Ivanhoe Energy dropped some big news today as the announcement was made of a global strategic alliance with one of the modern masters of offshore production logistics, SBM offshore. It is a marriage of technical expertise designed to fully exploit the largely untapped offshore heavy oil assets around the world via the creation of so-called FPUSO craft (floating, production, upgrading, storage, and offloading).
Brilliant strategic play by IVAN here, whose proprietary HTL (Heavy-to-Light) oil upgrading process, which renders out a high-value synthetic crude with massively improved viscosity, makes exploitation of heavy oil a localizable, economic operation, requiring only a relatively small footprint compared to extant coking methodologies and the like. The two companies have teamed up here to churn out a first-of-its-kind implementation for offshore producers, capable of producing and upgrading heavy oil down in the ten degrees API gravity and lower range.
Looking at the global macro picture of oil production, this is an exceptionally well-timed alliance. As conventional deposits become depleted, the industry-estimated 500B plus barrels of recoverable offshore heavy oil becomes an increasingly advantageous play. The only thing missing in this equation has been the technological and logistical capacity required to make offshore heavy oil recovery truly profitable and feasible, until now that is. This alliance has the potential to crack open a whole new frontier that has slumbered in the background of offshore production.
CTO over at SBM, Michael Wyllie, beamed with pride at the joint design effort over the last two years, arguing that this new, combined systems offering will become the de facto standard for production and upgrading among offshore heavy oil producers the world over. Refineries love the high-value synthetic crude IVAN’s HTL tech is capable of producing and the scale of the potential impact on the global energy sector is unquantifiable by any existing standard. Looking at the reputation and performance of the 7k plus employee SBM (market cap in excess of $3B), which handles about a 1M bbls of throughput per day across a 16-unit global production fleet, analysts are eyeing this deal and licking their chops.
You take the modularity and minimalist form factor/production footprint attainable via IVAN’s HTL systems and fuse it with SBM’s vessels, which are arguably some of the finest, most intelligently designed/engineered standard FPSOs in existence today and we are talking a production bonanza. Just think about how much offshore heavy oil there is out there and you quickly start to comprehend why markets are buzzing about this move by Ivanhoe Energy, a move which also represents a considerable milestone for the company in their overall commercialization of the HTL process.
Moreover, by taking the paradigm to the FPUSO level via HTL, it is possible to re-circulate some of the fluid into the subsea wells, comfortably offsetting typical flow rate problems associated with such wells via an extremely robust, redundant mechanism. That one aspect of technical execution alone could make or break certain projects from a feasibility standpoint and this combined solution promises to be a real game changer.
CTO of IVAN, Dr. Michael Silverman, asseverated his SBM colleagues’ statements wholeheartedly, praising the revolutionary engineering work of the last two years and thanked the awesome people at AMEC Engineering for their assistance in finishing the concept design for a 60k bbl/day FPUSO facility last year. The alliance will be looking to tap the massive potential of the existing and theoretically possible FPSO market and IVAN in particular sees this as a major new front in their campaign to commercialize the HTL process (one which is readily accessible near-term).
For more information on Ivanhoe Energy, visit www.IvanhoeEnergy.com
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