PICO ‘4’, the world’s largest and most technically advanced liftboat sets to change the mindset of workover in the GOS. Sherif Wadood, Managing Director of PICO Energy Holding, sheds light on how it would be of benefit to the market
What is PICO ‘4’, and what were the reasons behind making the decision in investing in a liftboat?
Egypt’s focus now is to arrest the depletion, It is workover time, there shall be a major migration from drilling to workover within this period, because workover costs much less, and the yield is extremely awarding and fast.
Investing today in drilling a new well in the GOS would cost 12 to 14 million dollars with wells producing an average of 2000 bpd, while a medium size work over, would cost 3 to 4 million dollars producing an average of 700-750 bpd. This is one of the major reasons behind such an investment, we will be able to provide our customers a 60% less cost of a normal workover operation that would cost them 4 million dollars.
Investing in PICO 4 is massive, the total investment of the liftboat with its supply vessel reached up to 100 million dollars. The decision was made based on certain realities, as we have been watching the trials of others investing in liftboats and bringing them in the Egyptian market since 2001, during this period, GUPCO and Petrobel issued tenders for such boats, and most trials were not successful due to its high cost and lack of knowhow, as also no one wanted to take the risk, knowing the weather conditions in the Gulf of Suez were and are very challenging,
When we decided, we looked into investing a class that would resist the weather to a certain extent and assure quality and time are provided. Another reason behind such an investment, was a simple fact, in the Gulf of Mexico there are a large number of liftboats, as in the Gulf of Suez, there are none, and both areas are similar in many cases, you have mature fields, a massive need for work over, and very tough weather conditions as well, also knowing they are economical and much better suited than a rig, not only because it is cheaper, but also it is much better suited to perform various types of workovers than a rig. This was very clear to us, that the market in Egypt is in need of at least 8 to 10 liftboats.
What does PICO ‘4’ technically obtain that would be of benefit to the market?
PICO 4 design is specially made for the conditions of the GOS, we modified a couple of things on the original design to suite the GOS. First, it is a massive boat, it can use short weather windows, it can jack up or down in 45 minutes (8 feet per minute), which is almost a record, compared when jacking up a rig it takes almost 6 hours. So you can jack down quickly and move if you have a short weather window of 2 hours, which you always have in the GOS, knowing the issue of wind speed fluctuation in this area.
With these weather conditions, rigs and static barges cannot use weather windows, because you would require tugs and supply vessels, so basically it is not an option for them to move, therefore you would find a rig waiting a month for the weather window to move, and paying a 100,000 to 120,000 dollars per day. Using PICO 4, you shall be saving this cost, as it moves in any weather window condition.
Looking into the other features, we chose a very expensive method of working on the well, we bought a very advanced workover rig from a Canadian company that is extremely impressive, instead of using the usual stubbing unit which has major limitations, because it cannot work in high speed winds. We went to another search and designed the cantilever with a reach of 25 feet and we placed the workover rig on the cantilever that has a fully automated hydraulic chain system in a closed box, so you can pull, run and rotate up to 225 tons, which is quite massive, you can workout every kind of well, and actually with the liftboat you can release the rig area and have your completion with the rig which is fully equipped with coiled tubing unit, slake line unit, logging unit, mud tanks and of course the workover unit. Also PICO 4 has accommodation facilities. We added to the liftboat a massive supply/accommodation vessel, bought from the UK, to accommodate a large amount of personnels and supply, in my opinion, I think of it as an ambulance unit in the GOS working over my patients, the wells, quickly moving from one to another. The difference in cost of this rig compared to the normal offshore workover rig is about 7 times the cost.
How economic would it be for operators to work with PICO ‘4’?
Our aggressive commercial structure of PICO 4 is to penetrate the Egyptian market, one of the main obstacles of bringing such a liftboat to this market, is the uncertainty with the contractor, as the contractor would like to have mobilization fees upfront and the operator would like to make sure this boat would fulfill its objectives. No one wants to pay 10 million dollars, then wait for the results and of course not knowing how weather resistant is it, are they going to utilize the liftboat for 150 to 200 day from the 365 days, and the rest would be waiting on the weather conditions, as this would be something very painful for the operators. Considering all of these factors, and as we are specialized in integrated services, we wish to alter the mind set of this market towards integration because we do not believe for a job in the oil and gas sector we need 20 to 30 contractors, we maybe need one general contractor and many sub contractors, as the operator needs to deal with 1 contractor who can manage the drilling operation, this way we will stop the blaming game, we will save a lot of money and assure the quality. Therefore we have decided to offer the liftboat with all its equipment in an integrated manner. We are offering the market a solution to insure offshore workover jobs, and we identified 9 types of workover jobs, and we put them into a menu style as we will quote our customer a lump sum for the job. We are taking the risk of the weather, we shall never charge for waiting on weather conditions. We shall plan the job including every single detail and the customer shall pay me when we deliver the job. We shall take the risk.
If you look into the costs of normal workovers in Egypt especially in the GOS, the least one will cost you, if everything goes well, and you have no weather waiting conditions, a average of 1 million dollars, this very workover, with a simple change of a ESP pump, could reach 2.5 million dollars. Looking into a more sophisticated workover, it would cost you in best case scenarios 2.5 to 3 million dollars and this would be heavy workovers that would last up to 3 weeks. In its worst case scenario, it could reach up to 6 million dollars.
Using PICO 4, I am better than your best case, you will have little reasons to refuse. We are placing our pricing around 60% of the average between the best and the worst scenarios mentioned. When you separate your service you end up with a massive expense, but when you put all together, and have someone willing to take the risk and be responsible for his work, you will save a lot of money and time. This means we are moving our relations with the operators from a contractor to a partner who would share the risks and build a knowhow on a learning curve in a period of time.
This approach will open the door for a new competition between service companies in the GOS. There is a lot of room to change the way we do workover, it will invite other players to compete.
Is PICO ‘4’ only for the Egyptian market, or are you planning to tackle other markets?
I am very prejudiced for this market, as we are going to raise the Egyptian flag on PICO 4. There are some opportunities arising in the Gulf of Mexico because there is only 1 of this kind there and demand is high. But, the current status of the market is actually very interesting, as it is workover time especially in the GOS, and it can also work up to 280 feet to cover a major part of the Mediterranean. Also, we see a lot of interest from EGPC, after establishing a new company recently for development, so they could be a major client for us. This also shows that the government is focusing on arresting the depletion.