2005 Annual Report - SBM Offshore

Report of the Board of Management
technology to the product line. In 2004, a contract was
obtained for an innovative deep-draft semi-submersible
platform that will be installed this year in the world record
water depth of 2,400 metres in the Gulf of Mexico.
Concerning another piece of the deepwater technology
puzzle, the Company secured a contract for the first
application of its GAP patented technology. Behind this
acronym is a near-surface transfer solution for production
flows of oil, gas, water and controls. Management is
confident that the industry will see in this technology an
attractive solution to overcome temperature problems
associated with fluid transfer in ultra deep water.
For field developments using very large spread moored
FPSOs, deepwater export buoys installed at about 2,000
metres from the FPSO, will remain a key component of the
field infrastructure. SBM Offshore is the supplier of eight out
of the nine such systems contracted in West Africa to date
and is confident to be able to maintain a high market share in
the future.
During 2005, a first contract was secured for the supply and
installation of a bonded flexible solution (the Trelline) on a
deepwater export buoy. This success will allow SBM Offshore
to bid more competitively for turnkey supply of deepwater
export terminals.
Another important element in the definition of the Company’s
Sanha LPG FPSO in operation offshore Angola since May 2005
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deepwater strategy is the vision of a growing need for ‘tieback’
solutions. Indeed, the first move into deep areas is
made on the basis of large reservoir economics that justify
investment in capital intensive production facilities. Soon
after, as production capacity becomes available on the main
facility, the oil producers seek for development of adjacent,
smaller reservoirs. The preference goes to satellite facilities
tied-back to the main producing centre, as opposed to standalone
solutions. This evolution is characteristic of maturing oil
provinces, very much like what is happening in the North Sea
and the Gulf of Mexico. SBM Offshore’s product line today is
exactly geared to this concept and Management believes that
a long period of sustained, high demand for tie-back
developments is coming up.
FPSOs
The engineering, supply and installation and operation of
FPSOs is the main component of the Company’s activities.
SBM Offshore holds the position of leader in the market of
lease and operation of floating production facilities.
It is Management’s intention to maintain this position and
remain focused on the large, complex end of the business. In
particular, focus will be maintained on the high standard
business from the oil majors who require integrated
competence and large resources in engineering and project
management.
The merit of this activity is essentially that it provides longterm
visibility of cash flows and earnings; it requires however
focused management of the complex financial, operational
and contractual risks involved. The Company started this
activity as a pioneer in 1979 and has acquired unrivalled
experience over the last 26 years; as a result it now operates
safely and comfortably in this environment. The risks are
further analysed in the Risk and Control section of this report.
Lease and operation of such facilities is a capital intensive
business and the strategy of the Company is to continue to
approach this activity prudently. Management has defined a
series of principles which have been respected in the most
rigorous manner:
• no investment on speculation, invest only on the basis of a
contract in hand, except for the acquisition of existing
tankers suitable for conversion into an FPSO;
• convert only quality tankers excluding ‘early’ double hulls
using high tensile steel (late eighties, early nineties)