LNG

The leading Western subsea oil and gas field services companies Schlumberger, Aker Solutions and Subsea 7 plan to join forces to form a separate joint venture to deliver a step change in subsea production economics as energy exploration and production is set to gather pace amid the supply crisis.

The three companies propose to help customers unlock reserves, reduce time to first oil and lower development costs while simultaneously delivering on their decarbonization objectives.

The proposed joint venture will comprise the subsea businesses of Schlumberger and Aker Solutions, with Subsea 7 purchasing 10 percent of the joint venture for $306.5 million.

“This combination brings together deep reservoir domain and engineering design expertise, an extensive field-proven subsea production and processing technology portfolio, world-class manufacturing scale and capabilities, and a comprehensive suite of life-of-field solutions to customers all over the world,” said a statement.

It added that the transaction was subject to regulatory approvals as well as other customary closing conditions and is expected to close during the second half of 2023.

Following completion of the transaction, Schlumberger will own 70 percent of the joint venture, with Aker and Subsea 7 owning 20 percent and 10 percent respectively.

Transaction details

The Board of Directors of the joint venture will consist of three representatives from Schlumberger, two from Aker and one from Subsea 7.

The new joint venture will form part of the Subsea Integration Alliance, currently an unincorporated alliance between Schlumberger and Subsea 7.

The alliance will be extended by 10 years from the transaction completion date.

“This joint venture will bring together world-class businesses that are uniquely positioned to provide subsea technologies to help our customers improve recovery and reduce overall subsea development costs,” said Olivier Le Peuch, Chief Executive of Schlumberger, whose main offices are in Paris and Houston.

“Customers will benefit from enhanced services that leverage digital and technology innovation to drive improved performance while increasing energy efficiency and reducing CO2 emissions,” added Le Peuch.

Schlumberger CEO Peuch had forecast in January 2022 that a super-cycle may be underway for natural gas and oil markets.

Kjetel Digre, CEO of Norway-based Aker Solutions, said that by combining strong and complimentary competence and technologies, this compelling combination will deliver an industry step-change that will benefit all involved and the customers.

Economics case

“The offshore market activity is increasing, and this joint venture will drive enhanced offerings both in terms of subsea production economic,” added Digre.

John Evans, CEO of Subsea 7, said he was excited to build on the highly successful alliance with Schlumberger and partnership with Aker Solutions.

“This new joint venture is a critical step as we collaborate on the integrated subsea projects that drive maximum value for our customers,” added Evans for Subsea 7, headquartered in London and domiciled in Luxembourg.

Other transaction details show that Aker will receive $306.5M from Schlumberger which will be settled in the form of shares in Schlumberger.

The shares will be settled based on the volume-weighted average trading price of Schlumberger shares in the 10 business days preceding the closing of the transaction and are subject to a lock-up period of a minimum of 180 days.

Subsea 7 will purchase a 10 percent interest in the joint venture from Aker Solutions for $306.5M, which will be settled in cash.

Of this, 50 percent will be settled upon closing of the transaction and the remainder will be settled, with interest, by June 30, 2024.

Aker will receive $87.5M in proceeds from a vendor note from the joint venture. Of this, at least 50 percent will be paid, with interest, one year after the transaction closes and the remainder within two years.

Woodside Petroleum, the Australian oil and gas company and LNG operator, has received final approvals for the pipeline to shore and for the field development plan Scarborough Gas project to underpin the Pluto LNG expansion in Western Australia.

Australian LNG operator Woodside has awarded a European-US grouping comprising units of Europe’s Subsea 7 and Houston-based Schlumberger, a significant contract for the subsea development of the Scarborough gas field to provide feed gas for the Pluto LNG plant expansion.

The Scarborough field is located about 380-kilometres offshore northwest Australia and is one of just two such feed-gas projects under way in Australia, with the other being the Barossa field to extend the lifespan of Darwin LNG.

Subsea 7 said the project work scope covered the engineering, procurement, construction, and installation (EPCI) of subsea pipelines and production systems.

The development will include 45 kilometres of rigid flowlines, six flexible flowline risers, 42 kilometres of umbilicals and eight trees, as well as associated subsea equipment, in water depths of about 950 metres.

The Subsea Integration Alliance team established during the initial front-end engineering and design phase, awarded in January 2019, will now transition into the full EPCI phase.

Project management and engineering will take place in Perth, Australia, with support from Subsea 7’s Global Project Centre’s offices in Malaysia, UK and France and various OneSubsea offices.

Offshore activities are targeted to take place from 2023 to 2025 using Subsea 7's reel-lay and flex-lay vessels.

Joint effort

“This award is the result of a strong and collaborative early engagement process with Woodside, working with a high level of transparency and cooperation during the pre-tender and FEED phases,” said Olivier Blaringhem, Chief Executive of the Subsea Integration Alliance.

“It demonstrates the potential value of Subsea Integration Alliance and its optimised and integrated offering capacity. We look forward to working with Woodside to deliver the project successfully and safely while maximising the client’s production objectives,” stated Blaringhem.

David Bertin, Vice President for Subsea 7 Global Projects Centre and Asia Pacific, said the group was proud to be awarded this contract by Woodside.

“This builds on our long-standing relationship with the client and our successful track record of projects executed offshore Australia,” explained Bertin.

“Our local office in Perth will be supported by Subsea 7’s Global Projects Centre, underlining the strength and breadth of our project management capabilities and the capacity to deliver complex projects,” added Bertin.

Subsea noted that it defined a large contract as being between US$300 million and US$500M and the value range refers to Subsea 7’s share of the contract.

The Subsea Integration Alliance is a non-incorporated strategic global alliance between Subsea 7 and OneSubsea, the subsea technologies, production and processing systems division of oil and gas services company Schlumberger.

The alliance brings together field development planning, project delivery and total lifecycle solutions under an extensive technology and services portfolio.