NIST GCR 04-863
Composites Manufacturing Technologies: Applications in Automotive, Petroleum, and Civil Infrastructure Industries
Economic Study of a Cluster of ATP-Funded Projects

4. Composite Production Riser Case Study

In offshore petroleum production, steel risers (tubing) are used to bring oil from the seabed to floating production platforms. In deepwater applications (3,000 to 5,000 feet), heavy steel risers require expensive tensioning and buoyancy systems. For ultradeep operations in water depths of 5,000 to 13,000 feet, the size and weight of conventional steel risers becomes cost prohibitive, inhibiting the exploitation of substantial offshore domestic oil reserves (Silverman 1999).

The use of lighter-weight composite production risers (CPRs) will reduce platform weight together with floatation and tensioning requirements and overcome one of the greatest limiting factors in offshore oil production, that is, increasing riser loads that floating platforms have to support in increasing water depths. However, the cost of CPRs has been significantly higher than steel risers because prior manufacturing techniques have not been optimized and production levels have not achieved economies of scale. When CPR cost disadvantages are overcome, platform lifecycle costs will be reduced, and additional crude oil production from deepwater Gulf of Mexico petroleum reserves will be realized (Johnson 2000).

This section describes the results of a case study of ATP-funded CPR technology. It presents project history and key technical accomplishments, describes commercial and market applications in the offshore petroleum industry, and presents the results of a quantitative economic benefit-to-cost analysis together with a brief discussion of qualitative benefits.

PROJECT HISTORY

The development of fiberglass-reinforced composites for petroleum production started with the efforts of Koch Exploration & Development Company in the 1950s to facilitate crude oil production from highly corrosive wells. The effort was continued by Institut Français du Pétrole (IFP) and Aerospatiale, resulting in proof of concept as well as some development and testing of glass- and carbon-reinforced rigid composite tubes for offshore applications. IFP subsequently attempted to form joint ventures with major petroleum exploration and development companies to complete technical development, to develop standard product specifications, to define design and manufacturing practices, and to conduct reliability testing. However, these joint venture efforts were “shelved due to a lack of sustained participation by the major petroleum companies” (DeLuca 2000).

In 1995, ATP selected the proposed high-risk project. In addition to cost sharing the high-risk technology development effort, ATP involvement also provided the additional important benefit of “keeping the industry collaborators engaged and making it possible to jointly develop product performance specifications for composite risers” (Johnson 1999).

The project was successfully completed in 2000 and resulted in technical advances, including the development of CPR design and performance criteria, development of high-quality, cost-effective manufacturing processes, and effectively addressing performance monitoring and reliability issues in deepwater saline environments.

Technical and cost efficiency benefits from the CPR project would not have been realized without ATP funding and without ATP’s role in motivating industry collaborators to remain “engaged in the development of appropriate CPR product specifications” (Johnson 2003).

Subsequent to commencing the ATP-funded project, Lincoln Composites became independent briefly. It was recently acquired (in 2002) by General Dynamics Corporation. The Lincoln Composites Division of General Dynamics now consists of 250 employees, including 60 engineers. It has potential access to General Dynamics corporate resources to support the completion of the remaining technical tasks and to effectively market and deploy the CPR technology for deepwater offshore oil production in the Gulf of Mexico.

Composite production risers are hybrid composite structures, consisting of continuous carbon fibers and electrical-grade fiberglass (E-glass) in an epoxy matrix. CPR strength and stiffness are provided by the carbon and glass fibers, with highest strength in the direction of the fibers (Johnson 1999).

As DeLuca (2000) explains:

Composite risers are designed with fiber orientation and layer thickness tailored to resist the actual load configuration. In offshore riser applications, the tension loads are carried by fibers that are axially oriented or helically filament wound at low angles to the tube axis and pressure loads are resisted by circumferentially placed hoop-wound fibers.

The primary success of composites in a particular application is due to the ability to tailor the composite’s superior strength and fatigue properties in a particular direction. Directional tailoring minimizes the amount of material (and weight) in the non-loaded direction. In contrast to composite structures, directional tailoring is not possible in homogenous materials such as steel and titanium (Silverman 1999).

CPRs are fabricated with a laminated composite tube body and a metal-to-composite interface (MCI). The MCI transfers loads between the composite tube body and the metal end fitting. Metal fittings are used for joining risers in a string.

The first step in CPR production involves machining metal end fittings from steel tubing for a “geometric trap” type of MCI design. End fittings are installed on a mandrel and uncured hydrogen resistant rubber (HNBR) is wound onto the mandrel to provide the inner liner of the CPR. Low-angle helically wound carbon fibers are wound over the HNBR and the metal end fittings, reversed through a low-profile dome, and secured between the trap geometry and the dome. Circumferentially oriented E-glass fibers are then hoop-wound to resist pressure loads, and both carbon and E-glass fibers are impregnated with epoxy resin during the winding process. The methods of impregnation and fiber tensioning are proprietary.

Next, “the mandrel wound assembly is removed from the winding machine and placed in a rotating cure dolly. After a curing process, the assembly is replaced on the winding machine, where another layer of HNBR is spiral wrapped on the outside of the assembly. Over the HNBR is wound a layer of glass hoops and a glass helical layer which compact the HNBR elastomer and provide extra abrasion protection.” This is followed by a final curing process (Johnson 1999). Figure 5 provides a cutaway view of the CPR and MCI.

Figure 5: Wound-in Metallic End Fittings with Traplock Composite-to-Metal Interface

Source: Johnson 2003.

A viable CPR structure has to achieve functional specifications, including resisting internal and external pressures, fluid containment, structural support, and resisting chemical corrosion and other environmental attack. It must also be cost competitive with steel risers. Relative to these functional specifications, the ATP-funded project faced technical challenges in the following areas:

• Optimized CPR design criteria had to be developed to avoid both overdesign (leading to unnecessary high cost) and underdesign (leading to system deficiency).
• A high-quality manufacturing process was needed that could be cost-effectively operated on a fully industrial scale.
• Effective performance monitoring was needed of complex stresses and strains inside CPR specimens, as was detection of local failures inside CPR specimens.
• CPR reliability was a primary industry concern, particularly in regard to the possible degradation of CPR material properties, strength, and fatigue life, due to to the possibility of localized microscopic failures inside the composite structure.

To address these technical challenges, CPR tubes and joints (metal-to-composite interfaces) were successfully designed, fabricated, and tested. Performance variables as well as static and cyclic fatigue curves were generated, showing compliance with initial functional specifications and performance criteria. Tubes and joints were shown to have adequate safety margins, and the CPR design methodology was shown to have achieved the cost, weight, and performance goals of the project. Most significantly, the test results for full-scale joint performance were shown to be nearly identical to test results for scaled-down prototypes.

In specific terms, the ATP-funded project resulted in the following technical accomplishments:

• CPR functional and performance requirements were developed for structural, operational, and environmental conditions for a range of loading scenarios (from 300 years of steady loading to 30 years of steady loads followed by 3 hours of 100-year hurricane loading). Also, material allowances were developed based on 0.999999 long-term reliability factors.
• An advanced design methodology was developed for CPR tube and joint failure predictions.
• A detailed design was completed for CPR tubes to (1) reduce joint fiber stresses, (2) eliminate microcracking and interlaminar failure, and (3) optimize fiber mesh structures, laminate layer thickness, and cure cycles.
• MCI joints were developed to meet required fatigue criteria, using a threaded connection adapted to the geometry of the multiple traplock configuration with wound-in metallic end fittings.
• An assessment was completed of manufacturing cost effectiveness. A survey was conducted of carbon fiber suppliers and an initial cost model developed to identify opportunities for material and labor cost reductions. It was established that cost reductions would move the CPR cost structure below the total system breakeven point with steel risers.
• Probabilistic formulations and methodologies were developed to (1) estimate CPR failure probabilities and reliability levels for longitudinal and transverse failure modes, (2) determine the long-term safety index for a CPR tube body, and (3) determine the long-term safety index for a CPR system, as a function of the number of tubes in a riser string.
• Testing was completed of 75 full-scale diameter/short-length tube specimens and 90 prototype MCI joints to empirically characterize specimen strength and fatigue performance.
• Advance design technology was validated for CPR detail design, showing a high correlation of the above test results with performance projections from the advanced design methodology.
• The development of a CPR quality assurance plan was completed.
• An integrated methodology was developed to facilitate CPR sea trials or in-situ tests. This methodology will facilitate CPR qualification testing required for widespread future industry acceptance of composite riser technologies for deepwater offshore oil production.
• The fabrication of two full-length CPR specimens and the testing of specimens to factory acceptance levels were completed. Also, CPR tooling was designed and fabricated to be used once full commercialization is achieved.

These accomplishments would not have been achieved without ATP cost sharing and without ATP facilitation of the broad-based industry joint venture.

OFFSHORE OIL PRODUCTION TRENDS

Lincoln Composites’ current CPR product development and marketing efforts are focused on offshore petroleum production in the Gulf of Mexico, and in particular on the affordable exploitation of deep and ultra-deep petroleum reserves.

Offshore Industry Trends

In 2001, U.S. crude oil production was 2,118 million barrels and net imports reached 3,398 million barrels (U.S. Energy Information Administration 2003), indicating a 61.6 percent energy dependence on imported petroleum.

The Gulf of Mexico outer continental shelf (OCS) is a major source of petroleum, accounting for 30 percent of domestic crude production (Readinger 2003). Gulf of Mexico reserves are estimated at 32 billion boe (barrels of oil equivalent), of which 15 billion boe have been confirmed. Gulf of Mexico annual production reached 522 million barrels in 2000 and is further expected to grow.

1984 to 1998 trends in the Gulf of Mexico reflect production increasingly from deepwater reserves (Figure 6). Year 2000 deepwater production was 271 million barrels (MMS 2001).

Figure 6: Recent History of Deepwater Developments

Source: U.S. Minerals Management Service, Gulf of Mexico Region, Offshore Information, March 1999.

Currently there are over 7,400 active leases in the Gulf of Mexico, 53 percent in deep water. Industry has plans for 97 deepwater production projects and 575 deepwater exploration projects utilizing these leases (Lytal 2000). Figure 7 summarizes Gulf of Mexico deepwater production trends, showing a 38 percent compound annual growth rate (CAGR).

Figure 7: Deepwater Production Rates and Compound Annual Growth Rate (CAGR) of Deepwater Production in the Gulf of Mexico

Source: K&M Technology 2003.

The average size of deepwater discoveries is many times larger than shallow water fields. In active deepwater projects, fields contribute more than 73 million boe, or 12 times the average production in shallow water fields (Baud 2002).

A recent U.S. Minerals Management Service (MMS) release stated that fourteen new Gulf of Mexico deepwater projects began production during 2002 and twelve deepwater discoveries were made, three in 8,000 feet or greater water depth (MMS 2003).

Offshore Industry Forecasts

Figure 8 identifies seven common types of production platforms suitable for Gulf of Mexico operations at various water depths and reservoir sizes.

Figure 8: Seven Types of Offshore Oil Production Platforms

Source: U.S. Minerals Management Service, Gulf of Mexico Region, Offshore Information, October 1999.

A fixed platform (FP) is supported by piles driven into the seabed and is economically feasible for water depths up to 1,650 feet. The compliant tower (CT) is a narrow, flexible tower that can operate in water depths of up to 3,000 feet. The Sea Star or floating “mini tension leg” structure is suitable for smaller reservoirs and operates in water depths up to 3,500 feet. The floating production system (FPS) is anchored in place and can be dynamically positioned using rotating trusters. Connected to wellheads on the ocean floor this system can be used in water depths up to 6,000 feet. Subsea systems (SS), connected to nearby platforms, can operate at great depths. However, the drilling and completion cost penalties of subsea systems make these arrangements less preferable than floating structures.

The ATP-funded CPR technology is expected to be most appropriate for TLPs (tension leg platforms) and for SPAR platforms, which are vertical floating cylinders (Johnson 2003). TLPs and SPAR platforms consist of floating structures held in place by vertical tendons connected to the sea floor. As indicated in Figure 9, TLPs and SPAR platforms account for 39 percent of announced Gulf of Mexico deepwater projects. It is expected that the availability of the CPR technology will significantly expand the operating reach of TLPs and SPAR platforms beyond 6,000 feet of water depth.

Figure 9: Market Share of Tension Leg and SPAR Platforms in the Gulf of Mexico

Source: Lincoln Composites 2003.

Worldwide, it is estimated that “there will be up to 22 deepwater projects each year during the next decade” (Hillegeist 2001). Of these, 10 are expected to be located in the Gulf of Mexico with 39 percent, or four projects, likely to use TLP or SPAR platforms. Of these four projects each year, one is expected to be located in excess of 6,000 feet water depth. Each year, this one project will be a strong candidate for the ATP-funded CPR technology (Johnson 2003), corresponding to the second pathway in the following section.

PATHWAYS FOR CPR DEPLOYMENT

In discussions with Lincoln Composites and major oil company representatives, three pathways were identified for the commercial deployment of the ATP-funded CPR technology.

• Pathway 1: On platforms originally designed for steel risers, CPR will be used to make connections to the remaining new wells. The reduced CPR weight will increase the number of risers that platforms can support, increase payload capacities, and increase production from lateral reserves.
• Pathway 2: On new platforms designed for CPR, lighter-weight CPRs will make it possible to reach large new deepwater petroleum reserves economically.
• Pathway 3: To facilitate the redeployment of out-of-production platforms that have gradually exhausted their underlying reservoirs, lighter-weight CPRs can replace steel pipe, making it possible to redeploy platforms in water depths two or three times their original nameplate specifications.

OFFSHORE INDUSTRY INITIATIVES

A representative of Shell Exploration & Production Technology Company stated that “the ATP-funded CPR technology is of considerable commercial interest to Shell International and is under active review for possible Gulf of Mexico deepwater deployment.” In the absence of cost-effective technologies for ultra-deep production (6,000 feet water depths), Shell could lose its investment in several leases ready to expire within the next few years.

Dr. Mamdouh Salama of Conoco Phillips said that the company intends to install 10 CPR risers in its Magnolia TLP, currently under construction. He indicated a “95 percent certainty that CPR technology, developed with ATP-funding, will be approved by the Minerals Management Service and will be used in the Magnolia TLP.” Dr. Salama also indicated that ConocoPhillips recently gave serious consideration to the redeployment of the Joliet TLP in ultra deepwater (per Pathway 3). While lighter-weight CPR was not yet available to facilitate redeployment at the time of that decision, “Joliet remains available for future redeployment, which could become economically attractive with CPR risers” (Salama 2003).

PLATFORM PROJECTIONS WITH COMPOSITE RISERS

Composite production riser deployment is projected to commence in 2004 and proceed as indicated in Table 4. The probability of reaching these projections is estimated to be 75 percent.

Table 4: Projected Gulf of Mexico Tension Leg and SPAR Platforms with Composite Production Risers

Given the presence of two competing initiatives to develop composite production risers, it is conservatively assumed that the ATP-funded CPR technology will capture a one-third share of projected CPR deployment.

CPR utilization will result in significant economic and energy production benefits by facilitating affordable crude oil production from Gulf of Mexico reserves at increasing water depths along the three pathways described above. Figure 10 illustrates the flow of benefits.

Figure 10: Flow of Benefits from the ATP-Funded Composite Production Riser Technology

Pathway 1: CPR Deployment on Currently Operating Tension Leg Platforms

On operating TLPs originally designed with steel risers, completed production wells will remain connected to steel risers. Additional production wells brought online after 2004 will be completed with CPRs.

Due to the weight advantage of composites, for every three wells completed with CPR, the platform’s payload capacity will be increased to support one composite riser to be connected to an additional production well. While the additional production well is not part of the TLPs original design, it is assumed that the size and configuration of the reservoir will permit the connection of additional wells and that replacing three steel risers with four composite risers will thereby increase production by 33 percent.

As indicated in Table 5, deployment of four CPRs on one TLP each year for four consecutive years will increase the annual production of three platforms by 12 risers. This is the estimated Gulf of Mexico market segment for CPR utilization, for Pathway 1. It is expected that the ATP-funded CPR technology will capture a onethird share of this market segment, or four CPR riser columns, each in excess of 6,000 feet in length.

Table 5: Expected Number of Production Wells Completed with CPR on Existing Tension Leg Platforms

The base case assumptions for estimating benefits along Pathway 1 include additional crude oil production and associated royalties for the U.S. Minerals Management Service (MMS), which would not have taken place without lighter-weight CPRs increasing platform payload capacity. Positing that each additional well produces 10,000 bpd (barrels per day), or 3.5 million barrels per year, and that crude sells at $20 per bbl (barrel), additional MMS royalty payments, at 12.5 percent of crude selling price, are $2.50 per bbl of raised crude. According to industry experience for Gulf of Mexico operations, each production well is expected to produce crude oil at the above rate for 10 years (Johnson 2003).

As this pathway represents a limited transitional stage toward the deployment of CPR in Gulf of Mexico platforms, only a base case analysis is conducted for Pathway 1.

Pathway 2: CPR Deployment on New Platforms Designed for CPR

By 2005, a major oil company will start the design and construction of new TLPs and SPAR platforms with lighter CPR risers. Assuming a 24-month design and construction cycle, the first new TLP will come on line in 2007.

As indicated in Table 6, the market for new platforms designed with composite production risers is projected to consist of 10 new TLP and 5 new SPAR platforms brought online in the Gulf of Mexico over the 2007 to 2021 period. Each TLP has 30 wells, of which 25 are used for production and 5 for reinjection. Each SPAR platform has 14 wells, of which 9 are used for production and 5 for reinjection. Over the 2007 to 2026 period, 370 wells will be completed on TLP and SPAR platforms. Of these, 75 wells will be used for reinjection and 295 for petroleum production.

Table 6: Expected Number of Wells Completed with Composite Production Risers on New TLP and SPAR Platforms

This is the estimated market segment for Gulf of Mexico CPR utilization for Pathway 2. It is expected that the ATP-funded CPR technology will capture a one-third share of this market segment or 122 CPR columns, each in excess of 6,000 feet in length.

The assumptions for base case analysis include the following:

• Continued utilization of ATP-funded CPR in designing new TLP and SPAR platforms for a period of 20 years. This is a reasonable assumption in light of very long duration development and test cycles for new offshore riser designs. Composite production risers have been under development since the 1950s and are just now making their entry as commercially viable products.
• $1.05 million capital cost savings per production well relative to the cost of steel risers (Fischer 1995).
• Additional production of 10,000 bpd, or 3.5 million barrels per well per year, selling at $20 per bbl, each generating additional MMS royalty payments at 12.5 percent of crude selling price of $2.50 per bbl of raised crude. This is consistent with industry experience for Gulf of Mexico operations, where each production well is projected to produce crude oil at the above rate for an average of 10 years (Johnson 2003).

For a step-out scenario, capital cost savings are increased by 10 percent to $1.15 million per production well relative to steel risers, up from $1.10 in the base case. The 10 percent increase in capital cost savings is within accepted industry projections (Fischer 1995).

Pathway 3: CPR Use for Redeploying Out-of-Production TLP Platforms

Operational TLPs that gradually exhaust their underlying reservoirs can be moved to new, deeper reservoirs and refitted with lighter-weight risers to reach production wells in water depths twice or three times the original nameplate. This process is enabled by the availability of affordable and lighter-weight composite risers.

It is assumed that one operating TLP in the Gulf of Mexico will reach the end of its reservoir’s economic life in 2007. The TLP will be disconnected from the current reservoir, relocated over a much deeper reservoir, and refitted with CPRs. For each relocation, the topside capital investment for hull and processing facilities is largely avoided. It is assumed this process is repeated every second year until 2023, by which time nine TLPs will have been redeployed in deeper water. The ATP-funded CPR technology is expected to capture one third of this market segment.

The base case analysis assumes that TLP redeployment in deeper water will result in $325 million capital cost savings, or 25 percent of a $1.3 billion new TLP. For the step-out scenario, capital cost savings are estimated at $390 million, or 30 percent of a $1.3 billion new TLP. The step-out scenario assumption remains a conservative estimate as capital costs of new platform hull and processing facility can be as much as 50 percent of total TLP capital costs (Lytal 2000).

ATP and Industrial Partner Investments

During the 1994 to 1999 period, ATP invested $2.39 million and its industry partners (Shell, BP Amoco, and ConocoPhillips) cost shared $2.42 million to develop high-risk CPR technology.

The ATP funding was exclusively used by Brunswick Corporation (the technology innovator) and its successor, Lincoln Composites, which acquired Brunswick, and by their technical and engineering subcontractors. Shell, BP Amoco, and ConocoPhillips fully funded their own project-related activities for CPR technical development, testing, and prototyping, and were funding sources for Lincoln Composites.

For purposes of cash flow analysis, the ATP investment was normalized to 2003 dollars and assumed to occur in 1997, the midpoint of the five-year investment period. The industry partner’s investment costs were not included in the economic analysis, given the emphasis on measuring benefits to the nation relative to ATP’s public investment.

Base Case Economic Analysis

Table 7: Cash Flows and Performance Metrics from CPR Deployment in Gulf of Mexico ($ Millions, in 2003 Dollars): Base Case

Note 1: A 1997 base year and an OMB-mandated 7 percent discount rate were used for analysis. Performance metrics were computed from time series assuming ATP investment in 1997 (project midpoint) and prospective cash flow benefits from 2004 to 2026.

Note 2: The NPV calculations for the Capital Cost Savings and Royalties benefit components assume investment costs divide equally across these benefit components.

The public benefit is $187 for every dollar invested, and the internal rate of return is estimated to be 58 percent.

Table 8 indicates step-out scenario returns on ATP’s investment in the CPR technology. The net present value of ATP’s investment is estimated at $557 million. The public benefit is $204 for every dollar invested and the internal rate of return is 59 percent.

Table 8: Performance Metrics from CPR Deployment in Gulf of Mexico: Step-Out Scenario

Note 1: A 1997 base year and an OMB-mandated 7 percent discount rate were used for analysis. Performance metrics were computed from time series assuming ATP investment in 1997 (project midpoint) and prospective cash flow benefits from 2004 to 2026.

Note 2: The NPV calculations for the Capital Cost Savings and Royalties benefit components assume investment costs divide equally across these benefit components.

Additional benefits from the ATP-funded CPR technology are expected to include the following:

• Additional domestic crude oil production of 7.5 million bbl in 2008, 77 million bbl in 2013, and 167 million bbl by 2020. Given the weight of steel risers, these incremental production levels and associated progress towards energy independence may not have been practical with currently available, state-of-the-art steel risers.
• Improved thermal protection from seawater temperatures and from corrosive saltwater environments as a result of composites’ superior corrosion resistance characteristics compared with steel risers.

* * * * *

Prior to ATP funding, Lincoln Composites was unable to allocate financial resources to fund in full a high-risk program to develop composite production risers. In large part, the perception of unacceptable technical risk reflected prior failed industry efforts to develop composite risers.

In 1994, the ATP funded the proposed CPR project. In addition to cost sharing the high-risk technology development effort, ATP involvement provided the additional important benefit of “keeping the industry collaborators engaged and making it possible to jointly develop product performance specifications for composite risers” (Johnson 1999).

Technical and cost efficiency benefits from the CPR project would not have been realized without ATP funding and without ATP facilitation.

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Date created: July 14, 2004
Last updated: August 3, 2005

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