Category description

Umbilical (also known as umbilical cable, or power cable) is cable and/or hose that is used as a connection between subsea infrastructure and surface facilities/platforms, to provide a critical connection to control subsurface equipment. In addition, umbilicals can be used to supply required utilities (power & communication, instrument air, injection gas) from a “mother” platform to a smaller / satellite platform next to it. Umbilical functions are design to provide the following:

  • Hydraulic pressure to activate valves
  • Electrical power to power up subsea control equipment
  • Fibre optics to transmit data
  • Chemical injection
  • Gas lift for gas injection
  • Various electrical (control) signals for reading and monitoring systems

Umbilical can be of several types, namely:

  • Power umbilicals and cables used to provide power and various control systems
  • Steel Tube umbilicals are more of an integrated system that includes powers, control, hydraulic, fiber optic, chemical injection and all other utilities required.  Sometimes it is also referred to as multicore umbilical.

Umbilicals can be of various length and diameter, which primarily depends on its functional design, flow rates, field layout, water depth, seabed condition, pressure and temperature regimes. Umbilicals can be designed for dynamic or static applications. Generally, the dynamic umbilical is hanging from the surface facilities and subject to many external forces, whereas static umbilical is trenched under the ground.

Two of the most critical elements of any umbilical are tensile strength and effective isolation, both internal between the cores and outer side. Those achieved via steel tubes and elastomer rubber. The grades of the steel tubes and type of elastomers are determined based on functional requirements, temperature regimes, both internal and external and degree of tensile loading.


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Risks & Opportunities

  • Generally, umbilicals are bespoke and designed to suit a particular project. Hence, the lead times are long and range anywhere from 6 months to 24 months. One of the key elements that play a big role in managing the lead-time is design tolerance. Very often engineering is gold-plated and would include unjustifiably high safety margins, which result in higher-grade materials requirements, prototyping and approval of manufacturing procedures. All of this result in longer lead times and higher prices for the buyers.
  • Generally, shorter length umbilicals result in high prices due to reconfigurations costs for short production runs.
  • Carousel on which umbilical is transported may be a very expensive item, hence rental of the carousel for shipping and then returning may save a significant amount of cash for buyers.
  • Design of umbilicals should incorporate installation vessel features or be standardized, so there is no restriction on which lay-vessel to use when it comes to vessel tensioners and laying equipment. This primarily applied in deep water applications.
  • Standardizing technical and admin procedures is a significant opportunity area of reducing costs when done for multiple purchases from the same supplier.
  • Steel tube materials tend to be a significant issue, Super Duplex Stainless Steel ( Cr25) is the ideal material to be used for tubes. Yet, it is expensive and with long lead times. 316L Stainless Steel could be used in some applications, with shorter field life ( less than 5 years), less than 3000 psi pressure and static service. The advantage of using 316L steel and cost and delivery.
  • Welding of smaller diameter (1”-4") super duplex tubes represent a challenge and have resulted in many delays and cost overruns.

Supply & Demand Dynamics

Demand

The demand for umbilicals is directly affected by subsea project activities around the world. In particular, the complexity of field subsurface infrastructure and long-distance tiebacks subsea, require larger length and more sophisticated umbilicals.In parallel to that, offshore wind farms play a large role in demand for umbilicals and power cables and set grow significantly, in particular, offshore Europe.

The largest oil & gas markets for umbilicals is South America & Gulf of Mexico representing around 30% of the global market, followed by the North Sea and Asia Pacific. MENA is a very small market and may not always be attractive for umbilical manufacturers.


Supply

The market of umbilicals is geographically connected to the end markets, with a relatively good competition. Most of the manufacturing is done in Europe and USA / South America. In parallel to that, some of those manufacturers tend to focus on a particular segment/application, leaving the less competitive environment to segments with fewer players available. As a result, buyer power is limited in those segments, in particular when the timing of delivery is critical.

Key Players

Major manufacturers

  1. JDR cables
  2. Technic FMC
  3. Aker
  4. Nexans
  5. Oceaneering
  6. Tratos
  7. Hydro Group
  8. Umbilicals International (SeaNamic)
  9. MFX Umbilicals

Cost & Price Analysis

Price

In the boom times culminating in 2014, umbilicals exhibited a step upward trend in prices. However, since early 2015 the market for umbilcals shrunk by more than half, as a direct result of reduced activities. Yet, this was somehow compensated by steady demand in renewables, i.e. offshore wind farms.

Although Q3 and Q4 2017 showed a revival in interest of subsea umbilicals, any significant growth in price is not expected in 2017 and 2018. Operating margins in this segment tend to stay below the 10% mark.


Purchasing price breakdown is as below. It shall be noted, the more complex the umbilcial, the share if umbilical will go up.


Cost

Below is the approximate manufacturing cost breakdown. Raw materials contribute around 60% of the total manufacturing cost. Due to long lead times, there is a lag between the cost of raw materials and the price of ready umbilicals.



Major cost drivers are:

  • Steel & metal prices - directly impact the cost basis. In particular, carbon steel, stainless steel, Duplex Steel and Zinc
  • Thermoplastics – Various insulation materials, polymers and rubber (elastomers) are used for temperature protection in multicore umbilicals
  • Engineering - engineering man-hours is a significant contributor to the cost structure. The more bespoke the requirements are, the most man-hours required
  • Manufacturing process - complex manufacturing process is a significant cost driver, in particular for higher-end products. Robust QA/QC activities are required to ensure quality & reliability
  • Capacity utilization - this element, being a variable cost, is a significant cost contributor. Due to the size of the end-product ( e.g. 200km of 30cm in diameter hose rolled on a carousel) storage area of end products is very large and add a significant burden to the cost structure

Strategy

  • Part of EPC package: The best preferable strategy is to include procurement of umbilicals as part of an EPC package of a larger tender. This allows not only putting a schedule and engineering risk on the best party to control it ( i.e. EPC contractor) but, very often, better rates, as EPC companies buy umbilicals all the time and would have a much more effective buying power than oil companies. 
  • Buy-and-free-issue: In the event the time is critical, procurement of umbilicals can progress in parallel with the EPC package and later free-issued to EPC contractor. There is a risk, though in the event of changes in engineering or installation vessel capabilities. The risks & benefits of this strategy as an option shall be carefully assessed and evaluated. What to consider:
    • Maturity of engineering & design and the likelihood of project changes that may result in technical variations of umbilicals, as project progress
    • The complexity of subsea infrastructure and who is in the best position to come up with a sound technical solution and manage changes. i.e. buyer vs. EPC contractor
    • The degree of bespokeness of the umbilicals would dictate the degree of interaction required between engineering Buyer, EPC company and umbilical manufacturer
    • Clarity on ultimate responsibility for technical performance and warranty of the umbilicals 
    • Clarity on manufacturing, expediting and shipment of umbilicals, i.e. clear boundaries and responsibilities when the EPC contractor gets involved and what their scope is. Always recommended FAT ( Factory Acceptance test) as a point when the EPC contractor picks up the materials on ex-works basis deliver it and install