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Deepwater Gulf Infrastructure …A Reliable Proposition?
Rory Miller, Vice President Gulf Coast
October 26, 2006
Deepwater
Midstream 2005 Tutorial Nov. 30, 20052 © 2005 The Williams Companies, Inc.
Changing nature of Gulf productionDeepwater aggregation theoryWorsening weather patternsDeepwater pipeline architectureRepair, DesignReliability Considerations
Overview of Major SectionsDeepwater
Midstream 2005 Tutorial Nov. 30, 20053 © 2005 The Williams Companies, Inc.
Gulf of Mexico Annual Gas ProductionDeepwater
*2004 – Some production lost due to Hurricane Ivan*2005 – Significant production lost due to Hurricanes Katrina & Rita
0
1,000
2,000
3,000
4,000
5,000
6,00019
90
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
ShelfDeepwater
BC
F
-51%
+18%
Midstream 2005 Tutorial Nov. 30, 20054 © 2005 The Williams Companies, Inc.
Gulf of Mexico Annual Oil Production
*2004 – Some production lost due to Hurricane Ivan*2005 – Significant production lost due to Hurricanes Katrina & Rita
Deepwater
0
100
200
300
400
500
600
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
ShelfDeepwater
MM
BO
+20%
-44%
Midstream 2005 Tutorial Nov. 30, 20055 © 2005 The Williams Companies, Inc.
Estimated UndiscoveredTechnically Recoverable
Oil & Gas Resources*Federal OCS Areas
26.6 BBO +132.1 TCF
3.8 BBO +37.0 TCF
44.9 BBO +232.5 TCF
10.5 BBO +18.3 TCF
* MMS 2005 Assessment, Pmean values
Estimated Undiscovered Oil & Gas ReservesDeepwater
Midstream 2005 Tutorial Nov. 30, 20056 © 2005 The Williams Companies, Inc.
Gulf of Mexico – Eastern Gulf AreaDeepwater
Midstream 2005 Tutorial Nov. 30, 20057 © 2005 The Williams Companies, Inc.
The Architecture of AggregationDeepwater
Midstream 2005 Tutorial Nov. 30, 20058 © 2005 The Williams Companies, Inc.
Aggregation: Reducing Risk for Everyone
Floating Production System Processing Capacity vs Time
010,00020,00030,00040,00050,00060,00070,00080,00090,000
100,000
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Year
Proc
essi
ng C
apac
ity (B
OE/
Day
)
Expanded Processing Capacity
Initial Processing CapacityTop End Risk
Back End Risk
Production Forecast
Producers toll across floating production systems and export systemsLower tolls due to economies of scaleWilliams assumes aggregation risks; lower than sum of individual risksReduces cycle time and economic threshold for marginal prospects
Deepwater
Midstream 2005 Tutorial Nov. 30, 20059 © 2005 The Williams Companies, Inc.
East Breaks: Initial Justification
East Breaks PV of Revenue - Initial
38%
62%
Contracted 3rd Party
• 4 discoveries at time of sanctioning
• Original P50 reserves provide return of capital (to small single digit returns on capital)
• Initial justification: 1999 - 2000
Deepwater
Midstream 2005 Tutorial Nov. 30, 200510 © 2005 The Williams Companies, Inc.
East Break PV of Revenue - Today
77%
23%
Contracted 3rd Party
12 discoveries in dedicated area today
• Additional undedicated discovery in area
• 3 - 5 additional exploration wells planned next year
• Pipeline well situated for Alaminos Canyon development
• Earning a return in excess of cost of capital
East Breaks: Today and the FutureDeepwater
Midstream 2005 Tutorial Nov. 30, 200511 © 2005 The Williams Companies, Inc.
Cyclical Hurricane Trend?Deepwater
Midstream 2005 Tutorial Nov. 30, 200512 © 2005 The Williams Companies, Inc.
Midstream 2005 Tutorial Nov. 30, 200513 © 2005 The Williams Companies, Inc.
Global Temperature TrendDeepwater
Midstream 2005 Tutorial Nov. 30, 200514 © 2005 The Williams Companies, Inc.
Recent Severe WeatherDeepwater
Midstream 2005 Tutorial Nov. 30, 200515 © 2005 The Williams Companies, Inc.
Wave VocabularyDeepwater
Midstream 2005 Tutorial Nov. 30, 200516 © 2005 The Williams Companies, Inc.
“Maximum” vs. “Significant” Wave Height
Significant wave height, Hs, is approximately equal to the average of the highest one-third of the waves.
Deepwater
Midstream 2005 Tutorial Nov. 30, 200517 © 2005 The Williams Companies, Inc.
Historical Snapshots
Recent Hurricanes (NOAA Buoy Data)
15
2528
2126
30
1118
52 55
-
10
20
30
40
50
60E
rin
Felix
Opa
l
Ber
tha
Edo
uard
Fran
Dan
ny
Floy
d
Ivan
Kat
rina
1995 1995 1995 1996 1996 1996 1997 1999 2004 2005
Sign
ifica
nt W
ave
Hei
ght,
Hs
[ft]
TypicalCriteria:45 ft
Deepwater
Midstream 2005 Tutorial Nov. 30, 200518 © 2005 The Williams Companies, Inc.
0
10
20
30
40
50
60
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46
Sign
ifica
nt W
ave
Hei
ght (
Hs)
, ft
Hours
45ftDesignCriteria
Hurricane Katrina (27-30, Aug. 2005)Significant Wave Height (Hs)
Deepwater
Midstream 2005 Tutorial Nov. 30, 200519 © 2005 The Williams Companies, Inc.
0
10
20
30
40
50
60
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46
Hurricane Ivan (15-16, Sept. 2004)Significant Wave Height
45 ftDesignCriteria
Sign
ifica
nt W
ave
Hei
ght (
Hs)
, ft
Hours
Deepwater
Midstream 2005 Tutorial Nov. 30, 200520 © 2005 The Williams Companies, Inc.
Offshore Booster & Spec-change StationsDeepwater
Midstream 2005 Tutorial Nov. 30, 200521 © 2005 The Williams Companies, Inc.
Seafloor Tie-ins
OIL
GAS
JUMPER
Deepwater
Midstream 2005 Tutorial Nov. 30, 200522 © 2005 The Williams Companies, Inc.
Trunk Line Extension & Lateral Tie-ins
FUTURE TIE-IN
10,000' R.
CHEVRON MP313FIXED PLATFORM300'
WILLIAMS "MOUNTAINEER"
(OIL)
62 M
I.
18X16 TAPER JOINT
18" -DSAW
14Ø10,000' R.
18" JUMPER
WYE
-DSAW18"
WYE
WYE (-5200')
18"
14Ø
WILLIAMS "CANYON CHIEF"
(GAS)
WYE
18X18X14" LAT.
WYE (-5200')
TO MP 261A PLATFORM
FROM FUTURE PLATFORM
FROM BLIND FAITH PLATFORM(-6,000')
CANYON
Deepwater
Midstream 2005 Tutorial Nov. 30, 200523 © 2005 The Williams Companies, Inc.
SCR
FLEXIBLE JOINT BEING LOWERED INTO “BASKET”
RISER
PORCH SUPPORT SCR (TYP.)
5-15 DEG. (TYP.)
MOORING / RISER ELEVATION (SHOWN FROM 3000’)
MOORING LINE (TYP.)
Deepwater
Midstream 2005 Tutorial Nov. 30, 200524 © 2005 The Williams Companies, Inc.
Preferred Deepwater Pipeline Repair
OII/Grayloc ConnectorsWith Alignment Sleds
Deepwater
Midstream 2005 Tutorial Nov. 30, 200525 © 2005 The Williams Companies, Inc.
Pipeline Repair -- Top View of Jumper
Compliant Jumper
Bowstring Cylinder
Deepwater
Midstream 2005 Tutorial Nov. 30, 200526 © 2005 The Williams Companies, Inc.
Reliability-Driven Design
Codes and regulations represent minimum criteriaSelectively increase minimums & add capability where:
Inputs / criteria are approximated – Metocean data seems to be trending higher – 20 years ahead?– Hydrocarbon characteristics of future line contents can vary widely
Redundancy is low– SCR structure has zero redundancy
Consequence of failure is high – Pipeline shut in for any reason affects all who are connected
Flexibility to recover is valuable – Ability to isolate a problem area and keep the main system online
Increased reliability often can come at low marginal cost
Deepwater
Midstream 2005 Tutorial Nov. 30, 200527 © 2005 The Williams Companies, Inc.
Other Keys to Reliability
Standardized and systematized:Design criteriaEquipment and Material SpecificationsExecution processes (PLC, etc.)
Limited menu of line sizesIn-stock valves, pipe, connectors and specialty toolsRepair plan execution readinessUp to date systems models for real time, line operationsExperience and continuity of our peopleA culture of trust that intrinsically encourages introspection & pro-actively drives change (there’s a mouthful)
Deepwater
Midstream 2005 Tutorial Nov. 30, 200528 © 2005 The Williams Companies, Inc.
Upshot of Trends in Gulf Coast
Weather increasingly more severeOil supply increasingly scarceEnergy demand growing globallyMidstream services increasingly in demandConstruction costs will be volatileIndustry’s discipline will be testedHigh barrier to entry, low barrier to failureReturns must be commensurate
Deepwater
Midstream 2005 Tutorial Nov. 30, 200529 © 2005 The Williams Companies, Inc.
Leadership
Structural EngineeringSCR Design/Verification
Topsides
Hull & Mooring
Hydraulics
Cost Estimating
Project Management
Commercial Expertise
Deepwater Operations
Building Our Deepwater CompetenciesDeepwater
Midstream 2005 Tutorial Nov. 30, 200530 © 2005 The Williams Companies, Inc.
Lessons Leaned from Katrina and Rita
Incident Command System Timely pre and post storm assistance for employees and their families Alternative and backup communications, power and transportation systems Critical material and supply inventories and staging areas Execute agreements for nontraditional services and supplies before handSecure dive boats early for post event offshore inspections Liaison with local, state & federal government agencies to expedite permits, variances waivers, etc
Deepwater
Midstream 2005 Tutorial Nov. 30, 200531 © 2005 The Williams Companies, Inc.
Questions?Deepwater