PARIS (Reuters) - Three European companies have won contracts for almost half the value of Angola’s $16 billion ultra-deepwater Kaombo oil project, confirming a trend toward bigger scale and risk for the deep-sea contracting and construction sector.
Saipem (SPMI.MI) of Italy announced a $4 billion contract related to fitting out and supplying two converted oil tankers to become the Floating Production Storage and Offloading (FPSO) part of the project.
Meanwhile, Paris-listed Technip TECF.PA and crane-ship specialist Heerema revealed a $3.5 billion deal for subsea tubes, pipes and cables to connect the two FPSOs to the seabed two kilometers below the surface. Heerema said the contract was the biggest on record of its kind.
Kaombo’s operator, French oil company Total (TOTF.PA), gave the project the go-ahead earlier this week after trimming 4 billion dollars off its estimated cost.
Less ambitious design, including converting tankers instead of using purpose-built FPSOs, and Angola’s relaxation of local content requirements will provide three quarters of those savings.
Total and other oil majors are reining in spending to keep shareholders happy in a potentially lower oil price world. As a result, some are using fewer oil service firms on a project and asking them to become involved at the start and stay with a project longer to share more of the risk.
Some project leaders are also ditching tailor-made designs in favor of standardized solutions, which the service companies can often more comfortably provide.
The partnership between subsea specialist Technip and privately owned Heerema, which controls some of the largest installation vessels on the water, shows how European service companies are joining forces to meet the scale now demanded.
“This project is the largest subsea contract ever awarded to Technip and strengthens our position in the ultra-deepwater market. This award further reflects the confidence of major industry players, such as Total, in the Technip Heerema alliance to address the significant challenges of ultra-deepwater projects,” said Thierry Pilenko, Technip chairman and chief executive officer in a statement.
Kaombo is due to start pumping 230,000 barrels a day in 2017.
Additional reporting by Stephen Eisenhammer and Isla Binnie; editing by Jane Baird