high spec deepwater markets, serious concern about an
oversupply situation has already been voiced about the glut of construction for
shallow water jack-up units.

Just as in shipping, drilling services are a derived demand, largely if not entirely
influence by commodity prices. t goes without saying that commodity prices while
experiencing historically high levels are always vulnerable to random and
unpredictable world events. Some newbuildings have the luxury of multi year
contracts, but the majority is speculative. While this is taking place on seemingly
sound demand forecasts it always remains to be seen how foreseeable the
foreseeable future actually is especially in this new admittedly unprecedented
economic environment.


2.5 Anchor Handling Tug Supply Vessels (AHTS)
The offshore industry is supported by an array of different vessels that range from
survey vessels that provide valuable seismic data on potential locations of interest
to supply vessels that bring the physical goods and materials that are needed by
rigs and offshore installations to continue daily operations.

One such vessel class that is relevant to the operations addressed in this research
is the Anchor Handling Tug Supply vessels (AHTS) sometimes also referred to
simply as an anchor handler. Their primary purpose, as the name suggests is to
assist MODUs in mooring operations, and to tow non-self propelled MODUs
between locations. These vessels can also perform logistical functions shuttling
supplies and equipment to offshore locations. This latter function is seldom used for
prolonged periods as the day rates are typically significantly higher than an
offshore supply vessel (OSV) designed specifically for that role.

AHTS are highly specialized purpose built vessels characterized by high bollard
pull. They typically have short bare steel work deck equipped with heavy duty deck
winches, deck storage reels, special deck fairleads, wire tuggers, hydraulic pop-up
bits and/or shark's jaws, and a large stern roller across an open stern. Some
31
Anchor handlers may also be equipped with an A-frame over the stern and when
working on installing deep water suction piles they may carry a 3
rd
party Remotely
Operated Vehicle (ROV) especially if performing the operation unassisted. They
are typically about 65m-90m Length over all (LOA) with twin screw mains, and
equipped with a variety of azimuth or tunnel thrusters to give them great
maneuverability. Furthermore to harness this great maneuverability they are
typically outfitted with at least a joystick control or class or dynamic positioning
system featuring DGPS, laser fan beam or even acoustics for positioning.


Figure 12: 17000 BHP AHTS Asso Ventitre Source: Vic Gibson


As with many other types of vessels serving the industry, the rapid growth into
increasingly deeper waters has had a significant impact on the design, and power
requirements of anchor handlers. The greater length of mooring legs and the
longer distance it needs to be carried for a deeper water mooring spread directly
affects the amount of bollard pull these vessels must be equipped with. Anchor
handlers can have as little as 4000bhp for shallower water activity, but more
commonly AHTS with more than 10,000bhp are a prerequisite when moving into
waters over 2000 feet. Today ATHS like the Maersk A-type are being delivered with
as much as 23,500 BHP or 280 t bollard pull.

Anchor handlers are an integral part of mooring operations. Semisubmersibles and
older conventionally moored drillships cannot moor without their assistance.
Depending on the type of mooring equipment, the water depth, mooring
configuration, local conditions or simply the operator's preference, one, two or more
anchor handlers may be employed for a mooring operation. t is also worth
mentioning that depending on region and the nature of mooring operation, the
anchor handler's crew may not be directly involved in the deck work of handling the
32
mooring gear but are responsible only to operate the vessel. Often a 3
rd
party crew
with specialized riggers is hired by the operator to handle the mooring equipment
on deck during an operation.
2.5.1 AHTS Market
There are a wide variety of anchor handlers available to the industry featuring
different arrangements but it is generally the power rating given in horse power and
bollard pull that is most significant in determining the day rate that a vessel can
obtain.

Just as in commercial shipping, vessels can be hired on a spot market or longer
term time charters can be negotiated with vessel owners. The concept of a day rate
persist throughout the offshore industry and serves as a general index for where
the market is at. Additionally regardless of the type of contract, fuel costs are
almost always for the charterer's account.
Over 6000bhp AHTS Market
0
20
40
60
80
100
120
Jan-98 Jul-00 Jan-03 Jul-05
Date
U
t
i
I
i
z
a
t
i
o
n

(
%
)
0
10000
20000
30000
40000
50000
60000
70000
D
a
y

R
a
t
e

(
$
U
S
D
)
Utilization (%) Day Rate ($)

Figure 13: AHTS Day Rates over 6000bhp Source: Workboat

As can be seen from the table in this section typically utilization rates, referring to
the number of vessels not on a fixed contract and available for immediate hire are
very high with anchor handlers especially for well equipped vessels with high
bollard pull ratings. Often vessels are sub chartered from one oil company holding
a long term charter to another that has an immediate requirement for an AHTS. As
can be imagined vessels with the high power ratings needed for deepwater
operation can often command a premium, and this cost component can
significantly affect the bottom line of a mooring operation.

The market day rates and utilization figures indicated are only for the Gulf of
Mexico; however, they give a representative idea of the tight market for AHTS
33
vessels. ndeed powerful AHTS seem to always be in short supply and
consequently come at a premium especially lately with the boom in offshore
activity.











































34
3 Station Keeping
The emergence of floating drilling units brought with it the need for station
keeping ability, or in other terms, the ability to safely and reliably maintain position
over the well head for as long as necessary to complete the project. ndeed the
need for station keeping ability is experienced throughout the industry in all
manner of applications from pipe laying to supplying offshore rigs and
installations.

Fundamentally there are two means of accomplishing station keeping. The first
method which has been around for centuries is by physically securing the vessel
to the bottom of the seafloor, mooring by nautical definition. This is a relatively
simple and safe, passive method but one that poses serious challenges as water
depth increases.

The second method which largely evolved as a direct consequence of efforts to
keep early drilling vessels on location in deeper water is called dynamic
positioning or simply DP as it is commonly referred to. Dynamic positioning as the
words imply is an active method using the vessel's propulsion to maintain the
desired position and heading. t is virtually unaffected by water depth as far as
positioning is concerned.

As conventional mooring systems using wire and chain near the boundaries of
their limits in terms of water depth, and the deepwater market continues to grow,
the only avenue into the deep seemed exclusively in the realm of dynamically
positioned vessels. However, technological advances in light synthetic materials
have allowed mooring solutions to emerge in water depths never before
imagined. This brings new life to a fundamental debate between DP and mooring
that has existed in the offshore industry for almost 40 years now.

3.1 Mooring Systems
A mooring system in its simplest form is no more than a device performing the
function of an anchor point and line connecting it to the vessel keeping it in a
desired position. n commercial shipping a mooring system today is predominantly
made up of a stockless anchor and a length of chain. n the offshore industry
however, the demands are quite different, one could characterize them as
extreme by comparison. t is not surprising therefore that mooring systems for the
offshore industry have evolved tremendously from their origin and through
innovation in design and materials are now pushing unimaginable boundaries.

Today a wide variety of solutions exist catering to the vast and diverse operational
needs of the growing deepwater sector. While innovation has been a key element
of success the industry is conservative in embracing radical step changes in
technology. The promise of small cost savings is often not enough to change
from tried and tested techniques especially when the consequences of a failure
can have huge financial, safety and environmental impacts.
35
3.1.1 ConventionaI mooring
Conventional mooring in the offshore industry has little or no resemblance to a
commercial shipping equivalent. While mooring in 600ft of water today is
considered extremely shallow by offshore industry standards, most commercial
vessels never have the need to anchor in more than 150ft and carry just enough
chain to do that. This distinction is being made, because what is considered
conventional mooring in the offshore industry is far from conventional to the rest
of the maritime world.

The first moored floaters primarily used chain and simple anchors or clump
weight to maintain position. Some early drillships and barges tied off to a pattern
of mooring buoys. Unlike anchoring a commercial vessel, it is important to
stabilize the exact position of the vessel to within a tight radius. For this to be
accomplished a spread of anchors is needed around the floater. Early drillships
typically had 4 anchor windlasses forward and 4 aft. With Semi submersibles the
design that is most common to this day is two windlasses in each corner.

As operations moved into deeper water more anchor chain was added to
provide the necessary scope. At one point however, adding more chain became
too heavy for the system, and indeed for the floater, having a negative effect on
the variable deck load of the vessel. This was especially pronounced on the
unique hull design of semisubmersibles which feature a small water plane area
and displacement. t was necessary to introduce steel wire rope into the mooring
systems which provided the necessary strength at a lighter weight.

Many older semisubmersibles and some drillships were extensively upgraded
with higher capacity anchor windlasses, larger anchors and additional floatation,
commonly referred to as blisters for semis. Some rigs carried their own wire
rope inserts while other smaller units had to have wire inserts installed by
anchor handlers. The overall effect of the introduction of wire rope into mooring
systems has been dramatic. MODUs that were designed to operate is less than
1000ft of water could now be taken well over 2500ft. At the same time, newer
generation semisubmersibles designed to use wire rope from the onset, could
moor in up to 5000ft of water using their own gear.

Going beyond 5000ft, wire rope and chain starts to present a number of
challenges, many of which stem from the sheer weight of the mooring system.
Apart from needing a rather large unit to offset the weight and the increasingly
negative impact on variable deck load, the restoring force in the system is not
adequate to provide a tight watch circle over the wellhead and begins to present
problems for drilling operations. Beyond that handling a system with that kind of
weight becomes dangerous, not only to the equipment which is put to its limits
and has to be handled exactly right, but primarily to the workers who are
exposed to potentially fatal accidents if something fails or goes wrong. This is a
major concern in an industry that takes safety and environmental protection very
seriously.
36
3.1.2 Taut Mooring & Catenary Mooring
Moorings used for MODU application fall into two compliant categories, catenary
and taut mooring systems. The primary function of a mooring system from a
technical perspective is to counteract the horizontal environmental forces so that
the vessel remains within specified position tolerances, otherwise referred to as a
watch circle. By the same token a system must be compliant or yielding enough
to allow for wave motion on the vessel.

The major difference between the catenary and taut mooring comes down to
weight again. Catenary systems are the conventional systems using
predominantly wire/chain and are still the most common. The station keeping
function occurs primarily by the action of the weight and shape of the system on
the vessel. t provides a restoring force towards the equilibrium point of the entire
system as environmental forces interact with the vessel. Unfortunately as water
depth increases, the efficiency of the restoring force diminishes. This is because
horizontal stiffness of the system counteracting environmental forces decreases
due to the increasing portion of the strength of the mooring line being consumed
holding up its own weight. This results in a less responsive system that cannot
safely and consistently maintain a desired watch circle. To overcome this
phenomenon it is necessary to introduce heavier chain and wire, which in turn
negatively impacts and greatly reduces the variable deck load of the MODU, thus
restricting deepwater operations with a steel catenary to the largest rigs in the
industry. Generally this limit is around 5000ft for the most capable rigs using a
steel catenary system.


Figure 14: Comparison of Taut and ConventionaI Moorings Source: BP

Attempts were made by the industry to introduce large submersible buoys on
chain/wire mooring legs to help support the additional weight of going deeper,
however many problems were encountered. The size and number of buoys
needed was significant. This not only representing a large increase in CAPEX for
37
the system, but also given the size of the buoys, the space they take up on AHTS
and the time to handle them increased OPEX dramatically. Consequently industry
consensus quickly ruled out the use of buoys as a practical means of going to
further depths with a steel catenary system.

Taut mooring systems were developed for deeper water applications where a
lighter weight system was necessary. These systems may use some chain and/or
wire rope, but they primarily use synthetic materials such as Polyester. Synthetic
materials are attractive because they are generally just as strong as steel if not
stronger but are much more buoyant in water. This dramatically reduces the
weight of the system, so a different principle is required to maintain station. This is
provided by making the legs of the system taut, going in an almost straight line
from the fairlead on the vessel to the anchor point. This also means that mooring
legs connect to the MODU at much larger angles. That directly results in a much
larger component of the line tension acting horizontally counteracting
environmental forces. The taut system thus provides the restoring force
necessary to maintain a tight watch circle that is 50 to 60 percent smaller than a
steel catenary system in similar water depth. At the same time the elasticity of the
synthetic material provides the compliant characteristics needed to deal with
wave motion on the vessel.

Taut mooring systems by virtue of their design also require a much smaller
footprint, (the distance that anchor point has to be placed from the desired center
or watch circle) than a catenary system for the same water depth. This direct line
to the seabed can reduce the required length of each mooring leg by as much as
70 percent. A mooring leg length in a catenary system is approximately 4 to 7
times the water depth as compared to a little over 1 times the water depth in
taunt leg system. This not only offers cost savings in materials and weight but can
also provide an operational advantage when working close to pipe lines and other
live installed subsea equipment. Even if the system has to cross over sensitive
subsea equipment, the threat posed by a heavy steel catenary system is far
greater than that of a light weight taut synthetic system.

The use of a taut leg system also imposes different requirements on the anchor
point. Unlike the catenary system that only exposes the anchor to a horizontal
force, the taut leg system has a significant vertical force component on the anchor
point, and therefore, specially designed anchors are needed to withstand both
vertical and horizontal forces. There are many different types which will be
touched upon briefly.

3.1.3 Anchors
Not surprisingly the anchor is a key component to any mooring system. n
traditional catenary systems the mooring line touches down on the seabed well
before it arrives at the anchor point thus imparting only a horizontal load on the
anchor itself. This is exactly what most anchors are designed to do, while
38
applying a vertical load typically trips or unseats the anchor so that it can be
recovered.

n taunt leg mooring systems, the mooring line arrives at the anchor point directly
at an angle, thus a different class of anchor is required, one that can resist both
vertical and horizontal loading. Furthermore these anchors need a specialized
means of being tripped if they are to be recovered. The development of taunt leg
mooring systems, as well as the innovation of pre-installed mooring patterns has
given rise to a number of new anchor technologies which will be briefly reviewed
here.

3.1.3.1 ConventionaI Drag Embedded Anchors
This type of anchor is still the most common type found on MODUs that carry
their own gear and moor with a conventional catenary system. Drag embedded
anchors like a Stevpris are designed to penetrated near the surface seabed and
generate their holding power from the soil in front of the anchor. They are capable
of withstanding large horizontal loads, but not vertical loads. The size of the
anchor largely depends on the required holding power but the typical size range
used to moor a Semi is between a 12t and 15t Stevpris which have dimensions of
around 19x22ft. The size of the anchor is significant, not only in terms of the cost
of the anchor, but also operationally in the amount of space it takes up if it has to
be stored on the deck of an anchor handler.

Figure 15: ConventionaI Drag Embedded Anchor instaIIation Source: Vryhof

The installation of a drag embedded anchors requires at least one anchor handler
to chase, or pull the anchor out to the required position. Depending on if wire
inserts will be placed in the mooring line, and if the semi is equipped to do that
independently, a second anchor handler may be needed to jay hook and install
39
the wire sections. Once the anchor has been pulled out to the appropriate length
the anchor is landed on the seabed. This procedure has to be done carefully as
flipping the anchor on its back at this stage would require running the anchor
again, a very costly mistake with so many assets on the clock. Once landed the
MODU windlass is used to slowly drag and embed the anchor up to the required
tension. The distance an anchor will travel on the seabed before it will achieve the
required tension can vary so the final position of the anchor is not known with
precision. This can be significant if there are obstructions in the area as is typical
in an offshore oil field with many sub sea pipe lines, wellheads and production
related equipment.

Recovery of the anchor occurs almost in the reverse order however it's a much
more time consuming operation, since the winches on the semi and AHTS must
slowly recover the heavy mooring system.

The installation and recovery of drag embedded anchors is time consuming and
costly. Not only does it generally require the presence of the MODU for the whole
operation, but it may require several powerful AHTS depending on the water
depth and insert work required. Furthermore, if procedures aren't followed
properly, serious damage can occur to the MODU and/or anchor handlers
resulting in lengthy delays. Overall there is a lot of experience in the industry with
this type of operation, but generally every mooring operation will have some sort
of unexpected event.
3.1.3.2 Suction PiIe
One of the first concepts to be used in anchoring semi-taunt and taunt mooring
systems was a pile driven into the seabed. n water depth up to 4000ft driving a
pile can be accomplished by a purpose designed underwater pile driving hammer.
This method is not cost effective for temporary MODU use because the pile is not
recoverable, and the equipment and vessel required for installing the piles is
expensive.

A very innovative adaptation of the original design is the suction pile. t is basically
a cylindrical suction caisson open at the bottom. t is lowered from the aft end of
an anchor handler at the precise location required. nitially it penetrates the
seabed due to gravity but subsequently an ROV launched off the same anchor
handler is used to pump water out of the top of the caisson until it has completely
penetrated into the seabed. The soil within the caisson acts as an integral part of
the anchor's deadweight and provides substantially more vertical holding capacity
than a driven pile or drag embedded anchor. To recover the pile the procedure is
reversed, pumping water into the caisson and raised by an anchor handler's wire
rope winch.

40

Figure 16: Suction PiIe instaIIed with ROV connecting mooring Iine. Source: SheII

The caisson is fitted with a male/female connector at the top which allows the pile
to be anchored and pre-installed mooring lines subsequently attached and
buoyed off using a single anchor handler equipped with an ROV. Alternatively the
mooring line can also be connected to the anchor at any time with the assistance
of an ROV. Once on location it takes about 2 to 4 hours per leg for an anchor
handler to connect the pre-installed mooring to the MODU. While this method
reduces cost by only requiring one anchor handler, suction piles required to moor
a MODU are about 70ft long and 9.5ft in diameter with a weight of around 70
tons. This means that at lease one trip would be required to a logistics base to
install a standard 8 point spread using one AHTS. However this method relies
more on the capacity of the anchor handler's winch, than on bollard pull which
may translate in saving by hiring a less powerful AHTS. A suction pile of the
required size for mooring a MODU runs around US $225,000 to US $250,000.

3.1.3.3 VerticaI Load Anchor (VLA)


The Vertical Load Anchor is a particular type of drag embedded anchor which is
designed to fully embed itself deep into the seabed. Different designs exist
featuring slightly different characteristics and means to 'key' the fluke into final
hold position. A popular design is the Vryhof Stevmanta which was first used in
Brazil in the late 1990's.

To install basically the anchor is dragged along the bottom by an AHTS all the
time embedding itself to a predetermined tension, at which point the fluke is
triggered and keys to a normal embedded position approx. 90 degrees to the axis
of pull. One of the draw backs of this installation method is that precise position
41
the anchor will be set can not be predetermined. n places with existing sub sea
equipment this could be of critical consequence.

To recover the anchor, the VLA is pulled in the opposite direction. Both
installation and recovery for deepwater MODU mooring application requires a
very powerful anchor handler.


Figure 17: VLA drag embedded anchor. Source: Vryhof

n terms of size, this type of anchor provides approximately 25 times its weight in
holding power putting it roughly about the same dimensions as a drag embedded
anchor. n a typical pre-installed mooring scenario with 8 anchor points, even if
one anchor handler could be employed for the operation it would have to make
trips back to a logistics base. The necessary anchors and equipment would not fit
on deck at the same time, or leave enough space to handle any of that
equipment. However a VLA is smaller than an average suction pile.

Practical experience with these types of anchors in Brazil has shown that
sometime two AHTS working in tandem are needed to provide enough bollard pull
to attain the required proof tension load when installing. Additionally when
working with synthetic mooring line a second AHTS will most likely be needed to
handle the installation of the synthetic line, while the first installs the anchor. Once
installed and proof tensioned to the required load, the system can be connected
to the MODU. n the case of a pre-installed mooring, the line is buoyed off for
easy retrieval and connection when the MODU arrives on location.

42
A VLA anchor like the Stevmanta is more expensive than a conventional drag
type anchor with a price tag of around US $ 165,000 to US $175,000. t can be
recovered and reused, but needs maintenance in order to be reset for each
subsequent reuse.

3.1.3.4 Suction Embedded PIate Anchor (SEPLA)
The SEPLA is a further innovation of two proven technologies into one cost
effective anchor solution. ntroduced by a company called Technip Offshore
Moorings it is essentially a large steel plate driven and embedded into the seabed
at the bottom of a purpose designed suction pile called a follower. Once the plate
anchor is at the required embedded depth, it is released, and the suction pile is
recovered to the surface for further use. The SEPLA is initially in a vertical
orientation when it is driven into the ground but rotates perpendicular to the axis
of pull once high tension is applied. A connector attached to the anchor for
hooking up the mooring line is installed on the seabed at the same time the
SEPLA is being deployed.

Ocean seabed



Figure 18: InstaIIation process of SEPLA. Source: Univ. of W. AustraIia

These plate anchors are designed to be retrieved and are fitted with two recovery
lines which are buoyed off and left close off the seabed automatically during the
installation process. With the help of an ROV the anchor handler's work wire is
connected to these lines and the anchor pulled out of the seabed and recovered
for re-use. Just as with the suction piles the installation of a pre-installed spread
can be done is stages, anchors first, then installing the mooring lines, and finally
connecting the MODU when comes on location. Alternatively the mooring lines
can be connected at any time.

The SEPLA is more efficient than a suction pile, offering more holding power for
it's weight and according to Technip cost
1
/
3
to the cost of a comparable
43
suction pile. As with a suction pile it is possible to precisely position the anchor
and unlike a VLA the exact depth the anchor has embedded is known. One
weakness of the SEPLA is getting its orientation right as its flat design doesn't
allow it to change the direction it is facing once embedded. Additionally an AHTS
with enough bollard pull is required to key the anchor into the holding position. A
SEPLA required for mooring a MODU in deepwater is about 8ft by 20ft, weights
about 24 tons and can lay flat on deck, allowing all the equipment needed for 8
anchors to be carried in one go by an ROV equipped AHTS. The SEPLA is a
relatively new development for but with the operational advantages offered and
with a price tag of about US $85,000 to US $100,000 each it is gaining
acceptance.

3.1.3.5 SPT Suction Embedded Anchor (SEA)
Another innovative design very similar to the SEPLA in terms of installation has
been introduced by a Dutch company SPT offshore. The SEA anchor is installed
to the desired embedded depth using a suction pile follower. The SEA just as the
SEPLA is positioned at the bottom of the suction pile follower, but has a totally
different design. t is a short hollow cylindrical shape, of the same diameter as the
suction pile follower with a shank connected in the center of two pivoting hinges.
When the follower is retracted back towards the surface the cylindrical sides of
the SEA close together like a clam shell grab providing a strong anchor point
capable of delivering holding power more than 100 times the anchors weight
independent of the direction of pull.


Figure 19: InstaIIation of SEA. Source: SPT Offshore

The SEA needed for MODU application is relatively small with a diameter of about
13ft and weighing only 15 tons. t offers many of the same advantages as a
SEPLA, but due to its rounded design is not sensitive to orientation or angle of
pull. Also the SEA anchor does not require a high load to key the anchor into its
holding position and would therefore not require a powerful AHTS. This anchor is
not designed to be recovered; having a price tag of only around US $60,000 to
44
US $70,000 and therefore exceeding the cost of hiring a powerful AHTS to unseat
and recover.

3.1.4 Pre-InstaIIed Mooring (PIM)

Pre-installed moorings is the term generally given to an operational concept that
has anchors and mooring legs installed at a future work location and ready for
later use by the intended MODU. This concept largely came over from the
installation of floating production units, which have permanent mooring systems
pre-installed prior to the unit's arrival. An opportunity for cost savings was also
seen applying this concept to temporary MODU moorings particularly when
moving into deeper water.

A typical scenario for a directly moored MODU arriving on or departing from
location involves many days of mooring operations, in close coordination with
several other vessels all of which are on the clock for the operator's account. n
deeper water the MODU may not be capable of carrying the entire length of the
mooring legs which requires an additional anchor handler per leg to install insert
sections which is a lengthy processes both when running and recovering a
system. The mooring operations are also quite sensitive to weather, so suitable
weather windows become an important consideration. This is not only a concern
in terms of costly delays, but also for the safety of the MODU, the work vessels,
other installations in the area and particularly the people working on the relatively
exposed decks of anchor handler's. MODUs and in particular Semis are very
sensitive to load conditions particularly at a transit draft. When a semi has all its
mooring gear aboard at transit draft, it reduces the available variable deck load
thereby limiting the operator's equipment and drilling fluids load out. This
becomes particularly important as smaller 2
nd
and 3
rd
generation semis are moved
into deeper waters.

Pre-installed mooring can help address many of these operational issues. They
lend themselves particularly well to deepwater applications for several reasons. n
the first place the deeper the water, generally the more protracted the mooring
operations will be before drilling operations can commence, thereby increasing
the operational costs and increasing the required weather window. n fact this is a
common advantage expressed for using a DP MODU, because of their quick
setup time drilling operations can begin shortly after arriving on location. Pre-
installed moorings offer a solution for moving mooring operations off the critical
path taking place on a future site well before the MODU arrives. Consequently
coming on location involves quick connections to the pre-installed system which is
virtually the same in terms of time regardless of water depth. This allows a MODU
to be moored in deepwater in a matter of hours not days and with much less
direct assistance from anchor handlers.

When contemplating the use of pre-installed moorings, the cost of an additional
mooring system has to be carefully balanced against the number of expected
45
moves in a drilling program, the operational time saved during each move, the
day rate saving by using a cheaper MODU, and potentially cheaper anchor
handlers.

While pre-installed moorings offer time savings there is always the risk for lost
time when using a buoyed off system. Losing a leg of the mooing system to the
seabed due to unexpected circumstance may be very difficult and operationally
time consuming to recover, not to mention the inability to quickly connect the
MODU sanding by.

Today, pre-installed mooring is used by the industry particularly for deep water,
and especially when dealing with synthetic fibers. The technique is consistently
used by oil majors spearheading deepwater mooring like BP and Shell. Both
companies appear to share a philosophy of favoring pre-installed moorings over
dynamic positioning which they see as offering superior station keeping, operation
cost reduction, enhanced safety and minimized environmental impact.

3.1.5 Synthetic Fibers
n the ongoing quest for reduced costs and improved performance the industry
started to search for alternatives to heavy steel chain and wire rope moorings as
early as the 1980's. Synthetic fiber ropes were seen as a light weight alternative
without the corrosion issues of steel.

The search for a synthetic fiber for use in offshore mooring applications began
amongst high-end, high-modulus fibers with superior strength to weight
properties. These included products such as Kevlar fiber, an aramid by DuPont
Chemicals and Spectra a high molecular weight polyethylene (HMPE) by Allied
Signal. Eventually more common industrial synthetic fibers like nylon and
polyester were considered.

Although many factors contribute to cost effectiveness, ultimately the properties of
standard polyester was found to be the optimal fiber by these studies. Today
polyester has become the most commonly used synthetic fiber for offshore
mooring applications. t has steadily gained acceptance even outside Brazil, the
region that largely pioneered the use of synthetic fibers. ndustry interest has
seen many joint projects undertaken to increase the knowledge base on synthetic
ropes. Along with classification societies and governmental bodies consistent
efforts have been made to develop an industry wide consensus and
standardization in the use of these materials.

While polyester is largely in the main stream, and the use of synthetic materials is
just really getting under way for temporary MODU applications there is another
high-end fiber product called Dyneema. This is a high modulus polyethylene
(HMPE) developed by Royal DSM that has been used in the past and is gaining
the interest of oil majors. This is particularly the case for ultra deepwater where
46
the physical size of polyester lines starts to become an operational issue but
Dyneema with greater strength for a smaller diameter can be very advantageous.


Figure 20: Mooring Line buoyancy comparison. Source: HoneyweII


With this kind of technology oil majors like Shell have been setting record depths
for moored MODUs. n 2004 Transocean's 5th generation semi-submersible rig,
Deepwater Nautilus, was moored in 8,951 feet of water in the Gulf of Mexico with
the deepest anchor at 9,205 feet. This mooring project was accomplished only
because of the use of high-strength synthetic mooring rope. Shell fully expects to
be able to take this system using polyester up to 10,000ft. The implications go far
beyond mooring the most capable latest generation rigs in record water depths.
This lightweight innovation allows less capable 2
nd
and 3
rd
generation MODUs to
now venture into deeper waters without major upgrades and conversions.









47
3.1.5.1 PoIyester
As mentioned already, performance and operational cost are the key drivers to
using new materials. Polyester ropes are about seven times lighter than steel wire
rope of comparable strength and according to Shell can reduce the overall
mooring system weight by 80 percent. This directly impacts the mooring system's
buoyancy penalty on the vessel thereby allowing a smaller and less costly MODU
to be used in deeper water.

As already mentioned, synthetic mooring systems are installed in a taunt leg
arrangement which have numerous cost reducing and operational advantages
already discussed in section 3.1.2. The reduced stiffness of polyester ropes in
conjunction with the taut legs results in up to 30% lower maximum tensions for
the whole systems as compared to a chain wire catenary arrangement. This in
turns not only further reduces the size, strength and thus cost of components
used in a mooring leg, but it also means dramatic costs savings on newbuilding
construction like floating production facilities specifically designed to use synthetic
taut systems throughout their operational life.

For MODU application, the reduced weight and tension have a direct impact on
the performance requirements of anchor handling vessels used for installation
and retrieval of temporary moorings. The wide array of anchors available today
for taut leg application also makes it is possible to find the right match and avoid
the need for a powerful AHTS. At today's high day rates for high end anchor
handlers the costs savings can be significant from this advantage. Additionally the
lighter weight makes it easier and thus faster to handle overall.

Synthetic fibers are not all good news; they do have some inherent properties that
need to be carefully considered. A big issue to confront is torque since the entire
mooring leg cannot be made of just synthetic fiber. Wire rope and/or chain are still
used at the terminations of synthetic mooring legs because of abrasion and
bottom touch concerns. Steel wire and polyester rope have inherently different
torque tension properties while different types of wire ropes also have different
torque tension properties. Simply placing swivels in the system may actually
cause more difficulties in torque matching. Manufacturers of synthetic ropes are
able to produce rope that is torque matched for the intended wire to be used at
specific tension loads. The implications however are that each mooring system
has to be carefully considered and may not be directly interchangeable between
two different MODUs with different wire designs or sizes. This torque issue and its
effect on service life is still very much debated, Shell pointing out that chain and
wire are also not torque matched but does not pose problems.

One of the big issues of fiber ropes is the lack of historical data regarding fatigue
and service life in mooring applications. While indications are positive for ropes
that have used within prescribed parameters and procedures, actual empirical
evidence is only now slowly beginning to emerge as more applications are made.
One company's experience stands out, Petrobras, the state oil company of Brazil
started first large scale tests in the early 1990's and today uses synthetic ropes
48
with confidence. Other oil major like BP and Shell, traditionally favoring moored
solutions in their offshore operations have also embraced synthetics despite the
lack of knowledge of the long term behavior of polyester ropes in seawater
environments under these kinds of loads.

Another notable concern with the use of Polyester and fiber ropes in general is
the issue of contact with the seabed and the risk of particle ingress. Sand or mud
particles that penetrate the ropes aren't actually threatening in and of them self as
a substance, however under cyclic loading the particles will abrade the fibers.
Over time this will reduce the strength and service life of the rope. This issue has
largely been addressed by special barriers built in to protect the rope's fibers and
procedures to prevent accidental contact with the seabed during installation and
retrieval. Other issues that surfaced through initial use but have largely been
addressed are Creep which is the continuous stretching of the line under load
leading to fatigue and reduced life, hydrolysis and resistance against UV rays.

n terms of actual price, polyester mooring rope is cheaper than equivalent
strength wire rope. The typical size wire rope for offshore MODU mooring is
96mm six strand construction, the equivalent strength of which in polyester is a
178mm rope with a price at the moment of roughly US $49 per foot. Prices can
vary dramatically by specification and region supplied. One synthetic fiber
supplier claims that delivery location of rope in places like Brazil and West Africa
can increase the price by as much as 50% or 60%. While simply looking at the
cost of a fiber material per foot is a starting point for making calculations, the total
cost structure of a mooring system goes far beyond the CAPEX of procuring the
actual rope and has to be looked at in the holistic context of its use and the
impact it has on OPEX.

3.1.5.2 High ModuIus PoIyethyIene (HMPE)
High Modulus Polyethylene is one of the high-end fibers that were originally
considered for mooring applications and was first used in 1999 by Unocal to drill a
series of eight wells with the Sedco 601, an old 2
nd
generation semisubmersible in
6700ft water depth off ndonesia. While having excellent properties the fiber was
initially written off as too expensive due to limited production and its high demand
as a ballistics material. Even though polyester emerged as the optimal fiber for
deepwater mooring applications practical limitations have already been realized
with the bulkiness of this innovative product. On average it takes a polyester line
with 174mm to get the equivalent strength of a 96mm six strand wire mooring
rope. As you approach 10,000 feet water depth it becomes more difficult and time
consuming to handle the rope and the reels needed to store enough rope of that
diameter becomes an operational issue not only out at sea but also for
transporting the rope on land.

The HPME fiber applied to mooring application goes under the product name
Dyneema. The SK78 grade of the product has won ABS and BV class approvals
and has been specially formulated for mooring applications. According to the
49
manufacturer DSM in the Netherlands Dyneema is stronger than steel for similar
diameter line yet light enough to be almost neutrally buoyant; and one tenth the
weight of wire rope in air. Furthermore Dyneema fiber ropes have a 40% smaller
diameter than polyester for equivalent strength rope and weights about 4 times
less in air, making it extremely easy for the rigging crews on anchor handlers to
work with.

The lighter and smaller diameter material also has several knock on effects
similar to the advantages experienced from changing from wire to polyester. Apart
from the previously mentioned characteristics of a taut mooring system going
from polyester to Dyneema allows for further reduction in the size and hence cost
of connecting hardware and components needed. The smaller submersible buoys
needed for a pre-laid mooring pattern are also significantly smaller, hence require
less space on the deck of an anchor handler and are easier to handle. This would
translate to potentially using a smaller anchor handler depending on the type of
anchor employed and a quicker turn around time due to the quicker and safer
handling possible.

The smaller diameter and lower weight also serve to provide for operational
safety. Not only does the near neutrally buoyant fiber pose a reduced threat to
subsea pipelines and production equipment, but on the surface it provides for
reduced risk of damaged equipment and injury to personnel. Furthermore, with
the smaller reels this makes transportation and logistics issues much easier.

n recent years production capacity for Dyneema has been increased
substantially and the price is about US $169 per foot, even though price can vary
significantly by region. According to DSM, when a drilling program involves 4
MODU moves per year the higher upfront CAPEX associated with using
Dyneema fiber ropes will be compensated by reduced operational cost saving in
anywhere from 1 to 4 years. The reduced operational costs come from the 30%
less time required for installing and recovering a pre-laid pattern and 50% less
time for connections with the MODU once on location. The reduced operational
time also allows for mooring operations to go ahead with smaller weather
windows, something that can be significant in certain regions.

While Dyneema makes mooring operations easier and faster in currently operated
water depths ultimately, this fiber allows for mooring to be taken into even deeper
waters well beyond the 10,000 feet range. The industry is still predominantly
exploring and developing in water depths below this at the moment, but with oil
prices at historic levels it is certainly no surprise that oil major are today
investigating and experimenting with the means to get there safely and reliably
with moored MODUs in the future.



50
3.1.6 MonohuII Mooring
The majority of deepwater mooring efforts specifically consider
semisubmersibles for drilling applications. Most of the 38 drillships worldwide
are equipped to use dynamic positioning for station keeping. Around 13
currently active vessels were built in the 1970's with mooring gear of which 9 are
not equipped with DP and have various ratings up to 2,500ft. The previous wave
of 16 newbuilding drillships that came out during the period 1997-2001 were all
DP capability only. The current wave of 8 newbuilding drillships on order is
being designed as DP capability only; however according to Dutch offshore
engineering firm GustoMSC, there is increasing interest by contractors to add
mooring capability to DP drillships again, as is frequently done on most current
newbuilding DP semis.

Monohulls, or what is generally thought of as the traditional ship shape used by
drillships, have certain critical issues to be considered when moored. Unlike
semisubmersibles that have more uniform environmental loading characteristics
from any relative heading to the vessels, monohulls naturally experience
significantly higher environmental loading on their beam than on their head or
stern. This can become particularly interesting when you have currents and
wind driven forces acting in different directions. For this reason when mooring a
monohull it is necessary to provide weathervane capability in the design of the
mooring system.

n FPSO applications, monohull vessels are outfitted with specially designed
turrets to which the mooring system is connected allowing the vessel to freely
weathervane. The turret structure can be located at any position between the
bow and midships, however the position of the turret will determine the ease
with which the vessel will weathervane. The further forward the turret is
constructed the more passively the vessel will weathervane into the direction of
environmental loading. While passive weathervane characteristics are desirable,
there is also a drawback to locating a turret all the way forward. The monohull
shape will pitch during heavy weather, with the most pronounced vertical motion
at the extreme ends of the vessel. This increased dynamic loading at the turret
location will also require the mooring system to be designed for up to 20%
greater line tension according to a study by ABS.

The turret for drilling applications would also have to be located around the
moonpool area of the vessel through which the drilling riser passes and
connects to the wellhead by the BOP on the seabed. This is to prevent any
interference between the marine riser and the legs of the mooring system. Even
if retrofitting current drillships to accommodate a turret structure is technically
possible without affecting the drilling activities, the fact that most moonpools are
located midships directly under the derrick means that some active thruster
assistance would be required to weathervane. This thruster power for heading
control would naturally be much lower that what is required for active DP station
keeping.

51
The turret design for drilling has been tried in the past. n the 1970's Sonat
designed a turret moored drillship, the Discoverer class, not to be confused with
so many other classes out there today using either the name discoverer or
explorer. There were at least two vessels built in Japan to this design the
Discoverer and the Discoverer 511. The Discoverer 511 is now the Frontier
Discoverer which is undergoing conversion to work in the Arctic and the original
Discoverer is now the Neptune Discoverer. Both vessels retain their original
mid-ships turret mooring system assisted by small tunnel thrusters forward and
aft for heading control.

For a conversion the capital costs associated with installing a turret need to be
carefully considered, not to mention the downtime incurred by the vessel which
at today's day rates could add up very fast. According to a study conducted by
Texas A&M University for a Gulf of Mexico FPSO, the turret structure
construction and materials alone could cost around US $33 million, and with day
rates for drillships at US $300,000 or more, that adds to at least US $9 million
for each month out of service. More likely such a design would have to be
anticipated and realized as a newbuilding.

There is however another means to provide weathervane capability to moored
monohulls. The older drillships mentioned with either mooring capability only or
both DP and mooring capability have windlasses mounted on the forecastle and
on the poop deck. Special bolster bars are provided above the water line to rack
the large anchors for transit as well as specially designed fairleads.


Figure 21: Weathervane capabiIity with traditionaI monohuII mooring. Source: Author

When mooring a monohull like this, typically 4 anchors are deployed off the bow
and 4 off the stern in an even spread. Weathervane ability is provided by
52
reducing the tensions on the anchor legs on the leeward end of the vessel. This
provides about 25 degrees of weathervane ability to either side of the original
mooring spread heading. t is quite flexible in that it can be applied to either end
of the vessel, so with environmental loading taking place off a quarter, slacking
the bow anchor cables and tensioning the stern anchors would give
weathervane capability pivoting on the stern.

This method however requires careful planning taking full consideration of the
expected regional environmental conditions during the time period the vessel
will be moored. Furthermore it requires careful monitoring and constant
adjustments by the marine crew to minimize environmental loading and hence
maintain watch circles within tolerable limits for drilling operations. To date this
has not been attempted in a deepwater application with synthetic moorings.

A temporary mooring system for MODU application would have to be designed
to meet at a minimum a 10 year return period storm condition. Most monohull
moored solutions for FPSOs have only been applied to relatively benign
environmental regions, such as Southeast Asia, West Africa and off Brazil near
the equator. While monohull mooring has also taken place in rougher areas
such as the North Sea, wind speeds are rarely sustained over 90kts and these
storm systems are rather predictable occurring during certain periods of the
year. Much more problematic are regions like the Gulf of Mexico and South
China Sea, were hurricanes and typhoons can evolve rapidly with the possibility
of sustained winds in excess of 140kts. n considering a moored solution for
deepwater on a drillship, regional weather considerations will be a crucial
limiting operational factor. Making the wrong decisions with a monohull could
result in having to recover the mooring spread prematurely during a well
program. Failure to do so in the face of severe weather could have dire
consequences as was the case for the Glomar Java Sea, a drillship which was
lost with all hands in 1983 during a typhoon in the South China Sea while
moored on location.

Despite these drawbacks, a moored monohull in deeper water has advantages
to offer over a moored semi. n benign environments, drillships with their
significantly greater variable deck loads, with more deck space, advantageous
logistics including greater bulk and drilling fluids capacities and greater mobility,
could provide the ideal asset for a drilling program of multiple wells in a remote
region.







53
3.2 Dynamic Positioning
Dynamic Positioning is the other station keeping option available to MODUs.
Fundamentally DP is a computer assisted maneuvering system, including all
associated equipment needed to control the position and heading of a vessel
within pre-defined limits using active propulsion. Dynamic positioning was seen by
the offshore industry not only as a means to operate in deeper water, but also as
a solution for working in areas where mooring was impractical due to subsea
equipment, pipelines or other considerations.

The concept has evolved tremendously from its origins in offshore drilling dating
back as far as 1961. Today it is used by a multitude of other vessel types working
not only in the offshore industry but also in commercial and passenger shipping.
Technological advances in the various components of a DP installation have
greatly enhanced DP capability and reliability. Positioning systems like satellite
navigation and hydro acoustics; propulsion systems like A/C azimuth thrusters;
diesel/electric power plants and power management as well as computer
processors and programming have all contributed to build robust systems.

To many the concept of dynamic positioning appears risky and prone to
operational problems. ndeed the idea of consistently maintaining a 754ft drillship
within a radius of 15ft only by means of propulsion may seem incredible even to
experienced mariners and vessel designers. However for those who have
operated such vessels, there is a great deal comfort and confidence in modern
DP technology manned by qualified and experienced officers.

3.2.1 DP Theory
A vessel at sea is subjected to forces from the wind, waves and currents, and
generates its own forces by the propulsion system. There are six basic motions
that a vessel is subjected to, surge, sway, yaw, pitch, roll and heave. The typical
functions associated with a dynamic positioning system are for controlling
position and heading which deal with the motions of surge, sway and yaw.

A DP system is a constant control loop. The vessel position and heading are
estimated based on a vessel specific model. This model is calculated based on
measured forces acting on the vessel, heading and filtered position
measurements returned by position reference systems and gyros. This model
returns and estimated position and heading, which is constantly being compared
with the desired position and heading as input by the operator.

54

Figure 22: Dynamic Positioning ControI Loop Source: Nautronix


Errors are then corrected automatically by the system which allocates the
optimal amount of thrust to the propulsion units online. Thrusters then provide
the necessary forces to counteract external environmental loads and moments
acting on the vessel. Power consumption is carefully controlled by a power
management system to ensure that appropriate power is available to thrusters
bringing additional power online as needed without blacking out the vessel.

The vessel model also tries to anticipate the forces acting on the vessel in the
model using features such as wind feed forward and current feedback which
help smooth and tighten station keeping capability. The diagram in this section
illustrates this control loop function.

3.2.2 Dynamic Positioning System CIass

The concept of DP class surfaced some 20 years ago, outlining technical
requirements arranged in three classes. The difference in class has a significant
effect on how a DP system is designed and in the case of Class 3 can have a
profound effect on the construction of the overall vessel. The costs associated
can increase rapidly through the classes, particularly if it is intended for the
vessel to receive a class notation for DP.

nitially the appropriate DP class was outlined in accordance with the particular
operation the vessel was involved in and the maximum defined consequences
that a failure in the DP system could result in. According to the Norwegian
Maritime Directorate the classes were arranged as follows; Class 1 operations
are those where loss of position may cause some pollution and minor economic
damage, but excluding severe harm to people. Class 2 operations are those
where loss of position may cause severe pollution, large economic damage, and
55
accidents to people. Class 3 operations are those where major damage may
occur, severe pollution, and fatal accidents.

There was a DP Class 0, for operations where no serious consequences would
occur. All vessels that can operate in DP mode however, can not avoid meeting
Class 0 requirements and the concept largely disappears after the emergence of
MO guidelines for dynamic positioning.

With the introduction of MO guidelines, DP classes were largely viewed as an
equipment class. All major classification societies developed specific equipment
requirements on the basis of the guidelines, to which vessels must be equipped
to qualify for notation. Based on the notation vessels could subsequently
undertake the corresponding consequence class of operations. What operation
constitutes what level of hazard and consequence is not dealt with by the MO
and is largely left to be decided by owners, operators, industry practice and
national authorities with jurisdiction over operational areas.

Without getting into specific technical detail, the general difference between
Class 1 and Class 2 is that Class 1 vessels are allowed to fail completely losing
both heading and position. Class 2 vessels are not expected to do that therefore
redundancy in systems is built in. The major difference between Class 2 and
Class 3 are the definitions of relevant failures that the vessel must continue to
be able to stay in DP mode through. That is Class 3 operation includes all failure
modes of a Class 2 design but has the added failures of fire and flooding events.
n effect, a Class 3 vessel must have redundancy not only of systems, but of
systems located in different fire protected and/or watertight spaces.

n order to receive a classification notation, all equipment used for the system
must be type approved. Furthermore DP vessels undergo a rigorous Failure
Modes and Effects Analysis not only to verify the redundancy of their design but
to identify what effects individual or group failures will have on the overall
operation of the system.

Today the level of DP class required for various operations is a heated debate in
the industry. Guidance from national authorities and industry organizations is
increasingly becoming available and helps in providing some clarity on the
issue. All drillships and semis with operational DP systems installed are noted
for Class 2 or 3 operations. t is important to point out however, that being noted
as DP Class 2 or 3 doesn't mean the vessel is always operating in that capacity,
it only means that the vessel is capable of operating in that class when fully
functional and set up appropriately. The significance here is that the emergence
of specific national directives with regard to what operations require which class,
could exclude certain vessels with lesser notations from markets. The cost of
converting a vessel from class 2 to class 3 may be prohibitive.

56
3.2.3 Positioning Systems and Reference Sensors
Measurements of the vessel's position, heading and attitude at any given
moment are essential elements of a dynamic positioning system. The
positioning system gives information that is relevant in controlling the surge and
sway of the vessel. Heading information from gyros gives the required
information for yaw, while a number of other reference sensors like Motion
Reference Unit (MRU) and Vertical Reference Units (VRU) are necessary to
detect the attitude of the vessel for the accurate function of many positioning
systems. The sensors cannot be considered individually in that they perform
functions within a system. Gyro's for example also feed many other pieces of
equipment so that they function properly.

3.2.3.1 DifferentiaI GIobaI Positioning System
The arrival of the global positioning system has changed the world and indeed it
has changed dynamic positioning by giving it yet another reliable position
reference system that can be used virtually anywhere. Normal GPS signals
although accurate for commercial shipping it does not offer a reliably stable
signal for DP operations. Differential GPS is a corrected signal which is much
more accurate. Companies like Thales provide several signal types featuring
various degrees of accuracy for a monthly subscription using proprietary
equipment.

The differential signals are received either by terrestrial radio signal or nmarsat,
or both in case of redundant systems. nteresting new developments in this
technology include SDGPS, Satellite Differential GPS which can provide reliable
accuracy of 10cm. t should be mentioned that in some areas of the world,
particularly equatorial regions, the effects of scintillation can dramatically disrupt
the stability of DGPS signals. DP vessels usually receive multiple independent
DPGS signals which are filtered and weighted according to performance along
with other position reference information by the DP system. Monthly
subscriptions for commercial DGPS signals like Starfix or Skyfix can run from
US $5,000 to US $20,000 per month depending on the services selected.

3.2.3.2 Hydroacoustic Position Reference System (HPR)
Hydroacoustics have been used as a position reference system from very early
on by DP vessels. Fundamentally sound is used for ranging between
hydrophones on the vessel and deployed beacons on the seabed. Three basic
systems exist, Long Baseline (LBL), Short baseline (SBL), and Ultra Short
Baseline. Without getting into great technical detail LBL uses one hydrophone
with at least 3 beacons on the bottom, were as short baseline uses one beacon
on the bottom with at least 3 hydrophones under the vessel. Ultra short baseline
is another principle which is primarily employed in shallower water. Some DP
drilling vessels employ hydroacoustic systems like the RS925 from Nautronix
that can operate in both LBL and SBL modes simultaneously using the same
equipment to produce multiple position solutions.
57

Using acoustics requires the deployment of one or more recoverable beacons
depending on the system being used. Additionally the hydrophones need to be
deployed which are usually mounted on the end of retractable poles designed to
place the heads below the noise created by thruster wash. Furthermore the
acoustics will need to be calibrated on each site once everything is in place. The
procedure can take several hours to perform and often involves moving the ship
to various positions and changing headings several times. When leaving
location the beacons are recovered and serviced for reuse.
3.2.3.3 Fanbeam, Artemis, Taut wire
These three positioning systems have been grouped together because they
deserve to be mentioned as systems used by DP vessels, however they are not
generally used by MODUs in deepwater drilling.

Fanbeam is a positioning system utilizing a laser and a reflector for ranging.
This system is generally used by support vessels working in conjunction with a
MODU. The reflector is passed to the MODU via crane and mounted in an
unobstructed area where the Fanbeam laser tracker on the support vessel can
see it. The support vessel then locks on and maintains position off the MODU.

Artemis is somewhat similar in that it is a short range tracking system but works
using microwave signal instead of a Laser beam. This system is more dated,
newer vessels typically having Fanbeam these days.

The taut wire is entirely different, it is a clump weight lowered to the seabed via
a special davit arm winch. An automatic tensioning system ensures that the wire
is kept taut while the weight is stationary on the seabed. As the vessel moves
sensors at the top of the davit arm sense the direction of motion and convert it to
an appropriate electronic signal used by the DP system. This position reference
system is generally used in shallow water and care is needed not to
inadvertently skip the clump weight along the bottom.
3.2.3.4 Wind Sensors
Wind sensors play a vital role in any DP system providing information of the
intensity and relative direction of the wind. Using the vessel model the force
contribution of the wind is calculated and the DP system can determine the
residual force being generated by other environmental elements, typically
grouped together as current, even though it could be attributed to a combination
of swell, seas and current.

DP MODUs are typically fitted with several wind sensors depending on class
requirements, and need to be monitored carefully for blind spots with sudden
wind shifts as well as interference from non-environmental sources such as
arriving/departing helicopters.
58
3.2.3.5 Gyros, MRUs, VRUs
Gyroscopic compasses are another vital reference unit that is depended upon to
provide vessel's true heading information not only to the dynamic positioning
system but also to a range of other vital equipment such as the HPR system,
and the nmarsat. Without working gyros the entire DP system is instantly
crippled. Not surprisingly then it is typical to find several gyros onboard class 2
or 3 vessels, sometimes even of different manufacturers.

There are also two other important types of equipment commonly found in a DP
system called a motion reference unit (MRU), and vertical reference unit (VRU).
These devices provide important information about the pitch, roll and heave of
the vessel. These inputs are necessary to the DP system and vital for the
accuracy of the HPR and DGPS systems.
3.2.3.6 PropuIsion and Thrusters
Marine propulsion technology has evolved greatly over the last 30 years. Older
DP vessels had few options and tended to be outfitted with twin screw
controllable pitch mains and a number of bow and/or stern tunnel thrusters as
necessary for the size of the vessel. There were some DC azimuth thrusters
available, as well as cycloidal propellers with their lower thrust for power output
but these started to appear more in the early 80's.

Today with advances in high power AC drive technology there are a number of
new propulsion options offering high efficiency and low fuel consumption.
Azimuth thrusters with fixed pitch or controllable pitch depending on the drives
are increasingly common with the largest units producing up to 5Mv of power.
Generally variable speed fixed pitch thrusters are preferred since they are less
mechanically complicated compared to controllable pitch thrusters and thus
theoretically less prone to failures. Work boats also carry an innovative drop-
down variant which gives them the operational advantage of an azimuth
thruster, without the draft restriction. ndeed newer construction drillships can
retract their thrusters into watertight spaces, either for maintenance or to gain
access to a port without draft limitations.

While there are too many configurations possible to discuss, the issue of how
much power or thruster resources a DP vessel should have is an interesting one
because there are no class requirements on that specific issue, it is up to the
owner to decide how much performance is desired. t is important not to confuse
this with the Class 2 and 3 operation requirements for redundancy in thrusters,
the later again also in spaces supporting the thruster's operation. This would
include not only the main engines, but transformer rooms, cooling and all other
associated equipment. Only two classification societies Lloyd's and DNV, have
guidelines for the issuance of a vessel specific DP performance indicator; the
PCR or Performance Capability Rating, and the ERN or Environmental
Regularity Number, respectively.

59
Future developments will probably see the introduction of more innovative
propulsion systems. Already podded thrusters or Azipods are being marketed in
a modified compact version for DP applications, and designers like GustoMSC
are keen to use them for the greater cruising speeds they can attain while still
providing enhanced maneuverability.

3.2.4 Main Engines, Machinery and Power Management
A DP station keeping system goes much further than the controllers and the
position reference sensors. An integral part of the system is the diesel electric
power plants, complex electrical distribution systems and the previously
mentioned thruster units. Additionally there are many auxiliary systems like
cooling and control elements like miles of cables to be considered.

Typically on a modern DP MODU, the electrical power plant will supply the
station keeping equipment, drilling equipment and hotel loads from one common
power plant. The design of the power plant may need to be split functionally for
Class 2 operation, and physically with fire/flooding segregation for class 3
operation. This also extends to auxiliary equipment. Obviously the more splits
and segregation built into the system, the greater the cost and weight of the
overall design. t's important to point out though that the more splits, the less
additional or redundant power installation required in obtaining a class notation
for a specified weather window. Rules only require sufficient station keeping
capability to carry out safe shut down of operations after any single failure.
Worst case single failures are normally considered to be switchboard short for
Class 2 and fire or flooding for Class 3.

A key feature of a DP system is the power management function. Continuous
power availability for ongoing operations and blackout protection is the
underpinning of a PMS. DP station keeping functions typically require very
small loads as a proportion of total installed power to maintain position even in
relatively rough weather provided the vessel is handled properly. There are
however times where conditions can change unexpectedly either due to rapidly
changing environmental conditions or sudden faults in the system. The PMS
must regulate the needs of the DP system, ongoing operations and the hotel
loads in order to ensure that sufficient power is available to the most critical
operations.

This becomes particularly important in emergency situations when cutbacks
may be necessary and/or additional power to be brought online rapidly.
Furthermore the PMS system must ensure that damage is not done to the plant
and that sudden spikes in demand do not back out the entire vessel. A well
designed, fully functioning and properly set up PMS is essential for smooth DP
operations.
60
3.2.5 VesseI Construction
DP Class can have a profound effect on the way a vessel is constructed with
significant cost implications. Vessels meeting Class 2 or 3 are based on
redundancy in systems making it possible for a minimum range of equipment to
continue to function while others have failed. This redundancy reaches all
systems necessary for the DP system to operate. This typically means
redundancy in power production and distribution, redundant thruster
configurations, and redundant control systems.

Typically a redundant DP MODU is based on two nearly identical half systems
for power and propulsion and controlled by a dual control system. f designed
properly the one half will continue to perform through the complete failure of the
other half. This is complex and costly for a class 2 solution, however the
complexity increases significantly in class three where physical separation of the
two half systems both for flooding and fire is required.

This means that a Class 3 vessel requires at least two complete engine rooms
separated by A-60 rated bulkheads, and watertight bulkheads below the
waterline. The separation further extends to all associated equipment such as
switchboard rooms, transformer rooms, thruster equipment spaces, engine
control rooms, DP control system and space, and auxiliary piping and wiring.
Needless to say, the cost of construction is significantly impacted by requiring
full Class 3 notation with newbuilding drillships reaching as much as US$650
million.

Conversion of an existing monohull vessel to full class 3 is a daunting task and
probably doesn't make financial sense however there have been conversions
undertaken to upgrade semis to full DP class 3. n 1999 Diamond Offshore
converted the flotel semi Polyconfidence built in 1987 into a DP class 3 MODU
capable of drilling in 7500ft water depth. The cost of conversion was stated at
US $210 million with 5,800 tons of steel added, however the project suffered
serious delays and reportedly came in way over budget. By comparison the Leiv
Eirksson, a new build DP class 3 Semi built at the same time period which also
experienced serious delays and cost overruns, came in at around US $425
million.
3.2.6 Thruster Assisted Mooring
Today, most newbuilding Semis being delivered have some level of DP
capability and mooring winches. This gives them the flexibility to be operated in
DP mode, moored mode or, both. Thruster assisted mooring, or DP assist as it
is sometimes called is another innovation that has been around for a while in
applications such as pipelaying but is now also being applied to deepwater
applications also.

Fundamentally a MODU will deploy a full or partial mooring pattern and use it for
station keeping in conjunction with DP controlled thrusters. t is important that a
DP system is configured to operate in this manner as it must have inputs of the
61
mooring pattern and line tensions. Thruster assisted mooring can be employed
continuously or as a temporary means to deal with increased environmental
loading during a weather or current event.

The implication of thruster assisted mooring is that an appropriately equipped
MODU may be able to satisfactorily maintain station while deploying a mooring
spread with less legs, for example 4 opposed to 8 lines. While today the trend in
the industry is either DP or mooring, this offers yet another interesting approach
for deepwater operations.
3.2.7 Manning
t has been said by many and indeed it is true that DP operations are 99%
boredom and 1% sheer terror. Of course the terror is felt by the man not the
machine, and that's why training is vital.

Formalized DP training was established some 15 years ago by the Nautical
nstitute's training scheme. The DP operator's Certificate while not issued by a
statutory authority it is well respected and acknowledged by industry and
governments alike as demonstrating the necessary professional competency.

Strangely in the offshore industry individuals with no merchant marine license
but with DP training and experience were deemed competent to stand a DP
watch. This was probably due to the fact that early systems were very complex
and technically unreliable. The people chosen to operate these systems often
had a technical background in electronics. With the improvement in reliable
technology and the introduction of large monohull MODUs, watch standing
duties have appropriately passed on to properly trained and experienced deck
officers.

Manning the bridge of a modern DP vessel is a multifaceted task, the bridge
being a nerve center of activity. Apart from the DP system controlling station
keeping functions, part of an integrated bridge system, there are engineering
control systems to be monitored, ballasting operations, monitoring fire & gas
systems, maintaining a proper navigation watch (after all a MODU on DP is still
an underway vessel), coordinating activity with supply vessels, as well as every
day business and paperwork. With so many tasks at hand it is not possible for
one individual to properly maintain a DP watch and perform all the other tasks
as well. This is particularly the case in emergency or critical situations.

A typical arrangement is to have two watch officers on duty; one solely focuses
on DP and station keeping, the other performing all the secondary duties.
Typically the watch on the DP console is rotated each hour by the two officers
on the bridge. Naturally this is not mandated by law, but simply by diligent
practice. Arrangements and setups can vary amongst different types of vessels,
companies and/or client requirements.

62
Having trained, experienced and vessel specific familiar operators is a vital
consideration for safe and uneventful DP operations. Getting even an
experienced DP operator familiar with a specific vessel may take months.
Furthermore since class 2 and 3 operations are still relatively specialized,
experience of which is required for an unrestricted DP operator's Certificate, it
can be difficult and expensive to find appropriately experienced and trained
personnel.






































63
4 The Economic Perspective - Cost EIements &
CaIcuIations

At this point it is hoped that the reader has a clear grasp of the various elements
and factors associated with station keeping in offshore drilling as well as the current
market conditions for the various assets required. As will be revealed the day rate
for these assets plays a vital role in the overall cost competitiveness of one option
over another.

n order to evaluate the various station keeping options from an economic
perspective a number of cost structures or models were developed and analyzed.
Once a basis cost structure and results were developed as described in this section
for each MODU scenario, certain variables which are detailed in section 5, were
manipulated to see their effect on the bottom line.

These models were developed from the operator's perspective that has a drilling
program in mind and is looking at assets to fulfill the requirement. There are no
future cash flows or earnings to be factored in since this is only an evaluation of
relevant operational costs, and certain capital expenses typical of what oil majors
would face as the operator of a drilling program. There are so many additional
factors and cost elements involved in producing and generating revenue from
successful wells that it falls way beyond the scope of the thesis topic.

The synthetic mooring system also received particular attention as its components
and thus cost could vary significantly depending on the choices made. A separate
evaluation and model was developed for the cost of the mooring system and used
for each of the scenarios utilizing a mooring system. The development of the
mooring system cost structure and the choices made in its composition will be
discussed in detail under the next subsection.

4.1 Mooring System Cost Model
As can be appreciated from the section that already covered mooring
equipment, there are many components and decisions that need to be made
when putting together a synthetic mooring system. There is the selection of the
material that the synthetic lines will be made of, the sizes and construction, the
type of anchors to be used, submersible buoys, connectors and all this with due
regard to the equipment of the intended MODU and it's mooring equipment.

One has to give particular attention to the "this is the way we've always done it
factor. Even for an industry that has pushed boundaries consistently for over 50
years the nature is still generally conservative toward new technologies, so
while certain options may offer cost competitive advantages, operators may still
elect proven components.

64
With the key objective of arriving at a reasonable cost estimate, the mooring
system was looked at with some technical specification but not in the same level
of detail required for an actual installation. Certain simplifications were made
regarding the sizing and rating of components for a semi and drillship, using
common equipment for both, the hypothesized difference not having a
significant enough effect on cost to affect the outcome of the calculations.

4.1.1 EnvironmentaI Loading Condition Requirements

Mooring systems are designed with specific environmental conditions in mind.
For the purpose of this project the assumption was made that the system for
temporary MODU application would be designed to withstand 10 year weather
return period, with an eddy loop current, and a 100 year return weather event for
the Gulf of Mexico. While regional weather conditions vary, the Gulf of Mexico
has a wide range of weather and strong currents. Compliance with these
conditions should satisfy requirements for most regions were offshore activity is
taking place except for some rougher regions like the Arctic Ocean or North
Sea.

TabIe 1: Specifications of environmentaI conditions used in determining mooring system requirements








Accordingly using data for environmental loads on a monohull from an FPSO
study by Texas A&M University and considering this to be a worse case than for
a semi hull form, the system components were selected with 800tf minimum
spliced break load (MBL). This also assumes that the monohull can
weathervane enough to bring resultant forces broad on the bow or on a quarter.
As confirmation of these assumption made the resulting sizes derived are the
same sized equipment already used in documented applications of synthetic
mooring systems for MODUs.

4.1.2 Mooring Line SeIection

The primary component in a system is the actual line that will make up the leg.
Even in a synthetic line there is still wire and chain sections included. Typically
these will be at the terminations due to concerns for abrasion and bottom touch
down issues. Additionally the MODU will have its own wire or chain that the
system will be connected to.

EnvironmentaI Condition
Wind Speed
Knots
Current
Speed
Knots
Hs
ft(m)
10yr Return Period w/ eddy loop current 50.5 3.11 26.2
100yr return Period 75.8 2.72 40
65
TabIe 2: Estimated mooring Iine prices used in caIcuIations
Estimated Costs
Item Size
Weight
in Air
per kg per m per ft
DeepRope Polyester Line 178mm (7") 20.2 kg/m $8.00 $161.60 $49.30
DeepRope Dyneema Line 114mm (4
1
/
2
") 5.5 kg/m $100.00 $555.00 $169.20
Six Strand Dyform Wire Rope 96mm (3
3
/
4
") 41.8 kg/m $5.02 $210.00 $70.00
Stud link Chain (Grade 2) 84mm (3
5
/
16
") 211kg/m $1.50 $317.00 $96.50

The above figures were used in calculating the cost model of the mooring
system for this research. t must be stressed again that these cost estimates can
vary greatly depending on region of delivery. Additionally synthetic ropes are
custom made subsequent to an order being placed so an actual price is very
difficult to determine. The above prices were derived from recent orders and
consultation with suppliers.

TabIe 3: Estimated prices of submersibIe buoys used in synthetic pre-instaIIed systems






The main decision to be made was whether to use Polyester or Dyneema
synthetic rope for the system. At first glance the cost of Dyneema is significantly
greater than that of polyester per foot; however savings can be made in the
system by the fact that smaller and less expensive components can be used for
pre-installed applications. For similar configurations the capital costs of using
Dyneema came out almost double that of a polyester system in calculations
made. While the use of Dyneema in deepwater and in particular ultra
deepwater beyond 10,000ft offers distinct operational cost savings that could
make up the difference in capital costs, the majority of deepwater activity today
is in 10,000ft or less. t also takes a program with high operational tempo
involving many rig moves for Dyneema systems to earn their savings and make
the higher initial investment pay off. Dyneema is a very interesting alternative
however and should receive consideration on a case by case basis. t would be
interesting for future research to focus on the economics of using different
materials in a mooring system.

Ultimately polyester was chosen as the material for the cost calculation basis of
the synthetic mooring system used in the models. This is because polyester is
the most used synthetic fiber in offshore mooring applications today. Beyond
that it has the lowest initial capital cost and represents a material that is gaining
acceptance in the industry which apart from Brazil is just now starting to
embrace the concept of synthetic materials in mooring. The calculations for a
polyester and Dyneema system are given in the Appendix.


Item Size Estimate Cost
Submersible Buoy for Polyester 60 kip $350,000
Submersible Buoy for Dyneema 15 kip $60,000
66
4.1.3 Anchor SeIection

Another critical item which needs to be selected and for which there are
increasing options is the anchor type. With synthetic mooring a taut line system
will be deployed. All the anchors indicated in the table are suitable for vertical
loading except the drag embedded Stevpris which is a very commonly used
conventional anchor and is included for comparison purposes. The specific
features and operational implications of each has already been elaborated on in
section 3.

TabIe 4: Estimated Anchor Prices used in CaIcuIations
Anchor Type Size
Estimated Cost per
Unit
Stevpris 15t $140,000 - $150,000
Stevmanta VLA 15t $170,000 - $180,000
Suction Pile 70t $225,000 - $250,000
SEPLA 24t $85,000 - $100,000
SPT Offshore SEA 15t $60,000 - $70,000

The SEPLA design was ultimately chosen for the anchor type to be incorporated
in the mooring system cost structure. While many of the early applications with
synthetic moorings pioneered by Shell used their designed Suction Piles, front
runner BP is now making use of the newer SEPLA design for their deepwater
MODUs. The initial capital costs are much lower than suction piles, and require
less deck space on an anchor handler with only one suction pile and smaller
anchors onboard for installation. This results in further operational cost savings
through fewer round trips.

The Stevmanta VLA was rejected due to its high initial capital cost and the need
for one and possibly two powerful anchor handlers. SPT's innovative SEA
anchor was rejected solely as a new product that has not gained industry
acceptance yet, but certainly is an attractive option that warrants close future
consideration. Anchor prices were estimated from information on recent orders
and consultation with industry professionals and suppliers.


4.1.4 Mooring System Cost CaIcuIation

The tables 5 & 6 in this section are mooring system costs for various depths
used in the appropriate station keeping models. The numbers are used as the
basis which is amortized over the specific contract period of the case being
considered. Dyneema numbers are shown for comparison purposes but are not
used in the models.

67
The following additional assumptions are made in the overall mooring system
calculation;

This system is a taut line system, and as such it was assumed that the
line leaves the fairlead on the MODU and arrives at the anchor point at a
45 degree angle there by using simple Pythagorean theorem to find the
hypotenuse as the length of line needed for a given water depth.
Catenary system is not applied anywhere.
There is an amount of chain and wire incorporated for inclusion at the
terminations of the system. n reality compositions can vary depending
on specific technical requirements. For simplification it was assumed all
mooring systems will be composed of 30% wire, 4% chain, and 66%
polyester.
A system is made up of 8 legs.
When using a pre-installed arrangement the operator must purchase 2
complete systems, for a total of 16 legs.
A mooring leg includes the line, a submersible buoy if pre-installed, an
anchor, and connecting jewelry.
Swivels, connectors and other jewelry needed in the system are
calculated as a lump sum and added.
With a pre-installed polyester system an appropriate 60 kip submersible
buoy is factored in for hanging off.
Once used in the MODU cost models the systems are amortized over
the length of the contract period for the specific MODU with an interest
rate of LBOR +3% (8.5%). Period will vary between MODU types, some
needing longer than others to complete the specified well program.


The following tables show the base results for 3 representative water depths in
the deepwater market. At this point there is no interest payment factored in on
the indicated figures. Complete sample calculations are shown in the appendix.

TabIe 5: Synthetic moorings, cost per Ieg










Cost Per Leg
Pre-installed Direct Moored Water Depth (ft)
Polyester Dyneema Polyester Dyneema
5000 $885,865 $1,145,427 $535,865 $1,085,427
7500 $1,088,798 $1,628,141 $738,798 $1,568,141
10000 $1,291,730 $2,110,854 $941,730 $2,050,854
68
TabIe 6: Synthetic moorings, totaI system costs










4.2 Operational Cost Models
n order to make an interesting and complete comparison it was deemed
appropriate to include a total of 6 cost models, 3 for semis and 3 drillships.

Specifically the six cost structures are;

1. Semi DP, a semisubmersible station keeping using DP
2. Semi Pre-installed Moored, a semisubmersible moored using pre-installed
moorings
3. Semi Direct Moored, a semisubmersible being moored directly while on
location
4. Drillship DP, a drillship station keeping using DP
5. Drillship Pre-installed Moored, a drillship moored using pre-installed
moorings
6. Drillship Directly Moored, a drillship moored directly while on location

While it is appreciated that each MODU is almost a prototype varying greatly even
with vessels of similar design or class, the effort is to keep the models as broad as
possible to offer some general insight of the relationships that exist between
different MODU types and the station keeping method employed. n reality these
comparisons would be made by the operator with the specific data of MODUs
being considered. The assumptions and general conditions of each model will be
explained in detail under the relevant sub sections.

Three of the models are hypothetical (3, 5, 6), since the types of operations
described have not taken place to date. Specifically, there has not been an
operational case of synthetic moorings used with a drillship in deepwater. The other
two hypothetical models involve directly mooring a semi and drillship. To the
author's knowledge from research done on this thesis there are no current
operations deploying or recovering synthetic moorings directly off a MODU.
Applications using synthetic lines to date have followed procedures with pre-
installed moorings only. While these are all hypothetical cases, they should be
technically feasible with existing technology and current operational
knowledge/experience.

TotaI System Cost
Pre-installed ( 2 Sys + Buoys) Direct Moored Water Depth (ft)
Polyester Dyneema Polyester Dyneema
5000 $14,173,842 $18,326,832 $4,286,921 $8,683,416
7500 $17,420,764 $26,050,249 $5,910,382 $12,545,124
10000 $20,667,685 $33,773,665 $7,533,842 $16,406,832
69
As mentioned the perspective taken is that of an operator looking for an asset to
fulfill a drilling program requirement. The following operational criteria are used as a
starting point to formulate an evaluation;

Number of Wells in the Program
Average duration of each well
Average distance between wells
Maximum water depth expected

The information entered is applied to all cost models as the basis for calculations.
Due to operational differences between the MODUs which will be discussed in
detail under the appropriate section different total contract durations are derived.
The total contract period derived for each MODU model is used by the
corresponding applicable mooring system cost model to determine the amortization
period and interest costs.

The operational cost structures take the following general categories into account
to determine an overall grand total for the proposed well program;

MODU specifications
AHTS specifications
Mooring system cost
Mobilization/Demobilization costs between locations
Pre-installation operational costs
MODU mooring and connection costs
DP system setup cost
MODU on location cost (day rate and fuel only)

All models are subject to the same cost of fuel. t is assumed that all vessels burn
MDO on a regular basis, something which is common in the offshore industry. The
average worldwide price of MDO $500/tonne for Dec 2005 was used for the base
model; this is to coincide with reliable day rate data used for the MODUs.

For the sake of clarity the following definitions are provided to identify what an
operational term in the calculations is describing;

Pre-instaIIation Operations This is the process of pre-installing a complete
mooring system on a future site, prior to the MODU's arrival. The work is done by
one or more anchor handlers.

MODU Mooring - This is the process of installing/recovering a mooring system
directly off a MODU when it arrives/departs on location with the assistance of one
or more anchor handlers

MODU Connecting/Disconnecting - This is the process of connecting and
disconnecting a MODU that has arrived on a location prepared with a pre-installed
70
mooring system. The work is done by coordination of the MODU with one or more
anchor handlers.

DP system setup - This is the process of setting up a DP system so that it can
perform station keeping functions on a new location. This is primarily to do with
acoustic position reference systems (HPR). t is conceivable that a moored semi or
drillship with DP capability would also set up acoustics for thruster assisted
mooring.

MobiIization/DemobiIization - This is the process of moving the MODU for one
well location to another. The process is performed with the assistance of one or
more AHTS except in the case of a self-propelled MODU like a drillship or DP
Semi.

The cost structures provide detailed breakdown and totals for all the identified
operational costs associated with the well program. An un-weighted grand total is
provided in the end for all models. t was deemed pointless for comparison
purposes to throw in a lump sum contingency amount on the grand total.
Operational downtime, and waiting on weather are factored in on specific operation
times and discussed in greater detail for each model specifically.

As has already been mentioned, MODUs are frequently upgraded and/or converted
to improve their performance, particularly with the rapid move to deeper water. t is
recognized that operators take advantage of competitive approaches to deepwater
drilling, but often need to foot the bill either by directly paying the drilling contractor
for new upgrades, or settling for a higher day rate. While again it is difficult to
anticipate all the upgrades a specific MODU may need if any to operate in a
specific station keeping scenario, the issue is addressed by offering an idea of the
capital expense allowance an operator can expect by taking one station keeping
option over another.

t must be stressed again that there are many individual cases pertaining to
MODUs and well specific site considerations. This is an attempt to provide a
generalized appraisal in generic terms of the differences between options from an
operational cost perspective factoring in the capital expenses of the mooring
system where applicable.


4.2.1 DP SemisubmersibIe
This model considers a DP semisubmersible performing the specified drilling
program while maintaining position on location using only dynamic positioning
the entire time. The values selected and assumptions made for this model are
discussed here in detail.

MODU ParticuIars
The following particulars are used in the base calculation for DP Semi;
71

MODU Day Rate Location - $227,500
MODU Fuel Consumption Location 70 tonnes/day
MODU Day Rate Mob/De-mob - $170,625
MODU Fuel Consumption Mob/De-mob 110 tonnes/day
Transit Speed 8 Kts

Current MODU rates are very difficult to determine given the many variables
involved, confidential information and phenomenal increases in the last year.
Good indications have already been given for the current market conditions in
section 2. The only reliable data available to the author on specific deepwater
capable rigs was from December 2005. This data was used in the determination
of MODU day rate in each option model.

TabIe 7: Day rates for DP Semisubs on contract Dec. 2005, Source: FearnIey Offshore
DP Semisub Day Rate
Eirik Raude $233,000
Cajun Express $207,000
Sedco Energy $202,000
West Venture $215,000
Stena Tay $175,000
Leiv Eiriksson $286,000
Deepwater Horizon $275,000
Average Day Rate $227,571

While this sample may seem small, it is very representative, keeping in mind
that there are only 41 Semisubs currently available that can work in 5000 ft or
more, and only 14 that can work in 7500ft or more. The average day rate was
rounded to $227,500 and used as the basis day rate for a DP Semi.
Mobilization/Demobilization day rate was considered to be 75% of full location
day rate and calculated at $170,625. This rate is applied during the transit
period only, not including connection or mooring time.

Fuel consumptions for on location and transit, as well as transit speed were
obtained from a MODU in this class, however at the request of the operator the
name of the vessel must remain confidential.

AHTS ParticuIars
An anchor handler is not required for this MODU during the drilling program. t is
assumed that the DP semisub will transit under its own power.

Mooring System Costs
There is no mooring system associated with this type of MODU for the specified
drilling program. t is assumed that the DP semi will maintain position on location
using its DP system.
72


MobiIization/DemobiIization Costs
For this cost model it is assumed that the DP semi will ballast to transit draft and
proceed under its own power from one well location to another. The applicable
day rate, fuel consumption and transit speed for this model have already been
mentioned in the MODU particulars.

n the initial well program specifications applied equally to all cost models an
average distance between wells is given and along with transit speed are the
basis for determining the total times.

Moorings Pre-InstaII Operations
There is no mooring system associated with this type of MODU for the specified
drilling program. t is assumed that the DP semi will maintain position on location
using its DP system.

Mooring/Connection Operations on Location
There are no mooring or connection operations associated with this type of
MODU for the specified drilling program. t is assumed that the DP semi will
maintain position on location using its DP system.

DP System Setup on Location
Once on location it is assumed that the DP SEM will deploy 4 beacons on the
seabed in a pattern around the well site for use with the Hydroacoustic Position
Reference system. Additionally hydrophones which are retracted for transit must
be lowered to the appropriate position once on location. With all components
deployed the HPR system must be calibrated for the new location which
depending on the system may require a series of position and heading changes
as well as the logging of data for minimum time periods as specified by
manufacturer's instructions.

A total of 10 hours of MODU time has been allotted per location for the
deployment, calibration and recovery of the system. This figure is based on
interviews with industry professionals working aboard DP MODUs.

On Location Operations
On location time is derived from the initial input criteria for the drilling program of
average days on each well. The average days on well per location is multiplied
by the MODU location day rate and fuel consumption to arrive at total on
location cost.

No account is taken of drilling expenses, 3
rd
party contractor costs or logistics
costs. Additionally total location time is identical for all models, there are no
assumptions made regarding dual activity rigs or other drilling program
efficiencies. This is strictly MODU time and fuel consumption on location applied
73
equally to all cost structures and does not include any of the other operational
times already mentioned.

TotaIs
Totals from each applicable operational phase per location are applied to arrive
at a sub total per location. This is then multiplied by the number of wells
specified in the initial drilling program to arrive at a grand total cost for that
MODU type to complete the drilling program.

Note that total number of MODU days, hence the contract period to complete
the specified program will vary between models due to the differences in
operational times outside total location time which is the same for all MODUs.

CapitaI Expense AIIowance
As already mentioned, frequently when an operator takes on MODU for a long
term contract, certain modifications or upgrades are contemplated to suit the
operator's requirements on the program. This may involve upgrades to drilling
equipment or for the station keeping ability to be extended to deeper water.
Since MODUs vary greatly and it is difficult to anticipate what upgrades may be
needed for a particular MODU so a total allowance for capital expenses is
calculated instead.

The capital expense allowance is an indicator of how much of a buffer an
operator has for modification and upgrade expenses over an alternative mooring
option. The comparison calculation is made between the grand total for this
option and the lowest costing alternative mooring option. This is most
meaningful when looking at a particular MODU type and deciding whether
mooring or DP is the best alternative and how much allowance is available for
modifications that may be required to prepare the vessel for that type of
performance.
4.2.2 SemisubmersibIe Pre-InstaIIed Moorings
This model considers a semisubmersible performing the specified drilling
program while maintaining position on location using pre-installed moorings
only. While many semis capable of drilling in these water depths may also be
fitted with a DP system the setup and use for stand by or thruster assisted
mooring was not assumed or incorporated. The specific values selected and
assumptions made for this model are discussed here in detail.

MODU ParticuIars
The following Particulars are used in the base Calculation for DP Semi;

MODU Day Rate Location - $181,000
MODU Fuel Consumption Location 25 tonnes/day
MODU Day Rate Mob/De-mob - $135,750
MODU Fuel Consumption Mob/De-mob 15 tonnes/day
Transit Speed 3.5 Kts
74


TabIe 8: Day rates for Deepwater Semisubs on contract Dec. 2005, Source: FearnIey Offshore
Deepwater Semisub Day Rate
GSF Development Driller $210,000
GSF Development Driller 2 $183,000
Noble Paul Wolff $155,000
Ocean Confidence $175,000
Average Dayrate $180,750

Again while this sample may seem small, presently there are only 41 active
deepwater semis with the fleet shrinking to 2 at 10,000ft of which some are DP
only without mooring gear installed. This group is very representative of the type
of 5
th
generation semis that could be used with synthetic moorings in water
depths well over 5000ft. The Ocean Confidence and Noble Paul Wolff are
examples of older rigs that have been upgraded to meet deep water
requirements, and both rigs have used synthetic moorings. The two Global
Santa Fe semis are newbuildings built to DP class 2 and have mooring winches,
certainly designed with deepwater mooring in mind. The average day rate was
rounded to $181,000 and used as the basis day rate for the Semi pre-installed
moored model. Mobilization/Demobilization day rate was considered to be 75%
of full location day rate and calculated at $135,700. This rate is applied during
the transit period only, not including connection or mooring time.

Fuel consumptions for on location and transit, as well as transit speed were
obtained from a MODU in this class, however at the request of the operator the
name of the vessel must remain confidential.

AHTS ParticuIars
The following AHTS particulars are used in the base calculation for Semi Pre-
installed Moored;

AHTS day rate - $25,000
AHTS fuel consumption 20 tonnes/day
ROV day rate - $5,000
Rigging crew day rate - $5,000

A specific worldwide AHTS rate is hard to accurately determine again because
of multiple variable, differences in regions and confidentiality. A day rate was
selected to coincide with MODU day rates used from around December, 2005.
At that time the AHTS market was rapidly increasing to its current high levels. t
was assumed that a less powerful AHTS would be required due to the use of
SEPLA anchors. Based on market information already discuss in section 2.5.1 a
day rate of $25,000 was used in the base model of this option. Additionally for
this type of anchor the AHTS would have to be equipped with an ROV, and
carry a rigging crew for handling the mooring gear.
75

Mooring System Costs
The calculation of mooring system cost has been previously described in section
4.1.4. t is assumed that an operator will purchase the appropriate mooring
system for the maximum anticipated water depth encountered during the drilling
program.

Since this is a pre-installed application two complete systems will be required for
the duration of the drilling program. The cost of the mooring systems is
amortized over the duration that the specific MODU takes to complete the
drilling program and interest charges of 8.5% applied on top for a total mooring
system cost. This is referred to as the contract duration in the full calculation
examples in the Appendix.

MobiIization/DemobiIization Costs
For this cost model it is assumed that the semi will ballast to transit draft and be
towed by 2 AHTS from one well location to another. Mobilization/demobilization
does not include the MODU time during mooring or connecting operations. The
applicable day rate, fuel consumptions and transit speed for this model have
already been mentioned in the MODU particulars.

n the initial well program specifications applied equally to all cost models an
average distance between wells is given and along with transit speed are the
basis for determining the total times.

Moorings Pre-InstaII Operations
This model assumes the use of a pre-installed mooring system. An appropriately
outfitted AHTS with an ROV and rigging crew is required on the future location
to install each mooring leg and buoy it off ready for connection when the MODU
arrives. Additionally the system has to also be recovered once the MODU has
moved on to the next well location.

A total number of 24days for one AHTS are assigned in this model per location
for installation and recovery of the pre-installed mooring system. Connection
and disconnection times for the MODU are not accounted for in this part of the
calculation.

Operational information available to the research was for pre-installed SEPLA
mooring systems in around 7000 ft water depth. With no information on
operational times for much deeper or shallower locations, no scaling is applied
for changes in water depths inputs. This was deemed acceptable although not
ideal to the author since the available operational times represent a median
deepwater mooring condition.




76
Mooring/Connection Operations on Location
With the use of a pre-installed system, there are no mooring operations involved
per say, only the connection of the MODU upon arrival to the previously installed
mooring system. This is accomplished with the assistance of one or more
AHTS.

For this model it is assumed that one AHTS is used to connect the semi to the
pre-installed mooring. A total of 4 hours for connecting and 4 hours for
disconnecting each leg are assigned in this model per well location regardless of
water depth. These numbers are assigned on the basis of available information
on similar operations and interviews with industry professionals. MODU time for
this operation is applied at full location day rate and fuel consumption.

DP System Setup on Location
t is assumed that the Semi will be expected to maintain position on location
using the pre-installed mooring system only. While many semis capable of
drilling in these water depths may also be fitted with a DP system the setup and
use for stand by or thruster assisted mooring was not assumed or incorporated
therefore they is no time allocated for DP setup in this model.

On Location Operations
On location time is derived from the initial input criteria for the drilling program of
average days on each well. The average days on well per location is multiplied
by the MODU location day rate and fuel consumption to arrive at total on
location cost.

No account is taken of drilling expenses, 3
rd
party contractor costs or logistics
costs. Additionally total location time is identical for all models, there are no
assumptions made regarding dual activity rigs or other drilling program
efficiencies. This is strictly MODU time and fuel consumption on location applied
equally to all cost structures and does not include any of the other operational
times already mentioned.

TotaIs
Totals from each applicable operational phase per location are applied to arrive
at a sub total per location. This is then multiplied by the number of wells
specified in the initial drilling program to arrive at a grand total cost for that
MODU type to complete the drilling program.

Note that total number of MODU days, hence the contract period to complete
the specified program will vary between models due to the differences in
operational times outside total location time which is the same for all MODUs.

CapitaI Expense AIIowance
The capital expense allowance is an indicator of how much of a buffer an
operator has for modification and upgrade expenses over an alternative DP
option. The comparison calculation is made between the grand total for this
option and the lowest costing alternative DP option. This is most meaningful
77
when looking at a particular MODU type and deciding whether mooring or DP is
the best alternative and how much allowance is available for modifications that
may be required to prepare the vessel for pre-installed mooring operations.
4.2.3 SemisubmersibIe Moored DirectIy
This model considers a semisubmersible performing the specified drilling
program while maintaining position on location using moorings only. The key
difference in this model is that the mooring system is deployed and recovered
directly while the MODU is on location. This is a hypothetical scenario because
an operation of this type has not been performed with synthetic moorings. This
is a scenario more common for wire/chain systems. t was desired to make this
comparison to show the difference between pre-installed and more conventional
mooring operations.

While many semis capable of drilling in these water depths may also be fitted
with a DP system the setup and use for stand by or thruster assisted mooring
was not assumed or incorporated. The specific values selected and
assumptions made for this model are discussed here in detail.

MODU ParticuIars
The following Particulars are used in the base Calculation for DP Semi;

MODU Day Rate Location - $181,000
MODU Fuel Consumption Location 25 tonnes/day
MODU Day Rate Mob/De-mob - $135,750
MODU Fuel Consumption Mob/De-mob 15 tonnes/day
Transit Speed 3.5 Kts

Since the objective of including this hypothetical scenario is direct comparison
with the Semi using pre-installed moorings, all MODU particulars used are the
same for this model. One consideration to keep in mind in reality, since this has
not currently been performed, modifications to a semi may be required to
actually undertake this operation with synthetic moorings. Such modifications
would likely add an upfront cost to the operator, or a premium on the day rate.

TabIe 9: Day rates for Deepwater Semisubs on contract Dec. 2005, Source: FearnIey Offshore
Deepwater Semisub Day Rate
GSF Development Driller $210,000
GSF Development Driller 2 $183,000
Noble Paul Wolff $155,000
Ocean Confidence $175,000
Average Dayrate $180,750

The average day rate was rounded to $181,000 and used as the basis day rate
for the Semi directly moored model. Mobilization/Demobilization day rate was
considered to be 75% of full location day rate and calculated at $135,700. This
78
rate is applied during the transit period only, not including connection or mooring
time.

Fuel consumptions for on location and transit, as well as transit speed were
obtained from a MODU in this class, however at the request of the operator the
name of the vessel must remain confidential.

AHTS ParticuIars
The following AHTS particulars are used in the base calculation for Semi
Directly Moored;

AHTS day rate - $30,000
AHTS fuel consumption 25 tonnes/day
ROV day rate - $5,000
Rigging crew day rate - $5,000

For this model it was assumed that slightly more powerful AHTS would be
required for the operation than the comparison pre-installed case. A day rate
was selected to coincide with MODU day rates used from around December,
2005. At that time the AHTS market was rapidly increasing to its current high
levels. A day rate of $30,000 was used in the base model of this option.
Additionally for the type of anchor used the AHTS would have to be equipped
with an ROV, and carry a rigging crew for handling the mooring gear.


Mooring System Costs
The calculation of mooring system cost has been previously described in section
4.1.4. t is assumed that an operator will purchase the appropriate mooring
system for the maximum anticipated water depth encountered during the drilling
program.

Since this is a direct moored application only one complete system will be
required for the duration of the drilling program. The cost of the mooring system
is amortized over the duration that the specific MODU takes to complete the
drilling program and interest charges of 8.5% applied on top for a total mooring
system cost. This is referred to as the contract duration in the full calculation
examples in the Appendix.

MobiIization/DemobiIization Costs
For this cost model it is assumed that the semi will ballast to transit draft and be
towed by 2 AHTS from one well location to another. Mobilization/demobilization
does not include the MODU time during mooring or connecting operations. The
applicable day rate, fuel consumptions and transit speed for this model have
already been mentioned in the MODU particulars.

79
n the initial well program specifications applied equally to all cost models an
average distance between wells is given and along with transit speed are the
basis for determining the total times.

Moorings Pre-InstaII Operations
This model assumes the use of a directly deployed and recovered moored
system while the MODU is on location. No pre-install operation is necessary.

Mooring/Connection Operations on Location
With the use of a directly deployed mooring system, it is assumed that the
mooring system is carried aboard the MODU. SEPLA anchors and Follower
suction pile would be passed to one AHTS for installation, while a second AHTS
begins to deploy one leg at a time for connection to a SEPLA. The reverse
would be done for recovery.

For this model it is assumed that 2 AHTS are used to moor and unmoor the
semi on the location. Two scaled coefficients were used to determine the hours
needed per leg for deploying and recovering as a function of water depth. These
coefficients are based on operational information of running chain/wire systems,
and times required for the installation and recovery of SEPLA anchors. The
coefficients specifically are 0.0015 for deploying and 0.0025 for recovery with
two AHTS working. The coefficients are multiplied by water depth to obtain the
number of hours required for each operation. As an example for 7,500ft water
depth it would require 11.25 hours to deploy and 18.75 hours to recover per leg.
As this is a hypothetical operation this has been on a best estimate basis with
available information on similar operations and interviews with industry
professionals. MODU time for this operation is applied at full location day rate
and fuel consumption.

DP System Setup on Location
t is assumed that the Semi will maintain position on location using the mooring
system only. While many semis capable of drilling in these water depths may
also be fitted with a DP system the setup and use for stand by or thruster
assisted mooring was not assumed or incorporated therefore they is no time
allocated for DP setup in this model.

On Location Operations
On location time is derived from the initial input criteria for the drilling program of
average days on each well. The average days on well per location is multiplied
by the MODU location day rate and fuel consumption to arrive at total on
location cost.

No account is taken of drilling expenses, 3
rd
party contractor costs or logistics
costs. Additionally total location time is identical for all models, there are no
assumptions made regarding dual activity rigs or other drilling program
efficiencies. This is strictly MODU time and fuel consumption on location applied
80
equally to all cost structures and does not include any of the other operational
times already mentioned.

TotaIs
Totals from each applicable operational phase per location are applied to arrive
at a sub total per location. This is then multiplied by the number of wells
specified in the initial drilling program to arrive at a grand total cost for that
MODU type to complete the drilling program.

Note that total number of MODU days, hence the contract period to complete
the specified program will vary between models due to the differences in
operational times outside total location time which is the same for all MODUs.

CapitaI Expense AIIowance
The capital expense allowance is an indicator of how much of a buffer an
operator has for modification and upgrade expenses over an alternative DP
option. The comparison calculation is made between the grand total for this
option and the lowest costing alternative DP option. This is most meaningful
when looking at a particular MODU type and deciding whether mooring or DP is
the best alternative and how much allowance is available for modifications that
may be required to prepare the vessel for direct mooring operations.
4.2.4 DP DriIIship
This model considers a DP Drillship performing the specified drilling program
while maintaining position on location using only dynamic positioning the entire
time. The values selected and assumptions made for this model are discussed
here in detail.

MODU ParticuIars
The following particulars are used in the base calculation for DP Drillship;

MODU Day Rate Location - $216,000
MODU Fuel Consumption Location 85 tonnes/day
MODU Day Rate Mob/De-mob - $162,000
MODU Fuel Consumption Mob/De-mob 125 tonnes/day
Transit Speed 11 kts









81
TabIe 10: Day rates for DP DriIIships on contract Dec. 2005, Source: FearnIey Offshore
DriIIship Day Rate
Discoverer Enterprise $182,500
Deepwater Pathfinder $190,000
West Navigator $215,000
GSF C.R. Luigs $225,000
Discoverer Deep Seas $205,000
Discoverer Spirit $204,000
Deepwater Expedition $240,000
Deepwater Millenium $286,000
Saipem 10000 $200,000
Average Day Rate $216,389

This is a very good sample of the available DP drillships, and very
representative of the vessels used in this option. The average day rate was
rounded to $216,000 and used as the basis day rate for a DP Drillship.
Mobilization/Demobilization day rate was considered to be 75% of full location
day rate and calculated at $170,625. This rate is applied during the transit
period only, not including connection or mooring time.
20
41
16
14
13
2
0
10
20
30
40
50
Number of
MODUs
5000 7500 10000
Water Depth Rating (ft)
Active Deepwater Rated MODUs -
WorIdwide
Drillships Semisubs

Figure 23: Active Deepwater MODU fIeet composition, Aug. 2006 Source: Rigzone

t is interesting to point out that the composition of the currently active deep
water rated MODU fleet. As can be seen from the table above as you move into
deeper water ratings the supply of semis becomes tighter than that for drillships.
This could potentially help explain why the average DP Semi day rate came in
higher than the rate for a DP drillship.

Fuel consumptions for on location and transit, as well as transit speed were
obtained from a MODU in this class, however at the request of the operator the
name of the vessel must remain confidential.
82
AHTS ParticuIars
An anchor handler is not required for this MODU during the drilling program. t is
naturally assumed that the DP Drillship will transit under its own power.

Mooring System Costs
There is no mooring system associated with this type of MODU for the specified
drilling program. t is assumed that the Drillship will maintain position on location
using its DP system.

MobiIization/DemobiIization Costs
For this cost model it is assumed that the DP drillship will proceed under its own
power from one well location to another. The applicable day rate, fuel
consumption and transit speed for this model have already been mentioned in
the MODU particulars.

n the initial well program specifications applied equally to all cost models an
average distance between wells is given and along with transit speed are the
basis for determining the total times.

Moorings Pre-InstaII Operations
There is no mooring system associated with this type of MODU for the specified
drilling program. t is assumed that the DP Drillship will maintain position on
location using its DP system.

Mooring/Connection Operations on Location
There are no mooring or connection operations associated with this type of
MODU for the specified drilling program. t is assumed that the DP Drillship will
maintain position on location using its DP system.

DP System Setup on Location
Once on location it is assumed that the DP drillship will deploy 4 beacons on the
seabed in a pattern around the well site for use with the Hydroacoustic Position
Reference system. Additionally hydrophones which are retracted for transit must
be lowered to the appropriate position once on location. With all components
deployed the HPR system must be calibrated for the new location which
depending on the system may require a series of position and heading changes
as well as the logging of data for minimum time periods as specified by
manufacturer's instructions.

A total of 10 hours of MODU time has been allotted per location for the
deployment, calibration and recovery of the system. This figure is based on
interviews with industry professionals working aboard DP MODUs.

On Location Operations
On location time is derived from the initial input criteria for the drilling program of
average days on each well. The average days on well per location is multiplied
83
by the MODU location day rate and fuel consumption to arrive at total on
location cost.

No account is taken of drilling expenses, 3
rd
party contractor costs or logistics
costs. Additionally total location time is identical for all models, there are no
assumptions made regarding dual activity rigs or other drilling program
efficiencies. This is strictly MODU time and fuel consumption on location applied
equally to all cost structures and does not include any of the other operational
times already mentioned.

TotaIs
Totals from each applicable operational phase per location are applied to arrive
at a sub total per location. This is then multiplied by the number of wells
specified in the initial drilling program to arrive at a grand total cost for that
MODU type to complete the drilling program.

Note that total number of MODU days, hence the contract period to complete
the specified program will vary between models due to the differences in
operational times outside total location time which is the same for all MODUs.

CapitaI Expense AIIowance
The capital expense allowance is an indicator of how much of a buffer an
operator has for modification and upgrade expenses over an alternative mooring
option. The comparison calculation is made between the grand total for this
option and the lowest costing alternative mooring option. This is most
meaningful when looking at a particular MODU type and deciding whether
mooring or DP is the best alternative and how much allowance is available for
modifications that may be required to prepare the vessel for this type of
performance.

4.2.5 DriIIship Pre-InstaIIed Moorings
This model considers a drillship performing the specified drilling program while
maintaining position on location using pre-installed moorings only. This is a
hypothetical model since synthetic moorings have not been used in conjunction
with a drillship. While all drillships capable of drilling in these water depths are
fitted with a DP system the setup and use for stand by or thruster assisted
mooring was not assumed or incorporated. The specific values selected and
assumptions made for this model are discussed here in detail.

MODU ParticuIars
The following Particulars are used in the base calculation for Drillship Pre-
installed moored;

MODU Day Rate Location - $156,000
MODU Fuel Consumption Location 30 tonnes/day
MODU Day Rate Mob/De-mob - $117,000
84
MODU Fuel Consumption Mob/De-mob 125 tonnes/day
Transit Speed 11 Kts


TabIe 11: Day rates for DP DriIIships on contract Dec. 2005, Source: FearnIey Offshore
DriIIship Day Rate
High Group
Discoverer Enterprise $182,500
Deepwater Pathfinder $190,000
West Navigator $215,000
GSF C.R. Luigs $225,000
Discoverer Deep Seas $205,000
Discoverer Spirit $204,000
Deepwater Expedition $240,000
Deepwater Millenium $286,000
Saipem 10000 $200,000
Average Day Rate $216,389
Low Group
DriIIship Day Rate
Deepwater Discovery $170,000
Deepwater Frontier $145,000
GSF Jack Ryan $145,000
Belford Dolphin $165,000
Average Day Rate $156,250


The above chart shows the day rates for all13 active DP drillship rated at 10,000
ft or more on long term contracts as of December 2005. The day rates showed
two distinct grouping one high and one low as indicated. All vessels in the low
group except the GSF Jack Ryan were in their firm contract period and had at
least 2 years remaining on the contract. These vessels do not have mooring
windlasses for deepwater mooring and would require modification/upgrade.
There are only 7 active conventionally moored drillships, interestingly two with a
turret design, but they would most likely need extensive upgrade to their drilling
package to get into deeper water. The average of the low group was selected
for this model because it represents exactly the kind of market opportunity
where mooring a DP drillship in deep water may offer operators the distinct cost
saving advantage where mooring could be applied.

The average day rate of the low group was rounded to $156,000 and used as
the basis day rate for the drillship pre-installed moored model.
Mobilization/Demobilization day rate was considered to be 75% of full location
85
day rate and calculated at $117,000. This rate is applied during the transit
period only, not including connection or mooring time.

Fuel consumptions for on location and transit, as well as transit speed were
obtained from a MODU in this class, however at the request of the operator the
name of the vessel must remain confidential.

AHTS ParticuIars
The following AHTS particulars are used in the base calculation for Drillship Pre-
installed Moored;

AHTS day rate - $25,000
AHTS fuel consumption 20 tonnes/day
ROV day rate - $5,000
Rigging crew day rate - $5,000

t was assumed that a less powerful AHTS would be required due to the use of
SEPLA anchors. Based on market information already discuss a day rate of
$25,000 was used in the base model of this option. Additionally for this type of
anchor the AHTS would have to be equipped with an ROV, and carry a rigging
crew for handling the mooring gear.


Mooring System Costs
The calculation of mooring system cost has been previously described in section
4.1.4. t is assumed that an operator will purchase the appropriate mooring
system for the maximum anticipated water depth encountered during the drilling
program.

Since this is a pre-installed application two complete systems will be required for
the duration of the drilling program. The cost of the mooring systems is
amortized over the duration that the specific MODU takes to complete the
drilling program and interest charges of 8.5% applied on top for a total mooring
system cost. This is referred to as the contract duration in the full calculation
examples in the Appendix.

MobiIization/DemobiIization Costs
For this cost model it is assumed that the drillship will naturally transit under its
own power from one well location to another. Mobilization/demobilization does
not include the MODU time during mooring or connecting operations. The
applicable day rate, fuel consumptions and transit speed for this model have
already been mentioned in the MODU particulars.

n the initial well program specifications applied equally to all cost models an
average distance between wells is given and along with transit speed are the
basis for determining the total times.

86
Moorings Pre-InstaII Operations
This model assumes the use of a pre-installed mooring system. An appropriately
outfitted AHTS with an ROV and rigging crew is required on the future location
to install each mooring leg and buoy it off ready for connection when the MODU
arrives. Additionally the system has to also be recovered once the MODU has
moved on to the next well location.

A total number of 24days for one AHTS are assigned in this model per location
for installation and recovery of the pre-installed mooring system. Connection
and disconnection times for the MODU are not accounted for in this part of the
calculation.

Operational information available to the research was for pre-installed SEPLA
mooring systems in around 7000 ft water depth. With no information on
operational times for much deeper or shallower locations, no scaling is applied
for changes in water depths inputs. This was deemed acceptable although not
ideal to the author since the available operational times represent a median
deepwater mooring condition.


Mooring/Connection Operations on Location
With the use of a pre-installed system, there are no mooring operations involved
per say, only the connection of the MODU upon arrival to the previously installed
mooring system. This is accomplished with the assistance of one or more
AHTS.

For this model it is assumed that one AHTS is used to connect the semi to the
pre-installed mooring. A total of 4 hours for connecting and 4 hours for
disconnecting each leg are assigned in this model per well location regardless of
water depth. These numbers are assigned on the basis of available information
on similar operations and interviews with industry professionals. MODU time for
this operation is applied at full location day rate and fuel consumption.

DP System Setup on Location
t is assumed that the Drillship will be expected to maintain position on location
using the pre-installed mooring system only. While all drillships capable of
drilling in these water depths are fitted with a DP system the setup and use for
stand by or thruster assisted mooring was not assumed or incorporated
therefore they is no time allocated for DP setup in this model.

On Location Operations
On location time is derived from the initial input criteria for the drilling program of
average days on each well. The average days on well per location is multiplied
by the MODU location day rate and fuel consumption to arrive at total on
location cost.

87
No account is taken of drilling expenses, 3
rd
party contractor costs or logistics
costs. Additionally total location time is identical for all models, there are no
assumptions made regarding dual activity rigs or other drilling program
efficiencies. This is strictly MODU time and fuel consumption on location applied
equally to all cost structures and does not include any of the other operational
times already mentioned.

TotaIs
Totals from each applicable operational phase per location are applied to arrive
at a sub total per location. This is then multiplied by the number of wells
specified in the initial drilling program to arrive at a grand total cost for that
MODU type to complete the drilling program.

Note that total number of MODU days, hence the contract period to complete
the specified program will vary between models due to the differences in
operational times outside total location time which is the same for all MODUs.

CapitaI Expense AIIowance
The capital expense allowance is an indicator of how much of a buffer an
operator has for modification and upgrade expenses over an alternative DP
option. The comparison calculation is made between the grand total for this
option and the lowest costing alternative DP option. This is most meaningful
when looking at a particular MODU type and deciding whether mooring or DP is
the best alternative and how much allowance is available for modifications that
may be required to prepare the vessel for pre-installed mooring operation.
4.2.6 DriIIship Moored DirectIy
This model considers a drillship performing the specified drilling program while
maintaining position on location using moorings only. The key difference in this
model is that the mooring system is deployed and recovered directly while the
MODU is on location. This is a hypothetical scenario because an operation of
this type has not been performed with synthetic moorings. This is more common
for wire/chain systems. t was desired to also make this comparison and see
what the difference between pre-installed and more conventional mooring
operations as it applies to a drillship's particular characteristics.

MODU ParticuIars
The following Particulars are used in the base Calculation for DP Semi;

MODU Day Rate Location - $156,000
MODU Fuel Consumption Location 30 tonnes/day
MODU Day Rate Mob/De-mob - $117,000
MODU Fuel Consumption Mob/De-mob 125 tonnes/day
Transit Speed 11 Kts

Since the objective of including this hypothetical scenario is direct comparison
with the drillship using pre-installed moorings, all MODU particulars used are the
88
same for this model. One consideration to keep in mind in reality, since this has
not currently been performed, modifications to a semi may be required to
actually undertake this operation with synthetic moorings.

TabIe 12: Day rates for Deepwater driIIships on contract Dec. 2005, Source: FearnIey Offshore
Low Group
DriIIship Day Rate
Deepwater Discovery $170,000
Deepwater Frontier $145,000
GSF Jack Ryan $145,000
Belford Dolphin $165,000
Average Day Rate $156,250


The average day rate from the low group discussed in the pervious model was
rounded to $156,000 and used as the basis day rate for the drillship directly
moored model. Mobilization/Demobilization day rate was considered to be 75%
of full location day rate and calculated at $117,000. This rate is applied during
the transit period only, not including connection or mooring time.

Fuel consumptions for on location and transit, as well as transit speed were
obtained from a MODU in this class, however at the request of the operator the
name of the vessel must remain confidential.

AHTS ParticuIars
The following AHTS particulars are used in the base calculation for Drillship
Directly Moored;

AHTS day rate - $30,000
AHTS fuel consumption 25 tonnes/day
ROV day rate - $5,000
Rigging crew day rate - $5,000

For this model it was assumed that slightly more powerful AHTS would be
required for the operation than the comparison pre-installed model. A day rate
was selected to coincide with MODU day rates used from around December,
2005. At that time the AHTS market was rapidly increasing to its current high
levels. A day rate of $30,000 was used in the base model of this option.
Additionally for the type of anchor used the AHTS would have to be equipped
with an ROV, and carry a rigging crew for handling the mooring gear.


Mooring System Costs
The calculation of mooring system cost has been previously described in section
4.1.4. t is assumed that an operator will purchase the appropriate mooring
89
system for the maximum anticipated water depth encountered during the drilling
program.

Since this is a direct moored application only one complete system will be
required for the duration of the drilling program. The cost of the mooring system
is amortized over the duration that the specific MODU takes to complete the
drilling program and interest charges of 8.5% applied on top for a total mooring
system cost. This is referred to as the contract duration in the full calculation
examples in the Appendix.

MobiIization/DemobiIization Costs
For this cost model it is assumed that the drillship will transit under its own
power from one well location to another. Mobilization/demobilization does not
include the MODU time during mooring or connecting operations. The applicable
day rate, fuel consumptions and transit speed for this model have already been
mentioned in the MODU particulars.

n the initial well program specifications applied equally to all cost models an
average distance between wells is given and along with transit speed are the
basis for determining the total times.

Moorings Pre-InstaII Operations
This model assumes the use of a directly deployed and recovered moored
system while the MODU is on location. No pre-install operation is necessary.

Mooring/Connection Operations on Location
With the use of a directly deployed mooring system, it is assumed that the
mooring system is carried aboard the MODU. SEPLA anchors and follower
suction pile would be passed to one AHTS for installation, while a second
begins to deploy on leg at a time for connection to a SEPLA. The reverse would
be done for recovery.

For this model it is assumed that 2 AHTS are used to moor and unmoor the
drillship on the new location. Two scaled coefficients were used to determine the
hours needed per leg for deploying and recovering as a function of water depth.
These coefficients are based on operational information of running chain/wire
systems, and times required for the installation and recovery of SEPLA anchors.
The coefficients specifically are 0.0015 for deploying and 0.0025 for recovery
with two AHTS working. The coefficients are multiplied by water depth to obtain
the number of hours required for each operation. As an example for 7,500ft
water depth it would require 11.25 hours to deploy and 18.75 hours to recover
per leg. As this is a hypothetical operation this has been on a best estimate
basis with available information on similar operations and interviews with
industry professionals. MODU time for this operation is applied at full location
day rate and fuel consumption.


90
DP System Setup on Location
t is assumed that the Drillship will maintain position on location using the
mooring system only. While all drillships capable of drilling in these water depths
are fitted with a DP system the setup and use for stand by or thruster assisted
mooring was not assumed or incorporated therefore they is no time allocated for
DP setup in this model.

On Location Operations
On location time is derived from the initial input criteria for the drilling program of
average days on each well. The average days on well per location is multiplied
by the MODU location day rate and fuel consumption to arrive at total on
location cost.

No account is taken of drilling expenses, 3
rd
party contractor costs or logistics
costs. Additionally total location time is identical for all models, there are no
assumptions made regarding dual activity rigs or other drilling program
efficiencies. This is strictly MODU time and fuel consumption on location applied
equally to all cost structures and does not include any of the other operational
times already mentioned.

TotaIs
Totals from each applicable operational phase per location are applied to arrive
at a sub total per location. This is then multiplied by the number of wells
specified in the initial drilling program to arrive at a grand total cost for that
MODU type to complete the drilling program.

Note that total number of MODU days, hence the contract period to complete
the specified program will vary between models due to the differences in
operational times outside total location time which is the same for all MODUs.

CapitaI Expense AIIowance
The capital expense allowance is an indicator of how much of a buffer an
operator has for modification and upgrade expenses over an alternative DP
option. The comparison calculation is made between the grand total for this
option and the lowest costing alternative DP option. This is most meaningful
when looking at a particular MODU type and deciding whether mooring or DP is
the best alternative and how much allowance is available for modifications that
may be required to prepare the vessel for direct mooring operations.






91
4.3 Basis Drilling Program Results
A basis drilling program was established making all the assumption per model
mentioned. This will serve as a basis from which all subsequent analysis on
individual variables will take place.

The basis drilling program consists of the following parameters;
Number of Wells 12
Average days on each well 90 days
Average distance between wells 120nm
Maximum water depth 10,000 ft
Average MDO price $500/tonne
Total Transits during contact period 12
The number of wells being set at 12 was deemed as a reasonable number of wells
that an operator may have in mind for a long term contract taking into account the
average number of days on a well. The average number of days on each well was
fixed at 90 for the base case because this represents a middle ground between a
typical deeper water exploration and development well. t was assumed that a
typical exploration wells without complications could run 50 to 60 days and a typical
development well without complications could run 120-130 days.

For the basis program the average distance between wells was kept to 120nm as it
was assumed that all wells would be located within a particular geographic offshore
region. t was further assumed that the maximum capability should be set for
10,000ft, on the upper side of the industry's capability. The cost of MDO was set at
the approximate worldwide price in December, 2005 which coincides with the time
period of day rate data used in the models.

TabIe 13: Basis driIIing program resuIts. FuII caIcuIation avaiIabIe in the appendix
Basis DriIIing Program ResuIts
Required Contract Duration for WeII Program
Semi DP
Semi Pre-
InstaIIed
Semi
Direct
Moored
DriIIship
DP
DriIIship
Pre-
InstaIIed
DriIIship
Direct
Moored
Calculated Contract Duration in Years Years 3.0 3.1 3.4 3.0 3.1 3.4
Calculated Contract Duration or in Days Days 1,093 1,129 1,257 1,090 1,117 1,245
TotaI Costs
Total Mooring System Cost CAPEX $USD $0 $23,576,622 $8,716,838 $0 $23,546,056 $8,716,838
Total Mob/Demob Cost $USD $1,692,188 $3,998,571 $4,255,714 $1,224,545 $979,091 $979,091
Total Preset Ops Costs $USD $0 $12,960,000 $0 $0 $12,960,000 $0
Total Mooring/Connecting Costs $USD $0 $7,632,000 $47,760,000 $0 $6,912,000 $44,160,000
Total DP Setup Costs $USD $1,312,500 $0 $0 $1,292,500 $0 $0
Total Mooring/Con/DP Set/+Pre-nst Cost $USD $1,312,500 $20,592,000 $47,760,000 $1,292,500 $19,872,000 $44,160,000
Total MODU Location Cost $USD $283,500,000 $208,980,000 $208,980,000 $279,180,000 $184,680,000 $184,680,000
Grand TotaI $USD $286,504,688 $257,147,194 $269,712,552 $281,697,045 $229,077,147 $238,535,929

CAPEX AIIowance over Lowest DP Option $USD $24,549,852 $11,984,493 $52,619,899 $43,161,116
CAPEX AIIowance over Lowest Mooring
Opt $USD
No
AIIowance No AIIowance

92
$0
$50,000,000
$100,000,000
$150,000,000
$200,000,000
$250,000,000
$300,000,000
Basis Drilling Program
Basis DriIIing Program Grand TotaIs
SEM DP SEM Pre-nstalled Moored
SEM Directly Moored Drillship DP
Drillship Pre-nst Moored Drillship Directly Moored

Figure 24: Basis driIIing program resuIts.


The basis drilling program parameters indicate that the two DP station keeping
options are more expensive than all mooring options but complete the program in
the shortest period of time the DP drillship being the fastest with 1,090 days.

The mooring options provide the cheaper solutions for the specified basis mooring
program, with the hypothetical drillship pre-installed moored offering the greatest
operational savings and shortest contract period amongst moored options with a
total of 1,117 days. While in the real world modifications would have to be made for
this option, a $52,619,899 allowance is available for this scenario over the lowest
DP option.

The results also show the hypothetical directly moored option is more expensive
both for the Semi and for the Drillship despite not have to pay for an additional
mooring system, operational mooring expenses apparently contributing more
significantly to the bottom line.

n the next section an analysis will be performed on this base case altering
individual variables to examine their effects on the bottom line.








93
5 CaIcuIation AnaIysis
The objective of this section is to look at some of the key variables that affect the
various options. The base case offers some insight but this is only one snap shot of
a particular case, and certainly there is a wide variety of cases which could benefit
one model while penalize another.

For the purpose of the analysis, all variables were kept the same as in the basis
case except the variable being examined, with the idea being to determine the
degree of impact this one variable has on the bottom line.

5.1 Number of Wells
The number of wells in a drilling program is part of the time factor, but certainly
not all since operational tempo, or how long is spent on each well is another
important time consideration. Here we isolate the number of wells during a drilling
program, assuming the 90 days on each well from the basis case.
Effect of TotaI Number of WeIIs on Grand TotaI
$0
$50,000,000
$100,000,000
$150,000,000
$200,000,000
$250,000,000
$300,000,000
$350,000,000
$400,000,000
4 6 8 10 12 14
TotaI Number of WeIIs
G
r
a
n
d

T
o
t
a
I

(
$
U
S
D
)
SEM DP SEM Pre-nstalled Moored SEM Directly Moored
Drillship DP Drillship Pre-nst Moored Drillship Directly Moored

Figure 25: Effect of TotaI Number of WeIIs on Grand TotaI

From the results of the sensitivity analysis on the way a difference in the number
of wells in a drilling program affects the overall cost, at the low end of the range
with only 4 ninety day wells we see a very close and mixed picture for all cases.
nterestingly the lowest costing options here is the direct moored drillship models,
while the other Semi direct moored model is only slightly higher than the DP
drillship model. At the same time these two options also take the longest total
amount of time to complete the program.

94
TabIe 14: Effect of TotaI Number of WeIIs on Grand TotaI
Grand TotaI Cost
TotaI Number of
WeIIs
SEMI DP
SEMI Pre-
InstaIIed
Moored
SEMI DirectIy
Moored
DriIIship DP
DriIIship Pre-
Inst Moored
DriIIship
DirectIy
Moored
4 $95,501,563 $99,516,602 $94,932,622 $93,899,015 $90,160,461 $84,536,886
6 $143,252,344 $138,914,388 $138,431,908 $140,848,523 $124,415,643 $122,840,068
8 $191,003,125 $178,318,755 $181,931,193 $187,798,030 $158,670,825 $161,143,250
10 $238,753,906 $217,729,694 $225,430,479 $234,747,538 $192,926,007 $199,446,432
12 $286,504,688 $257,147,194 $268,929,765 $281,697,045 $227,181,189 $237,749,613
14 $334,255,469 $296,571,241 $312,429,051 $328,646,553 $261,436,370 $276,052,795
TotaI Change $238,753,906 $197,054,639 $217,496,429 $234,747,538 $171,275,909 $191,515,909
TotaI Change (%) 250.0% 198.0% 229.1% 250.0% 190.0% 226.5%


Clearly the operational efficiency gained and time saved by using pre-set
moorings at added cost of a second mooring system does not pay for itself over
the relatively short drilling program of around a year with only 4 moves. The pre-
installed Semi model came in with the highest overall cost and took only about 12
days more than its DP counterpart, significantly more attractive than the 43
additional days required to direct moor a Semi. Dynamic positioning also had
mixed results with the DP semi being the second most expensive option and the
DP drillship coming in right in the middle of the pack.

As the total contract period continues to increase by the increasing number of
ninety day wells we see a clearer picture emerging. At around 8 wells, the pre-
installed drillship becomes the clear low cost leader undercutting the direct
moored drillship. At roughly the same time period but at a higher cost level, we
also clearly see the pre-installed Semi undercutting its direct moored counter part.
The two DP options clearly start to become the most costly options with the Semi
higher than the Drillship throughout.

While the issue of day rate will be analyzed separately later, to a large extent we
can see the impact the lower day rate moored drillships clearly shown. What can
be said, looking at these results about the overall costs, is that with this given well
duration of 90 days in a shorter contract period DP options are competitive, while
preset option tends not to be advantageous. n the longer term with this
operational tempo DP is the most expensive option, with pre-installed mooring
becoming the lowest cost option for a Semi or Drillship.








95
TabIe 15: Effect of TotaI Number of WeIIs on TotaI Contract Period
TotaI Contract Period in Days
TotaI
Number of
WeIIs
SEM DP
SEM Pre-
nstalled
Moored
SEM
Directly
Moored
Drillship
DP
Drillship Pre-
nst Moored
Drillship Directly
Moored
4 364 376 419 363 372 415
6 546 565 629 545 559 623
8 728 753 838 727 745 830
10 910 941 1,048 909 931 1,038
12 1,093 1,129 1,257 1,090 1,117 1,245
14 1,275 1,317 1,467 1,272 1,304 1,453

n terms of time to complete the specified program, not surprisingly DP with its
short setup time and rapid transit speeds always comes in with the lowest number
of days. Amongst the mooring options pre-installed demonstrated the faster
option trailing DP by a significantly closer margin than direct moored options
which in the case of a 14 well program the latter options taking an average of 187
days more than DP.
5.2 Duration of Each Well
The Duration of each well is another time issue that needs separate consideration
from total contract period already discussed. While total contract period is one
element of time, it is also important to consider how frequently a MODU will be
moving from one well to another or for the lack of a better term the operational
tempo.

n the previous section all wells were set at the basis rate of 90 days and the
number of wells was simply adjusted to affect the duration of the contract. n this
analysis the duration of each well is being adjusted, while keeping the total
number of wells fixed at the basis value of 12. While this also affects the total
contract period, the important thing that is occurring is that the frequency of rig
moves is changing giving an understanding of how this factor affects the bottom
line.
96
Effect of Duration of Each WeII on Grand TotaI
$0
$50,000,000
$100,000,000
$150,000,000
$200,000,000
$250,000,000
$300,000,000
$350,000,000
$400,000,000
$450,000,000
45 60 75 90 105 120
Duration of Each WeII (Days)
G
r
a
n
d

T
o
t
a
I

(
$
U
S
D
)
SEM DP SEM Pre-nstalled Moored SEM Directly Moored
Drillship DP Drillship Pre-nst Moored Drillship Directly Moored

Figure 26: Effect of Duration of Each WeII on Grand TotaI

The most striking thing that is immediately evident with shorter well durations of
up to 60-70 days and subsequent greater operational tempo is the cost and time
advantage for the DP models. Even though the Pre-installed drillship still comes
in with the lowest overall cost at the shortest well durations this primarily shows
the cost effectiveness of the pre-installed option with a MODU on a much lower
day rate.

TabIe 16: Effect of Duration of Each WeII on Grand TotaI


Grand TotaI Cost
Average Days on
Each WeII
SEMI DP
SEMI Pre-
InstaIIed
Moored
SEMI DirectIy
Moored
DriIIship DP
DriIIship Pre-
Inst Moored
DriIIship
DirectIy
Moored
45 $144,754,688 $151,271,442 $164,712,746 $142,107,045 $135,352,565 $145,675,306
60 $192,004,688 $186,557,351 $199,542,746 $188,637,045 $166,132,565 $176,455,306
75 $239,254,688 $221,849,271 $234,372,746 $235,167,045 $196,912,565 $207,235,306
90 $286,504,688 $257,147,194 $269,202,746 $281,697,045 $227,692,565 $238,015,306
105 $333,754,688 $292,451,106 $304,032,746 $328,227,045 $258,472,565 $268,795,306
120 $381,004,688 $327,760,994 $338,862,746 $374,757,045 $289,252,565 $299,575,306
TotaI Change $236,250,000 $176,489,552 $174,150,000 $232,650,000 $153,900,000 $153,900,000
TotaI Change (%) 163.2% 116.7% 105.7% 163.7% 113.7% 105.6%
97
For the mooring options interestingly but also not surprisingly direct moored
options are more expensive than pre-installed options, however as the
operational tempo decreases, the days on the well becoming greater, the gap
between the two begins to narrow. Accordingly in a situation where only one or
two rig moves are expected for the year, the decision between direct or pre-
installed mooring is very close to neutral, while DP will clearly be the most
expensive approach.

Another element that can be seen clearly here even though the variables affecting
this are not examined individually here is the difference between the mooring
options for the Semi and the Drillship. While the relationship between pre-installed
and direct moored was just discussed, we can clearly see the two Semisub
mooring options are clearly more expensive than the two moored drillship options
throughout. The factors affecting this are the higher MODU day rate for the Semi
and the longer times taken for transits, the semis having to be towed at 3.5kts,
while the drillships are self-propelled and can travel at an average of 11kts.


TabIe 17: Effect of Duration of Each WeII on TotaI Contract Time
TotaI Contract Period in Days
Average Days on
Each WeII
SEM DP
SEM Pre-
nstalled Moored
SEM Directly
Moored
Drillship
DP
Drillship Pre-
nst Moored
Drillship Directly
Moored
45 553 589 717 550 577 705
60 733 769 897 730 757 885
75 913 949 1,077 910 937 1,065
90 1,093 1,129 1,257 1,090 1,117 1,245
105 1,273 1,309 1,437 1,270 1,297 1,425
120 1,453 1,489 1,617 1,450 1,477 1,605

n terms of the total amount of time taken to complete the drilling program not
surprisingly the two DP solutions completed it in the shortest amount of time with
3-7 days difference between semi and drillship throughout the examined range.
This is due to the slight difference in transit speeds of a self-propelled Semi and a
Drillship. Next in line are the two pre-installed mooring options impressively only
30-40 days behind DP solutions. Finally the direct moored options are on average
over 150 days longer than DP options, which show how they particularly suffer in
terms of time with the many rig moves involved in high tempo drilling programs.







98
5.3 Average Distance between Wells
The distance between wells is another variable that was specifically examine for
its impact on the drilling program. The average distance between wells was
adjusted from 50nm representing short in field moves, to 2500nm representing a
rather extreme case of a move from region to region for almost every well,
something which may occur but is highly unlikely. The main reason this extreme
value was chosen was to clearly see the impact of distance.

A more realistic upper limit would be the 1000nm average, representing a series
of wells within a particular offshore region, followed by a long transit for a series of
wells in another region. As an example the 1000nm average in the basis case
would represent 6 wells in the Gulf of Mexico, followed by 6 wells in Brazil
Campos Basin area or Nigeria (roughly similar distance, Nigeria about 500nm
more) and return transit after the last well. This is a reasonable scenario even
though for longer transits a non-self propelled MODU like a Semi may be loaded
onto a heavy lift ship, depending again on market conditions.
Effect of Distance between WeIIs on Grand TotaI
$0
$50,000,000
$100,000,000
$150,000,000
$200,000,000
$250,000,000
$300,000,000
$350,000,000
$400,000,000
50 250 500 1000 1750 2500
Average Distance between Each WeII (nm)
G
r
a
n
d

T
o
t
a
I

(
$
U
S
D
)
SEM DP SEM Pre-nstalled Moored SEM Directly Moored
Drillship DP Drillship Pre-nst Moored Drillship Directly Moored

Figure 27: Effect of Distance between WeIIs on Grand TotaI

The results of the analysis clearly shows the DP options as the most costly
options when short distances are involved compared to both Semi and Drillship
mooring options, Drillships options being the lowest owing in part to their greater
transit speed. The same relationship holds as before with pre-installed moorings
being consistently lower than direct moored options throughout.

99
TabIe 18: Effect of Distance between WeIIs on Grand TotaI
Grand TotaI Cost
Distance
Between WeIIs
(nm)
SEMI DP
SEMI Pre-
InstaIIed
Moored
SEMI DirectIy
Moored
DriIIship DP
DriIIship Pre-
Inst Moored
DriIIship
DirectIy
Moored
50 $285,517,578 $254,788,541 $267,220,433 $280,982,727 $228,497,694 $237,950,491
250 $288,337,891 $261,527,598 $274,313,290 $283,023,636 $230,129,512 $239,582,309
500 $291,863,281 $269,951,632 $283,179,362 $285,574,773 $232,169,285 $241,622,082
1,000 $298,914,063 $286,800,407 $300,911,504 $290,677,045 $236,248,830 $245,701,627
1,750 $309,490,234 $312,075,335 $327,509,719 $298,330,455 $242,368,148 $251,820,945
2,500 $320,066,406 $337,352,378 $354,107,933 $305,983,864 $248,487,467 $257,940,264
Total Change $34,548,828 $82,563,838 $86,887,500 $25,001,136 $19,989,773 $19,989,773
TotaI Change (%) 12.1% 32.4% 32.5% 8.9% 8.7% 8.4%

As the distance between wells is increased the effect of the slower transit speed
associated with the Semis under tow begins to take hold. Both moored Semi
options eventually overtake the DP options as the highest cost options.

n terms of time, again the efficiency of DP shows with these options providing the
shortest drilling program completion times. Pre-installed again trailed behind DP
options slightly except in the case of the Semi which at longer distances, the slow
transit speed takes an increasing toll with the difference reaching as much as 228
days to complete the program.

TabIe 19: Effect of Distance between WeIIs on TotaI Contract Time
TotaI Contract Period in Days
Average
Distance
Between
WeIIs
SEM DP
SEM Pre-nstalled
Moored
SEM Directly
Moored
Drillship
DP
Drillship Pre-nst
Moored
Drillship Directly
Moored
50 1,088 1,119 1,247 1,087 1,114 1,242
250 1,101 1,148 1,276 1,096 1,123 1,251
500 1,116 1,183 1,311 1,108 1,135 1,263
1000 1,148 1,255 1,383 1,130 1,157 1,285
1750 1,194 1,362 1,490 1,165 1,192 1,320
2500 1,241 1,469 1,597 1,199 1,226 1,354

With this analysis it is important not to take it directly in the context of such large
moves for each well at the upper range of the analysis, but more so as an
average in a scenario as explained in the beginning of this section. As can be
seen distance puts self-propelled MODUs in an advantageous position and may
be the deciding factor when an operator has a short drilling program in a remote
location with no available MODUs near by. While all DP vessels are self-
propelled, all drillships are also self-propelled, which gives them a distinct
advantage over moored Semis in terms of mobility and flexibility.

Conversely when short distances are involved and no major transit is anticipated
during the well program, mooring options with slow non-self propelled MODUs are
not at a disadvantage and can offer a competitive choice. Typically non-self
100
propelled MODUs will stay in a particular geographic region for many years
seldom making long transits to other regions.
5.4 Water Depth
The effect of water depth was analyzed to determine its impact on total drilling
program cost. Accordingly the models were run through typical water depth for
the deep water sector up to 10,000ft while the upper most limit today is around
12,000ft.
Effect of Water Depth on Grand TotaI
$0
$50,000,000
$100,000,000
$150,000,000
$200,000,000
$250,000,000
$300,000,000
$350,000,000
5,000 6,000 7,000 8,000 9,000 10,000
Water Depth (ft)
G
r
a
n
d

T
o
t
a
I

(
$
U
S
D
)
SEM DP SEM Pre-nstalled Moored SEM Directly Moored
Drillship DP Drillship Pre-nst Moored Drillship Directly Moored

Figure 28: Effect of Water Depth on Grand TotaI

The flexibility of DP options is instantly visible from the graphed results above
which show how DP operations costs are virtually unaffected by water depth. This
is because of the quick setup time which is identical for all water depths and the
lack of a mooring system, the cost of which increases with water depth. However
even with this advantage, given the basis drilling program criteria our DP options
still come out with the highest overall cost.

The mooring options come in at lower levels, the two semi options higher than the
two drillship options. On the other hand the moored options show gradual
increase with water depth in part due to the cost of the mooring system costs and
in part due to the additional operational time required for deployment and
recovery. The relationship between directly moored and pre-installed follows a
very similar relationship for both semi and drillship. Direct moor starts off as a
lower cost option at the lowest end of the range but appears to increase at a
101
higher rate than the corresponding pre-installed option at around 7000ft water
depth.

t is important to note that the difference in the slope of the pre-installed and direct
moored total cost curves is probably not as great as indicated and lays closer to
the direct moored option for both due to an assumption that is made for
operational costs in the pre-installed model. Specifically in the pre-installed model
due to a limited operational time data, the pre-installed operational times are not
scaled the same way for depth as the direct moored options.

TabIe 20: Effect of Water Depth on Grand TotaI
Grand TotaI Cost
Water Depth (ft) SEMI DP
SEMI Pre-
InstaIIed
Moored
SEMI DirectIy
Moored
DriIIship DP
DriIIship Pre-
Inst Moored
DriIIship
DirectIy
Moored
5000 $286,504,688 $249,739,355 $242,032,103 $281,697,045 $221,678,912 $212,649,118
6000 $286,504,688 $251,220,923 $247,552,840 $281,697,045 $223,158,559 $217,808,891
7000 $286,504,688 $252,702,491 $253,073,576 $281,697,045 $224,638,206 $222,968,663
8000 $286,504,688 $254,184,058 $258,594,312 $281,697,045 $226,117,853 $228,128,436
9000 $286,504,688 $255,665,626 $264,115,048 $281,697,045 $227,597,500 $233,288,209
10000 $286,504,688 $257,147,194 $269,635,785 $281,697,045 $229,077,147 $238,447,981
TotaI Change $0 $7,407,838 $27,603,681 $0 $7,398,234 $25,798,863
TotaI Change (%) 0.0% 3.0% 11.4% 0.0% 3.3% 12.1%

nterestingly and perhaps ironically from a technical perspective while greater
depth is not an issue for a DP MODU (at least to the limits of the vessel's design),
shallow water start to become an issue for DP drilling operations in less than
3000ft water depth. This is because watch circles for the marine riser flex joints
are determined as a function of water depth becoming increasingly small and
difficult to operate under in shallower waters.

The affect of water depth on the overall cost of a drilling program is difficult to fully
and accurately assess because it affects a range of factors from the drilling
package to the station keeping method which in turn affect other variables like
day rate. Furthermore, as was the case with DP in the past and particularly today
with synthetic mooring systems, operators like Petrobras, BP and Shell have
absorbed years of research and development costs before full scale operational
deployment of a new technology. This is a hidden cost which is not directly
represented in normal operational costs, and becomes particularly relevant when
looking at the R&D needed to move past 10,000ft into ultra deepwater mooring.

Regardless of any slight inaccuracy that the assumption may make to the
underlying results, there is one important aspect that is clear. As water depth
increases so does the cost of mooring, and at some foreseeable point this cost
increase may be dramatic, while at the same time the cost of DP will remain
rather constant with slight increases conceivable for upgrades to the hydro
acoustic positioning systems in ultra deep applications.
102
5.5 Fuel
With current historically high and increasing energy costs faced globally, the cost
of fuel is a significant factor on every operator's mind. The cost of MDO was
isolated and analyzed for its impact on the six cost models in this research. n the
basis case the price was established at around $500/tonne to coincide with
December 2005 levels, however as of August 2006, the average worldwide price
is around $640/tonne and hence the range of prices chosen for the analysis.

Effect of FueI Cost on Grand TotaI
$0
$50,000,000
$100,000,000
$150,000,000
$200,000,000
$250,000,000
$300,000,000
$350,000,000
$400 $500 $600 $700 $800 $900
Cost of MDO in $USD/Tonne
G
r
a
n
d

T
o
t
a
I

(
$
U
S
D
)
SEM DP SEM Pre-nstalled Moored SEM Directly Moored
Drillship DP Drillship Pre-nst Moored Drillship Directly Moored

Figure 29: Effect of FueI Cost on Grand TotaI

Quite evident for the basis drilling program, even with relatively lower fuel costs
DP still remains the most costly option. At the same time we see the same
relationships as before, with the two moored semi options higher than the two
moored drillship options and directly moored always leading pre-installed. There
are of course other factors some of which have already been discussed that
create this hierarchy.







103
TabIe 21: Effect of FueI Cost on Grand TotaI
Grand TotaI Cost
MDO Price per
tonne in $USD
SEMI DP
SEMI Pre-
InstaIIed
Moored
SEMI DirectIy
Moored
DriIIship DP
DriIIship Pre-
Inst Moored
DriIIship
DirectIy
Moored
$400 $278,827,188 $253,632,908 $265,701,124 $272,406,364 $225,032,965 $233,936,504
$500 $286,504,688 $257,147,194 $269,712,552 $281,697,045 $229,077,147 $238,524,686
$600 $294,182,188 $260,661,479 $273,723,981 $290,987,727 $233,121,328 $243,112,868
$700 $301,859,688 $264,175,765 $277,735,410 $300,278,409 $237,165,510 $247,701,050
$800 $309,537,188 $267,690,051 $281,746,838 $309,569,091 $241,209,692 $252,289,232
$900 $317,214,688 $271,204,337 $285,758,267 $318,859,773 $245,253,874 $256,877,413
TotaI Change $38,387,500 $17,571,429 $20,057,143 $46,453,409 $20,220,909 $22,940,909
TotaI Change (%) 13.8% 6.9% 7.5% 17.1% 9.0% 9.8%

What is more significant in this analysis than the absolute level however is the
rate of change, the degree to which cost level changes with increasing fuel prices
between the various options. We can clearly see that the DP options are much
more sensitive to fuel price changes than moored options, with the DP drillship
having the highest consumption values being the most sensitive. We can see that
in our range; with the cost of fuel at around $800/tonne in this particular basis
case the DP drillship model take the lead over the DP semi offsetting other factors
with its higher fuel consumptions.

Amongst the mooring options the drillships with their slightly higher consumptions
show more sensitivity to MDO prices than the Semi counterparts. Additionally we
can see the impact of AHTS consumption in the difference between direct moored
and pre-installed moored, the former requiring more AHTS hours than the latter.
While the case is clear that DP vessels are the most affected type of vessels, one
still must keep the big picture in mind. n a drilling program given favorable
circumstances as demonstrated the higher consuming DP vessels can be the
lowest costing alternative.
















104
5.6 MODU Day Rate
The MODU day rate is the most significant cost element in the models to an
operator's drilling program and requires special attention and close analysis.
MODU day rates are generally difficult to determine not only because of their
confidential nature but also due to varying contract lengths and the often
significant differences in MODU specifications. This research was very fortunate
to have access to an accurate snapshot of specific day rates for a very
representative group of deep water MODUs including all ultra deepwater DP
Drillships.

For the first part of the sensitivity analysis on MODU day rate the basis case was
taken as is and adjustments were made in $50,000 increments above and below,
so the relationship between rates remained the same, only the price level of each
MODU changes.
Effect of MODU Day Rate on Grand TotaI
$0
$50,000,000
$100,000,000
$150,000,000
$200,000,000
$250,000,000
$300,000,000
$350,000,000
$400,000,000
$450,000,000
$500,000,000
-$100,000 -$50,000 Basis $50,000 $100,000 $150,000
Difference in MODU Day Rate From Basis Rates ($USD)
G
r
a
n
d

T
o
t
a
I

(
$
U
S
D
)
SEM DP SEM Pre-nstalled Moored SEM Directly Moored
Drillship DP Drillship Pre-nst Moored Drillship Directly Moored

Figure 30: Effect of MODU Day Rate on Grand TotaI

The results of the first analysis reveal that the two DP options remain almost
constant amongst themselves. The DP Semi with the higher basis and no
difference in time requirement to complete the program from the DP drillship,
maintaining the highest cost overall throughout the range examined.

Amongst the mooring options a more interesting picture unfolds largely due to the
fact that they take different amounts of time to complete the drilling program. We
see the two pre-installed options running almost constant to each other, the
105
drillship option increasing just slightly faster. The directly moored options however
with the significantly longer time requirement to complete the basis program show
a much more dramatic increase with relationship to the DP and pre-installed
options. At around $150,000 above basis the direct moored drillship overtakes the
cost of the pre-installed semi, while the direct moored semi overtakes both DP
option at around the $100,000 above basis point.

t is also interesting to note the opposite end of spectrum where direct moored
and pre-installed options of the same vessel type become almost equal in the
case of the semis, and cheaper for direct moored drillship when price level reach
$100,000 below basis offsetting the time difference required by the two types of
operation. This has interesting implications and adds another important variable
to the consideration of using pre-installed moorings or going with a directly
moored option. Fundamentally it would appear that if the MODU day rate is low
enough the added expense of two mooring systems required for a pre-installed
option does not generate enough cost savings to offset the addition MODU time
required for the direct moored option.


TabIe 22: Effect of MODU Day Rate on Grand TotaI
Grand TotaI Cost
Difference in MODU
Day Rate from
Basis Rate
SEMI DP
SEMI Pre-
InstaIIed
Moored
SEMI DirectIy
Moored
DriIIship DP
DriIIship Pre-
Inst Moored
DriIIship
DirectIy
Moored
-$100,000 $177,442,188 $144,661,479 $144,426,838 $172,787,955 $117,468,056 $114,115,595
-$50,000 $231,973,438 $200,904,337 $207,069,695 $227,242,500 $173,272,601 $176,320,141
Basis $286,504,688 $257,147,194 $269,712,552 $281,697,045 $229,077,147 $238,524,686
+$50,000 $341,035,938 $313,390,051 $332,355,410 $336,151,591 $284,881,692 $300,729,232
+$100,000 $395,567,188 $369,632,908 $394,998,267 $390,606,136 $340,686,238 $362,933,777
+$150,000 $450,098,438 $425,875,765 $457,641,124 $445,060,682 $396,490,783 $425,138,323
TotaI Change $272,656,250 $281,214,286 $313,214,286 $272,272,727 $279,022,727 $311,022,727
TotaI Change (%) 153.7% 194.4% 216.9% 157.6% 237.5% 272.6%

Seeing the dramatic impact that MODU day rate has on the bottom line cost, it
clearly shows the sensitivity of this research on the assumptions made for MODU
day rates selected as the basis for each class of vessel, which was explained in
detail in section 4. The advantage of the moored drillship options we have thus far
seen can be largely attributed to the lower MODU day rate assumed for these
vessels on the basis of the snapshot data already mentioned. Even though this is
a clear demonstration of a real world market opportunity that does present itself
and can be used by operators to get cheaper day rate MODUs into deeper water,
the research would not be fair if it did not consider the models on an equal footing
for a variable with such an impact on the bottom line. For this reason a second
analysis was performed using the basis drilling program but setting MODU day
rates equal at $200,000 for all models.


106
$200,000,000
$250,000,000
$300,000,000
Basis Drilling Program
Basis DriIIing Program Grand TotaIs
MODU Day Rates Being EquaI
SEM DP SEM Pre-nstalled Moored
SEM Directly Moored Drillship DP
Drillship Pre-nst Moored Drillship Directly Moored

Figure 31: Basis DriIIing Program Grand TotaIs MODU Rates Being EquaI

Day rates being equal for all models, and the drilling program kept to the basis
case, the results are quite interesting indeed. Both DP case become the lowest
costing alternatives with the DP drillship being the lowest. At approximately
$18million more follow the pre-installed options which are nearly equal for both
semi and drillship. Even higher up at a cost that is approximately $33 million more
than the average DP option come the direct moored options which are also
almost equal for both semi and drillship.

TabIe 23: Basis DriIIing Program Grand TotaIs MODU Rates Being EquaI
Grand TotaI Cost

SEMI DP
SEMI Pre-
InstaIIed
Moored
SEMI
DirectIy
Moored
DriIIship DP
DriIIship
Pre-Inst
Moored
DriIIship
DirectIy
Moored
Basis
$286,504,68
8
$257,147,194 $269,712,552 $281,697,045 $229,077,147 $238,535,929
Basis All Day Rates Equal
@ $200,000
$256,512,50
0
$278,519,479 $293,516,838 $264,271,591 $278,185,147 $293,275,929

Taken as a whole, the analysis of MODU day rate offers some interesting insight.
Not only do we clearly see that this variable has a significant impact on the
bottom line but we also see how the seemingly most expensive options can
actually be the lowest costing options when this variable is equal amongst
models. This analysis also clearly shows the motivation behind finding ways to
take a lower day rate rig into deep water using synthetic mooring as an avenue
for significant cost savings; however the drilling package must also be up to the
task. Additional upgrades could add up quickly so whether such an option would
ultimately be advantageous would come down to a case by case basis of the
program requirements and the capability of the MODU under consideration.
107
5.7 AHTS Day Rate
The final variable analyzed in this research was the anchor handler's day rate. As
in the evaluation of the MODU day rate the basis case was used as a starting
point. Again the AHTS rates used in the basis case was adjusted to their
approximate level in December 2005 to coincide with the MODU day rate data.
This was a period of rapid day rate increase to the current high levels of around
more than $60,000 for a powerful AHTS. Accordingly for the analysis the basis
case was used as the lower end of the range and rates are increased at $15,000
increments to clearly determine overall effect on bottom line costs for each model.

Effect of AHTS Day Rate on Grand TotaI
$0
$50,000,000
$100,000,000
$150,000,000
$200,000,000
$250,000,000
$300,000,000
$350,000,000
Basis $15,000 $30,000 $45,000 $60,000 $75,000
Difference in AHTS Day Rate From Basis Rates ($USD)
G
r
a
n
d

T
o
t
a
I

(
$
U
S
D
)
SEM DP SEM Pre-nstalled Moored SEM Directly Moored
Drillship DP Drillship Pre-nst Moored Drillship Directly Moored

Figure 32: Effect of AHTS Day Rate on Grand TotaI


Given the fact that DP options do not utilize an AHTS for any part of their
operation there is naturally no effect to these models. The mooring models are all
affected almost equally, the pre-installed options showing just slightly more
sensitivity. With an increase over basis day rates of around $50-$55,000 the
directly moored semi overtakes the DP options to become the most costly option,
and at &75,000 above basis, the pre-installed semi option also overtakes the DP
options.




108
TabIe 24: Effect of AHTS Day Rate on Grand TotaIs
Grand TotaI Cost
Difference in
AHTS Day Rate
from Basis Rate
SEMI DP
SEMI Pre-
InstaIIed Moored
SEMI DirectIy
Moored
DriIIship DP
DriIIship Pre-Inst
Moored
DriIIship DirectIy
Moored
Basis $286,504,688 $257,147,194 $269,712,552 $281,697,045 $229,077,147 $238,524,686
+$15,000 $286,504,688 $262,461,479 $275,026,838 $281,697,045 $233,877,147 $243,324,686
+$30,000 $286,504,688 $267,775,765 $280,341,124 $281,697,045 $238,677,147 $248,124,686
+$45,000 $286,504,688 $273,090,051 $285,655,410 $281,697,045 $243,477,147 $252,924,686
+$60,000 $286,504,688 $278,404,337 $290,969,695 $281,697,045 $248,277,147 $257,724,686
+$75,000 $286,504,688 $283,718,622 $296,283,981 $281,697,045 $253,077,147 $262,524,686
TotaI Change $0 $26,571,429 $26,571,429 $0 $24,000,000 $24,000,000
TotaI Change (%) 0.0% 10.3% 9.9% 0.0% 10.5% 10.1%

The explosive increasing in AHTS day rates noted in 2005-06 time frames is of
concern when contemplating a moored option. This sensitivity analysis shows how a
rapid increase in AHTS rates can invalidate the cost savings advantage of a mooring
option over a DP option. Operators often charter AHTS for extended periods to
guarantee availability and control costs due to price fluctuations, sub-chartering to other
operators during times of inactivity or using them as supply vessels.


























109
6 The OperationaI Perspective
While an attempt has been made to reveal the economic picture between station
keeping methods, economic considerations are not the only decision making
factors. There are indeed many other operational factors and circumstances that
also weigh heavily. As shown, changing the circumstances of the well program can
have a very different impact on the economic picture, and likewise, operational
circumstances also have a profound effect.

n the early 1990's the path to ultra deep water clearly seemed to be a DP only
proposition from a technological standpoint, but the proven capability of synthetic
moorings to get MODUs into unimaginable water depths has seriously changed
that impression. Today the debate is renewed with some oil majors like Exxon
Mobil clearly favoring DP and others like BP and Shell aggressively pursuing
synthetic moorings. Ultimately there is probably no panacea each project requiring
specific consideration from both operational and economic perspectives.


6.1 Availability
The worldwide offshore industry is separated into many distinct regions of activity.
MODUs often stay within one of these regional markets for years as they serve
out contracts only moving to another region for changing market conditions or for
a new contract. The notable exceptions to this are the drillships which are quite
mobile and can move between markets much quicker.

While debating the case of what is optimal for a specific drilling program or
individual well, it is often the case that regional market conditions and hence
availability of units forces the decision. With approximately 72 active MODUs
world wide capable of 5000ft or more deepwater units are very much in demand
at the moment, and an operator may have to accept whatever technically suitable
MODU is regionally available. That having being said, for operators with extended
drilling programs there is always a drilling contractor willing to build a newbuilding
for the right day rate. The deep water market is also about to get a significant
boost in numbers over the next 3 years as previously mentioned.
6.2 Drilling Package
Since the whole object of maintaining position over a location is to drill or work on
a well, the drilling package is of paramount consideration. There are many factors
and variables, which range from specific types of equipment to capacities and
pressure ratings. Newer developments also include dual activity rigs that
essentially have two complete rig floors that can operate simultaneously and
expedite the operation.

One of the key implications for synthetic mooring use is the ability to take cheaper
rigs rated for shallower depths into deeper water, thereby saving on day rate.
While synthetic fibers offer a solution to the mooring issue, the drilling package
110
needs to also be able to perform in these deeper waters. Considerations would
include the amount of marine riser available, heave compensator capacities, the
capacity of the draworks and derrick as well as all the other drillings systems like
mud pumps and BOP ratings. t is quite conceivable that taking a less capable rig
into deeper water would almost definitely involve upgrades to the drilling package.

With so many variables and differences in MODU drilling packages upgrades
would certainly have to be taken into account on a case by case basis when
making a decision as to which asset to use.
6.3 Exploration or Development
The issue of the type of drilling program, exploration or development again
partially comes down to time, as the duration on a well significantly adds to the
cost of a DP option over mooring. To date, most DP vessels are involved in
shorter duration exploration but there have been exceptions with dual activity
vessels capable of doing development type work faster.

While the longer time duration of development drilling seem to favor moored
solutions there is also the element of risk particularly when a MODU undertakes
well testing and completion. The risk exposure comes with the nature of the work
and the consequential cost of a catastrophic scenario if the operator is not able to
secure the well in the event of the MODU loosing position over the well. This not
only has a great environmental impact but is dangerous to the rig itself, and can
have huge financial liability as can be seen by the Exxon Valdez case, still being
referred to regularly after 20 years. Even with todays redundant DP systems and
vessel configurations, there are probably very few if any who would categorically
state that a DP vessel can more reliably maintain station than a moored solution.

Other factors include the issue of deck space; a larger vessel like a drillship being
much more capable of handling most of the equipment required at once, versus
having to shuffle the necessary equipment on and off a semi as the operation
unfolds. Furthermore there is the issue of how severe weather affects the
operation which will be discussed more specifically in another section because it
is an interesting and important issue on its own.

6.4 Weather
Severe weather or even the threat of severe weather events like hurricanes are a
major concern to offshore operations and affect DP and moored operations
differently. While DP has the advantage of being able to pick up and move to a
safer location rather quickly moored operations don't enjoy the flexibility to rapidly
get out of a storm system's way.

Many operators and contractor feel comfortable with the general ability of
moorings to withstand severe weather. Often operations are secured and the
moored MODU abandoned temporarily while the severe weather passes.
However this confidence has probably been seriously shaken in the aftermath of
111
Hurricane Katrina in the Gulf of Mexico which left many moored semis adrift or
aground.

On the other side DP operations cannot be abandoned and cannot be expected
to maintain position through severe weather like a strong hurricane, hence the
ability to move out of a storm system's way is more of a necessity than an ability.


Figure 33: Semi that broke Ioose from mooring during hurricane Katrina. Source: Times Picayune

n terms of dealing with weather on location, Semis offer a more stable platform
from which to conduct operations than a monohull and are thus generally
preferred for harsh weather operations. Ultimately both offer advantages and
disadvantages in dealing with severe weather, and it comes down to an operator
experience and preference.
6.5 Capacity
Logistics planning is a crucial part of any successful offshore drilling program. Not
having the right part at the required moment can bring the whole operation to a
grinding halt. During a drilling program, a wide range of specialized third party
equipment is required onboard, and depending on the type of drilling program this
may be quite extensive and heavy, consuming a lot of deck space and deck load.
Beyond that a lot of bulk materials such as cement, bentonite, barite, chemicals,
drilling fluid, referred to as mud, water, MDO, and aviation fuel.

All these materials need to be stored onboard, or if there isn't sufficient capacity
either in physical terms or due to limitations in loading condition as frequently
occurs with Semis, the materials and equipment need to be shuffled on and off
the rig as required. Monohulls have a distinct advantage in this situation; with their
greater displacement they offer greater storage capacity for bulk materials and
112
also generally greater amounts of deck space. This makes drillships superior
when operating in remote regions with limited logistical support.

This isn't as much a case for one positioning option over another, as much as it's
a case for monohulls over semis in logistically difficult areas of operations. The
implication here is that most drillships are DP vessels, so it is conceivable that an
operator will select a DP drillship on the basis of logistical needs in the intended
area of operation. nterestingly though, as shown, mooring a drillship could offer
distinct cost savings in addition to greater logistical flexibility.
6.6 Reliability
This subject has plagued the DP alternative since its inception. The
consequences of a drive-off or drift-off due to a system malfunction, particularly
during drilling operations can be catastrophic and have a profound effect on the
cost of a well, if not the complete loss of the well.

The difference between mooring and DP are in the way that they affect critical
drilling operations. With mooring systems it is usually during deploying and/or
recovering operations when things go wrong, a time when no critical drilling
operations are taking place. With DP however the station keeping is active, and
problems such a degraded system performance directly impact and slow down
critical drilling operations. n extreme cases of a DP system failure, drilling
operations are all together ceased, the vessel having to initiate an EDS,
Emergency Disconnect Sequence, to prevent serious damage to the wellhead
and/or the marine riser and BOP.

Today's modern DP vessels undergo rigorous trials and inspections to ensure
their reliability and performance even in degraded conditions. This has greatly
improved the industry comfort level and general acceptance of DP. The
consensus however is that it still does not offer the same reliability as mooring,
even though mooring isn't 100% reliable either. According to an MCA study, the
majority of failures experienced today on DP vessels are with peripheral
equipment such as sensors, position references systems, and electrical systems
but the single largest component is human intervention failures. That is why
proper training and familiarity for DP operators is critical to a safe and reliable DP
operation. Ninety-nine percent of the time it's just acknowledging an alarm, but it's
that one time that an unexpected event will materialize and in an instant making
the right judgment call is the difference between a routine call to caution the drill
floor or a $4million disconnection.






113
6.7 Time
As was demonstrated in the economic comparison, time is significantly impacted
by the type of station keeping method employed. A DP vessel offers the distinct
advantage of being able to setup and begin drilling operations within hours of
arriving on a new location, while direct mooring requires length and costly
deployment of the system. The deeper you go with a mooring system, the more
time will be required for setup, something that does not apply to DP vessels.

Pre-installed moorings however have dramatically narrowed this gap and offer an
interesting operational alternative to DP. This is particularly true when you
consider the many added benefits of a light taut line mooring spread using
synthetic fibers already discussed.

While this all deals with time on location, DP vessels, and particularly drillships
still enjoy the advantage of relatively higher transit speeds. This becomes a
critical factor when wells are spread apart over a significant distance, most semis
having to be towed. Semis can be transported using a heavy lift vessel however
this is very expensive and would only be done to relocate a semi from one region
to another for a long term stay, not from well to well. n general when time is of
the essence DP appears to have the clear edge.
6.8 Preference
The offshore industry is a rather conservative one; the feeling of "we've always
done it this ways is very strong. t would appear that certain operators have over
years of operating various types of MODUs in different conditions developed
preferences for one over another depending on circumstances. Certainly today it
would appear that companies like BP and Shell are strong proponents and front
runners in mooring technologies while ExxonMobil seems pretty happy with DP
for deep water operations.

Contractors on the other hand also seem quite willing to build the rig that
operators are willing to pay for. Certainly a longer term perspective is required
than the first 3 or 4 firm contract years out of the yard, and that's where more
prudent contractors build flexibility into rig designs such are mooring and DP on
one unit.

At the end of the day operators will look at an individual well or drilling program
requirements on a case by case basis and make a determination of what is
clearly the optimal option both from an economic and operational perspective.
Every well is unique in a way with so many possible operational variables. While
almost any well in deep water or ultra deep water can be performed with a DP
MODU, mooring cannot always offer a solution either due to obstructions on the
seabed or simply because of water depth, even though as we have seen, this is
becoming less of an issue than in the past.
114
6.9 Maintenance
Maintenance is generally an item that falls under the contractor's cost
considerations but it is none the less interesting to point out some key differences
between DP and mooring because it may fall back on downtime issues for the
operator.

Generally speaking maintenance on the DP control system is just a matter of
routine monthly checks by electronic technicians and occasional software
upgrades. Looking at the system as a whole there is certainly the added
complexity level of the power plant and electrical distribution system to factor in
but typically the thrusters form the most awkward components to provide
maintenance to. Depending on the configuration of the vessel, serious
maintenance on a thruster could involve retracting a thruster into a maintenance
space and performing repairs while on location and still working, a feature
common to newer drillships. However on semis it could be infinitely more complex
and disrupting, involving a complete shut down of operations, divers and keel
hauling thrusters out of the water.

On the other hand mooring systems are easily accessible and are mostly
mechanical in nature. Repairs can often be made on location or during
transit/mooring times. Additionally and of major concern particularly with
synthetics is the condition of the mooring gear and lines themselves. Close
inspection of the condition of the mooring system is required prior to each
deployment to ensure that it is not damaged and retains its intended strength.
This is perhaps one of the biggest concerns with synthetics, as long term
experience is just starting to materialize.

Both mooring and DP maintenance issues offer the potential for major disruption
to a drilling program. A mooring line parting during a well can have just as
significant an impact as a thruster seal needing immediate repair, while it must be
said, that in a Class 3 vessel, redundancy could offer a temporary solution to
carry on operations in the short term.
6.10 Newbuilding/Conversion
This subject has already been touched upon but some emphasis and
clarifications need to be made. As can be seen by recent newbuilding orders the
price of a deepwater mooring system and DP system is rather close, DP being
slightly more expensive due to regulatory and notation costs as well as more
electronic components.

On a newbuilding DP vessel the cost of construction can vary significantly
depending on the DP class with Class 3 as already mentioned the need for
separate fire and flood protected spaces greatly adding to overall cost. Beyond
that a DP installation requires more electronic components over a mooring
solution, multiple powerful thrusters, large fuel storage capacity and a much more
complicated electrical distribution system. The actual DP control system is not
115
that significant, a class 3 system running around $2.5 million according to
Nautronix. The cost of DP comes from the remaining components of the system.

A newbuilding designed for deepwater mooring also has significant costs
including winches, mooring system components, monitoring devices and controls.
However the system is largely mechanical, less expensive than electronic devices
and general cheaper and less time consuming to install and commission.

Today most drilling contractors building a new semi looking at technological
developments generally want to make their units as marketable as possible and
factor in both installations. nterestingly according to Gusto MSC even clients
contemplating newbuilding DP drillships today are considering mooring capability.

The issue for an upgrade is quite different. While each case may be slightly
different depending on the type of vessel it is generally easier and cheaper to add
a mooring system than to install a retrofit DP system especially in the case of a
Class 3 system. This was quite evident in the conversions of the Poly Confidence
and Poly Castle into MODUs. Of the two identical flotel semis, one converted into
full class 3 DP as the Ocean Confidence with significant cost and time overruns,
while the other was converted into the GSF Celtic Sea, a moored Semi which
came out largely on time and in budget. This makes the choices at newbuilding
particularly critical especially if one is to exclude DP. t also makes the case for
retrofitting a DP drillship more attractive even though downtime is a major
consideration. Of course there will continue to be contractors who take a rather
short term approach and only undertake newbuildings to client's specifications for
which they have an initial long term contract with.


















116
7 ConcIusions
At the outset of this research the underlying question posed was; "Which method
of station keeping for MODUs makes the most sense in deepwater taking
economic and operational considerations into account?" To this end the many
variables both economic and operational were introduced and evaluated in order
to reach some conclusions. t is from answering this question that further
inferences can be made as to why huge investments are being made in particular
vessel types characterized amongst other things by their means of positioning.
Furthermore it became apparent during the research that market conditions in the
deepwater sector may make certain hypothetical alternatives an attractive option
in the near future.

Clearly there is no single positioning system that makes the most sense in all
cases and circumstances. Dynamic positioning and mooring have their own
distinct places in the deepwater sector and overlap in a few particular
circumstances. While the use of synthetic moorings for MODUs in deepwater is
still in a relatively early stage of deployment it is clear that this technology will
have a profound impact on the industry and particularly on the way development
drilling will be done in deepwater.

For dynamic positioning the analysis showed this approach favorable in cases of
shorter duration wells, with frequent moves or when long distances are involved.
t is over these short periods that the quick set-up time of DP offset the addition
fuel expense. The key issue of water depth is not a factor to DP operations being
able to function anywhere in the deepwater market. From an operational
perspective, the industry perceives it as a slightly higher risk operation and along
with its economic characteristics it naturally lends itself to exploration type drilling
programs.

The synthetic mooring approach showed that longer duration wells, with less
frequent moves in a drilling program and in the case of a semi over shorter
distances were the most desirable circumstances for this option. Coupled with the
greater comfort factor the industry places on moorings, it is evident that longer
term development drilling is better suited to mooring solutions. The case was also
made for pre-set moorings which demonstrated their cost effectiveness over
direct moorings in almost all cases except the shortest duration programs where
the cost of the additional mooring system becomes a significant proportion of the
total costs.

Other operational characteristics depend more on what type of MODU the
positioning system is installed in, one notable example a DP drillship has more
logistical flexibility with it's high capacities as a consequence of it's monohull form
not its DP system. Semis also enjoy greater stability in harsh weather as
compared to a monohull again a virtual of hull design and not positioning. These
issue of what MODU type, Semi or Drillship is an integral part of the positioning
question in that availability for DP and moored amongst the two types of MODU is
not uniform, today, excluding the wave of newbuildings coming in over the next 3
117
years, saying you want a DP MODU for deepwater largely means finding a
drillship.

Having made these statements about mooring and dynamic positioning, the
research also showed the significance of MODU day rate on these outcomes.
With all day rates equal it fundamentally turns the argument around and dynamic
positioning becomes the most attractive option from an economic perspective. n
this era where the capital costs of building a latest generation Semi and Drillship
are virtually equal, this is something to be carefully considered.

This is perhaps where the application of synthetic moorings has its most
compelling application. n an industry where day rate is largely affected by water
depth capability, operators now have the opportunity to bring lower day rate
MODUs that were previously restricted to shallower water due to heavier steel
mooring system into the deepwater market using lightweight synthetics. Certainly
the drilling package must also be considered, but noting again the tremendous
potential for savings on the MODU day rate in a long term contract, an operator
can afford to make capital expenditures for upgrades and still enjoy overall cost
savings.

Finally the point that has hopefully been made with the hypothetical pre-set
moored drillship case within a real world market context; since all DP drillships
currently have the drilling package for deepwater operations, such a vessel if
equipped to use a synthetic mooring system, could offer the most versatile and
economic platform for both exploration and development drilling. Clearly stated
with the anticipated increase in development drilling in deepwater on the horizon
and the ever increasing regions of drilling activity, the operational safety and cost
saving advantage of a moored solution for longer term projects, coupled with the
flexibility and mobility of DP make a drillship on a low day rate the idea platform
for any kind of project. n a rapidly changing world this kind of operational
flexibility is vital, particularly when an asset is on hire for a multiple year contract.

While such a case makes a compelling argument for fitting mooring equipment on
newbuilding drillships, and indeed any deepwater MODU, the issue of economic
advantage for a retrofit/upgrade is still not clear. n the basis case there is a
stated buffer of $52million for the pre-installed moored drillship model, however
this is against a higher day rate MODU operating in DP. One could easily argue to
operate the lower day rate vessel in DP particularly given the finding in the
research models that all day rates being equal, DP is less costly than any other
alternative. This is where operational considerations have to play their role, the
need for 'safe' positioning on development wells, greater logistical capability, high
mobility and versatility.


Further research areas linked to this topic include;
The capital costs of upgrading existing DP drillship with mooring capability.
118
The drilling contractor's perspective; operational costs and anticipated
income from various MODU types/positioning approach.
The optimal synthetic fiber; direct comparison of various synthetic mooring
systems particularly in water depths over 10,000ft. Which fibers will
compete beyond the limitations of polyester?
Technological and operational innovation that can streamline mooring
operations
Mooring a monohull; the optimal way to moor a monohull MODU; would an
FPSO type turret design work for a drillship
The impact of surface BOP technology on MODU/station keeping selection.
The impact of a dual activity derrick on the economics of a drilling program.
Does it make DP a more attractive option?



























119
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130
Appendix 1
Appendix TabIe: CIass notation requirements and IMO recommendations for DP CIass operations.
ABS DPS-0 DPS-1 DPS-2 DPS-3
DNV AUTS AUT AUTR AUTRO
LIoyds DP(CM) DP(AM) DP(AA) DP(AAA)
Class Notation

Regulatory
Designation
IMO MSC/Cr 645 Not Recognized Class 1 Class 2 Class 3
Subsystem Component Minimum Requirements for Notation
Gens and prime
movers Non-redundant Non-redundant Redundant Redundant
Main Switchboard 1 1 1 with bus tie
2 with bus tie
in separate
compts
Bus-Tie Breaker 0 0 1 2
Distribution system Non-redundant Non-redundant Redundant
Redundant in
separate
compts
Power Systems
Power Management No
No
MO-Optional
Yes
MO-Optional
Yes
MO-Optional
Arrangement Non-redundant Non-redundant Redundant
Redundant in
separate
compts
Thrusters
Hold Station with
Thruster Single
failure
No
No for ABS, MO,
DNV; Yes Lloyds
Yes Yes
Auto Control -
number of control
systems
1 1 2
2+1 in
separate
control station
Manual Control -
Joystick with Auto
Head
No Yes Yes Yes
Control
ndividual Levers for
each Thruster
Yes Yes Yes Yes
Position Reference
Systems
1
1 for MO; 2 for all
others
3
3 with 1 in
alternate
control station
Wind Sensors 1
1 DNV, MO; 2 for
Lloyds, ABS
2 ABS, DNV,
Lloyds; 3 MO
2 with 1 in alt
control station;
3+1 for MO
VRU/MRU 1
1 DNV; 2 for
Lloyds; ABS and
MO no Spec
2; MO no
Spec
2 with 1 in alt
control station;
MO no Spec
Sensors
Gyro Compass 1
1 for DNV; 2 for
Lloyds ABS
2 for ABS,
DNV, Lloyds; 3
MO
3 with one in
alt control
station
UPS 0 1 1
1+1 in
separate
Compt
FMEA
Yes for ABS,
DNV; No for
Lloyds
Yes for ABS,
DNV; No for
Lloyds
Yes Yes
Consequence
Analysis
No No Yes Yes
Various
Performance
Capability
Only Lloyds
(PCR) and DNV
(ERN)
Only Lloyds (PCR)
and DNV (ERN)
Only Lloyds
(PCR) and
DNV (ERN)
Only Lloyds
(PCR) and
DNV (ERN)
131
Appendix 2
Appendix TabIe: Semi Pre-instaIIed poIyester mooring system cost caIcuIation for 10,000ft water depth, with
amortization.
SEMI Pre-InstaIIed Moorings
POLYESTER
Cost Total per System
Length of Synthetic (ft) 9,334
Cost per foot $49.30
Cost of Line $460,157 $7,362,509
Length of wire rope (ft) 4,243
Cost per foot $70.00
Cost of Line $296,985 $4,751,758
Length if Chain (ft) 566
Cost per foot $96.50
Cost of Chain $54,589 $873,418
Cost of Anchor $100,000 $1,600,000
Swivels, conectors etc.per leg $30,000 $480,000
Submersible buoy $350,000 $5,600,000
Number of legs 16
Cost per Mooring Leg $1,291,730 $20,667,685
Total costs system $20,667,685 $20,667,685
nterest rate 8.5%
Total Loan Cost $23,527,321
Month $644,539
Payment
Daily $21,190
Years 3.04
Contract Period
Days 1110
Loon Amort|zot|on
Enter vo|ues
Lccn cmcunI $20,7,85
/nnuc| inIere:I rcIe 8.50 7
Lccn pericc in yecr: 3
NumLer cf pcymenI: per yecr 12
Loon summory
Schecu|ec pcymenI $644,539
Schecu|ec numLer cf pcymenI: 37
IcIc| inIere:I $2,85,3
IcIc| cc:I cf Lccn $23,527,321


132
Appendix 3
Appendix TabIe: Semi moored directIy poIyester mooring system cost caIcuIation for 10,000ft water depth, with
amortization.
SEMI Moored Direct
POLYESTER
Cost Total per System
Length of Synthetic (ft) 9,334
Cost per foot $49.30
Cost of Line $460,157 $3,681,254
Length of wire rope (ft) 4,243
Cost per foot $70.00
Cost of Line $296,985 $2,375,879
Length if Chain (ft) 566
Cost per foot $96.50
Cost of Chain $54,589 $436,709
Cost of Anchor $100,000 $800,000
Swivels, conectors etc.per leg $30,000 $240,000
Submersible buoy $0 $0
Number of legs 8
Cost per Mooring Leg $941,730 $7,533,842
Total costs system $7,533,842 $7,533,842

nterest rate 8.5%
Total Loan Cost $8,652,653
Month $221,111
Payment
Daily $7,269
Years 3.26
Contract Period
Days 1190.28571

Loon Amort|zot|on
Enter vo|ues
Lccn cmcunI $7,533,842
/nnuc| inIere:I rcIe 8.50 7
Lccn pericc in yecr: 3
NumLer cf pcymenI: per yecr 12

Loon summory
Schecu|ec pcymenI $221,111
Schecu|ec numLer cf pcymenI: 3
IcIc| inIere:I $1,118,810
IcIc| cc:I cf Lccn $8,52,53
133
Appendix 4
Appendix TabIe: Semi pre-instaIIed Dyneema mooring system cost caIcuIation for 10,000ft water depth, with
amortization.
SEMI Pre-InstaIIed Moorings
DYNEEMA
Cost Total per System
Length of Synthetic (ft) 9,334
Cost per foot $169.20
Cost of Line $1,579,281 $25,268,489
Length of wire rope (ft) 4,243
Cost per foot $70.00
Cost of Line $296,985 $4,751,758
Length if Chain (ft) 566
Cost per foot $96.50
Cost of Chain $54,589 $873,418
Cost of Anchor $100,000 $1,600,000
Swivels, conectors etc.per leg $20,000 $320,000
Submersible buoy $60,000 $960,000
Number of legs 16
Cost per Mooring Leg $2,110,854 $33,773,665
Total costs system $33,773,665 $33,773,665

nterest rate 8.5%
Total Loan Cost $38,446,679
Month $1,053,260
Payment
Daily $34,628
Years 3.04
Contract Period
Days 1110

Loon Amort|zot|on
Enter vo|ues
Lccn cmcunI $33,773,5
/nnuc| inIere:I rcIe 8.50 7
Lccn pericc in yecr: 3
NumLer cf pcymenI: per yecr 12

Loon summory
Schecu|ec pcymenI $1,053,260
Schecu|ec numLer cf pcymenI: 37
IcIc| inIere:I $4,73,014
IcIc| cc:I cf Lccn $38,44,7

134
Appendix 5
Appendix TabIe: Semi pre-instaIIed Dyneema mooring system cost caIcuIation for 10,000ft water depth, with
amortization.
SEMI Moored Direct
DYNEEMA
Cost Total per System
Length of Synthetic (ft) 9,334
Cost per foot $169.20
Cost of Line $1,579,281 $12,634,245
Length of wire rope (ft) 4,243
Cost per foot $70.00
Cost of Line $296,985 $2,375,879
Length if Chain (ft) 566
Cost per foot $96.50
Cost of Chain $54,589 $436,709
Cost of Anchor $100,000 $800,000
Swivels, conectors etc.per leg $20,000 $160,000
Submersible buoy $0 $0
Number of legs 8
Cost per Mooring Leg $2,050,854 $16,406,832
Total costs system $16,406,832 $16,406,832

nterest rate 8.5%
Total Loan Cost $18,843,322
Month $481,524
Payment
Daily $15,831
Years 3.26
Contract Period
Days 1190

Loon Amort|zot|on
Enter vo|ues
Lccn cmcunI $1,40,832
/nnuc| inIere:I rcIe 8.50 7
Lccn pericc in yecr: 3
NumLer cf pcymenI: per yecr 12

Loon summory
Schecu|ec pcymenI $481,524
Schecu|ec numLer cf pcymenI: 3
IcIc| inIere:I $2,43,40
IcIc| cc:I cf Lccn $18,843,322

135
Appendix 6
Appendix TabIe: Day rates and Contract Periods for MODUs, December 2005. Source: FearnIey Offshore


Appendix TabIe: Day rates and Contract Periods for MODUs, December 2005. Source: SeaDriII





136
Appendix 7
Appendix TabIe: Basis DriIIing Program fuII caIcuIation.

Summary

SEMI DP
SEMI Pre-
InstaIIed
Moored
SEMI
DirectIy
Moored
DriIIship DP
DriIIship
Pre-InstaIIed
Moored
DriIIship
DirectIy
Moored

OperationaI Criteria VaIue Unit
Number of Wells 12 Each
Avg. Days on each Well 90 Days
Avg. Distance Between Wells 120 nm
Max Water Depth 10000 Feet
Avg.Price of MDO 500 $USD/tonne
Transits During Contract period 12 Each

Required Contract Duration for WeII Program
Calculated Contract Duration in Years Years 3.0 3.1 3.4 3.0 3.1 3.4
Calculated Contract Duration or in Days Days 1,093 1,129 1,257 1,090 1,117 1,245

MODU ParticuIars Unit
MODU Day Rate Location $USD/Day $227,500 $181,000 $181,000 $216,000 $156,000 $156,000
Fuel Consumption Location tonne/Day 70 25 25 85 30 30
Fuel Cost per Day Location $USD/Day $35,000 $12,500 $12,500 $42,500 $15,000 $15,000
Total MODU per Day Location $USD/Day $262,500 $193,500 $193,500 $258,500 $171,000 $171,000

MODU Mob/Demob Day Rate $USD/Day $170,625 $135,750 $135,750 $162,000 $117,000 $117,000
Fuel Consumption Transit tonne/Day 110 15 15 125 125 125
Fuel Cost per Day Transit $USD/Day $55,000 $7,500 $7,500 $62,500 $62,500 $62,500
Total MODU per Day Transit $USD/Day $225,625 $143,250 $143,250 $224,500 $179,500 $179,500

Transit Speed Kts 8.0 3.5 3.5 11.0 11.0 11.0

Anchor HandIer (AHTS) ParticuIars Unit
Anchor Handler Day Rate $USD/Day $30,000 $25,000 $30,000 $30,000 $25,000 $30,000
Fuel Consumption tonne/Day 25 20 25 25 20 25
Fuel Cost per Day $USD/Day $12,500 $10,000 $12,500 $12,500 $10,000 $12,500
ROV Dayrate $USD/Day $5,000 $5,000 $5,000 $5,000 $5,000 $5,000
Rigging Crew Day Rate $USD/Day $5,000 $5,000 $5,000 $5,000 $5,000 $5,000
Total AHV per Day $USD/Day $52,500 $45,000 $52,500 $52,500 $45,000 $52,500

Mooring System Cost/Location Unit
Total System CAPEX $USD $0 $23,576,622 $8,716,838 $0 $23,546,056 $8,716,838
Daily Cost $USD/Day $0 $20,880 $6,934 $0 $21,071 $6,934

MobiIization/DemobiIization Costs/Location Unit
MODU Cost per Transit $USD $141,016 $204,643 $204,643 $102,045 $81,591 $81,591
137
Number of AHTS Each 0 2 2 0 0 0
AHTS Cost per Transit $USD $0 $128,571 $150,000 $0 $0 $0
Avg. Num. of Days per Transit Days 0.63 1.43 1.43 0.45 0.45 0.45
Total Mob/Demob Costs per transit $USD $141,016 $333,214 $354,643 $102,045 $81,591 $81,591

Pre-InstaII Mooring Ops./Location Unit
Days Pre-install Ops nstall/Recover Days 0 24 0 0 24 0
Number of AHVs Each 0 1 0 0 1 0
Total Preset Cost per Location $USD $0 $1,080,000 $0 $0 $1,080,000 $0

Mooring/Connecting MODU/Location Unit
Number of AHVs Each 0 1 2 0 1 2
Number of legs Each 0 8 8 0 8 8
Hours connecting/ Per leg (pre-installed) Hours 0.00 4.00 0.00 0.00 4.00 0.00
Hours disconnecting/ Per leg (pre-installed) Hours 0.00 4.00 0.00 0.00 4.00 0.00
Hours running Leg Hours 0.00 0.00 15.00 0.00 0.00 15.00
Hours pulling Leg Hours 0.00 0.00 25.00 0.00 0.00 25.00
Total Time (days) Days 0.00 2.67 13.33 0.00 2.67 13.33
Total Mooring/Connecting AHV Cost $USD $0 $120,000 $1,400,000 $0 $120,000 $1,400,000
Total MODU Mooring/Connecting Time Cost $USD $0 $516,000 $2,580,000 $0 $456,000 $2,280,000
Total Mooring/Connecting Related Cost $USD $0 $636,000 $3,980,000 $0 $576,000 $3,680,000

TotaI Mooring + Preset Ops Costs /Location $0 $1,716,000 $3,980,000 $0 $1,656,000 $3,680,000

DP System Setup/Location Unit
Deploy/Recover Beacons Hours 6 0 0 6 0 0
Lower/Raise Hydrophones Hours 2 0 0 2 0 0
Calibrate Acoustics Hours Hours 2 0 0 2 0 0
Total Time Days 0.42 0.00 0.00 0.42 0.00 0.00
Total MODU Time Cost for Setup $USD $109,375 $0 $0 $107,708 $0 $0

TotaI Mooring + Pre-instaII + DP Setup/Location $109,375 $1,716,000 $3,980,000 $107,708 $1,656,000 $3,680,000

TotaI Moves and Times Unit
Total Days in Transit Days 7.50 17.14 17.14 5.45 5.45 5.45
Total Days Preset Mooring Ops Days 0.00 288.00 0.00 0.00 288.00 0.00
Total Days Mooring/DP Setup Days 5.00 32.00 160.00 5.00 32.00 160.00
Total Days on Location Days 1,080.00 1,080.00 1,080.00 1,080.00 1,080.00 1,080.00
Total AHTS Days Days 0.00 320.00 320.00 0.00 320.00 320.00
Total MODU Days Days 1,092.50 1,129.14 1,257.14 1,090.45 1,117.45 1,245.45

FueI and Day Rate Cost TotaIs
Total AHTS Fuel $USD $0 $3,200,000 $4,000,000 $0 $3,200,000 $4,000,000
Total AHTS Day Rate $USD $0 $11,200,000 $12,800,000 $0 $11,200,000 $12,800,000
Total AHTS $USD $0 $14,400,000 $16,800,000 $0 $14,400,000 $16,800,000
Total MODU Fuel $USD $38,387,500 $14,028,571 $15,628,571 $46,453,409 $17,020,909 $18,940,909
138
Total MODU Day Rate $USD $248,117,188 $203,599,143 $226,767,143 $235,243,636 $174,110,182 $194,078,182
Total MODU $USD $286,504,688 $217,627,714 $242,395,714 $281,697,045 $191,131,091 $213,019,091
Total Fuel $USD $38,387,500 $17,228,571 $19,628,571 $46,453,409 $20,220,909 $22,940,909

Required Contract Duration for WeII Program
Calculated Contract Duration in Years Years 3.0 3.1 3.4 3.0 3.1 3.4
Calculated Contract Duration or in Days Days 1,093 1,129 1,257 1,090 1,117 1,245
TotaI Costs
Total Mooring System Cost CAPEX $USD $0 $23,576,622 $8,716,838 $0 $23,546,056 $8,716,838
Total Mob/Demob Cost $USD $1,692,188 $3,998,571 $4,255,714 $1,224,545 $979,091 $979,091
Total Preset Ops Costs $USD $0 $12,960,000 $0 $0 $12,960,000 $0
Total Mooring/Connecting Costs $USD $0 $7,632,000 $47,760,000 $0 $6,912,000 $44,160,000
Total DP Setup Costs $USD $1,312,500 $0 $0 $1,292,500 $0 $0
Total Mooring/Con/DP Set/+Pre-nst Cost $USD $1,312,500 $20,592,000 $47,760,000 $1,292,500 $19,872,000 $44,160,000
Total MODU Location Cost $USD $283,500,000 $208,980,000 $208,980,000 $279,180,000 $184,680,000 $184,680,000

Grand TotaI $USD $286,504,688 $257,147,194 $269,712,552 $281,697,045 $229,077,147 $238,535,929

CAPEX AIIowance over Lowest DP Option $USD $24,549,852 $11,984,493 $52,619,899 $43,161,116
CAPEX AIIowance over Lowest Mooring Opt $USD No AIIowance No AIIowance