OTC 2008 Trip Report

Patri Friedman’s Trip Report Offshore Technology Conference Houston, Texas May 6-7, 2008.

Summary:

The offshore oil and gas industry is enormous and mature, with incredible specialization.  It is very focused on one very profitable and expensive way to make money (via resource extraction).  At times, this will be of benefit to us – the analysis of offshore structures is a very well-understood field, given that ~$25B/year goes into building them.  At other times, it will be of harm – there is tons of regulation and classification crap that the current industry can afford and we may not be able to.  And while the industry has generated tons of offshore structure engineers, their training is pointed in what is for us the wrong direction, which means we’ll need a very flexible mind to see things our way.

It is unclear at this point to what degree our different needs will reduce our engineering costs.  Fortunately, while detailed design work is expensive, conceptual and early-stage work is fairly cheap, so we will be able to learn substantially more in the coming months at a reasonable price.

Full Report

Imagine

…living in a world where airplanes were only used for military uses.  Fighters, bombers, and troop transports are all manufactured as part of a $100B/year industry, but no one has ever heard of a civilian passenger airplane.  Sure, there are paragliders, and hanggliders, and even the occasional nut who ties balloons to his lawn chair.  But the idea of affordable civilian air travel is completely unknown.

Now pretend you’ve had the bright idea that airlines could also be used to move people around, and gotten some funding to design and build a prototype.  You’re not an aeronautical engineer, but you’ve got some ideas on how to decrease costs – like not using all that armor plating, and dispensing with the missiles.

As part of your research, you go to the Aeronautic Technology Conference, a massive yearly affair at which the hundreds of companies involved in the military aeronautics industry congregate.  You’re hoping to learn a bit about how aeronautics is currently done, and maybe make some contacts that could help you adapt the current science to this entirely new (but related) purpose.

As you wander the huge halls, you see display after display of components for airplane warfare.  Not at the level of missiles – the industry is far more advanced than that (again, it’s over a hundred billion dollars a year).  Firms make missile guidance systems, explosives , anti-radar reflective coatings, control systems, heads-up displays – an incredible array of deeply specialized parts that are irrelevant to a passenger airplane.  Every now and then you see something like an airplane-optimized toilet or landing strip surfacing material that seems somewhat useful.  What you really want is engineering expertise that can understand your novel application and figure out which parts of a warplane are needed and which aren’t.

Occasionally, you see a company which does design work on new planes, often specializing in fighters or bombers.  Usually, such companies are huge, as the expertise required to coordinate all the parts of producing a modern warplane, with all its massively optimized parts, is enormous.  They are used to handling government contracts of tens or hundreds of millions, sometimes billions of dollars.

You try talking to them about your project, and get widely mixed responses.  Sometimes they just dismiss you, due to the novelty of the application or small size.  Sometimes they say they’d be happy to do concept exploration, or analysis of the material requirements and performance characteristics of your proposed airframe.  Occasionally, you talk to someone who seems to glimpse the potential of this new mode of transport, but not often.  After all, these people are already employed in an enormous, hugely profitable industry currently enjoying a boom due to high defense spending.

Footsore

I’m not sure I found the best metaphor, but this should give you some idea of my experience at the Offshore Technology Conference.  Most of the displays were dedicated to very specialized parts for oil – piping, drilling, cladding, mooring, specialized new materials for ultra-demanding applications.  The occasional structure engineering firms tended to be large, and mainly devoted to wave response characteristics and/or conceptual designs.

At the beginning, I just wanted to talk to someone, so I asked a couple valve companies about Isaac’s Pump valves.  Specifically: how much for a flapper/check valve 1m in diameter that can hold a 100m column of seawater?  I got two answers, $6K and $12K, so that was somewhat useful.  I found a company that tracks eddy currents in realtime, which seemed like it might be potentially useful.  But really, I was looking for structure designers.

So I walked and walked the 550,000 ft^2 (12 acres!) of exhibits.  I found a few structure design companies, although most were at the huge conglomerates like Technip, DNV, J Ray McDermott, SBM, Schlumberger, KBR.  I said that I worked at a small research institute, interested in exploring permanent ocean settlement, that had some designs for a “novel semisub” that we wanted to complete the design of.  They wanted to know the project size, and some were willing to take on a project that small, and others weren’t.  No surprise when the oil business is booming, and these big conglomerates are building rigs with several more digits in their price tag than I’m talking about.

Engineering Gap?

I was left with deeply mixed feelings about the difficulty of the engineering and design work we need.  Some of the things we want to do are trivial – there are tons of companies that will take a proposed design and do computer simulation and wave tank testing of its response characteristics.  There are a decent number of companies that will help us explore initial designs at a high level to decide which we want to then get detailed on (although I’m a bit concerned about whether they’ll actually be able to wrap their heads around our requirements when advising).  And there are plenty of shipyards that will build whatever we tell them to.

But that leaves a big gap.  Not once did I find someone who offered what I think of as the heart of innovative engineering: to understand our (unusual) purpose, listen to our (unusual) requirements, and come up with a (complete) innovative solution by modifying the standard technologies for our needs.  You’d think that’s what they meant by Conceptual Design, but many of them explicitly specified that we’d provide the concepts, and they’d provide the analysis (?!)

Perhaps it’s just a communications issue b/c I don’t speak the language of their project lifecycle, or because we have a very different lifecycle.  Alternately, perhaps it’s a question of what things usually get outsourced – it may be that innovation in rig design happens in the R&D labs of these big companies (or startups), and just isn’t something you’d usually hire a consultant for.

We Do The Innovation?

Fortunately, Wayne & Andy & I have some specific designs and alternatives in mind.  I’ve been thinking of us as smart amateurs, playing with things we don’t deeply understand.  I figured we’d supply some “out of the box” thinking that the professionals would usually shoot down, but occasionally approve of and integrate into their design.  Instead, it looks like our ideas may provide much of the innovation in seastead design.  (And in fact, several design ideas that we came up with independently seem to be good ones, in that I saw them implemented in current practice.  For example, using deep draft spars for low wave response, and mating spars to decks via ballasting/deballasting to reduce shipyard draft requirements.)

Still, I have very mixed feelings about this.  It seems sort of scary and wrong for the good ideas to be coming from us amateurs.  For example, maybe even if they pass lab testing, they will turn out to be bad in practice.  Perhaps I’m overly respectful of professional competence, but I can’t help thinking that people who know more about this stuff would be better at coming up with ideas.  On the other hand, an awesome Norwegian businessman who had just commissioned the largest lathe in Europe told me years ago at an aquaculture conference that he was looking for engineers who had not had their creativity ruined by education, and was having trouble finding them.

While Wayne & I are idea-generating machines, and it’s fun to imagine supplying some key engineering innovations, I’d be a lot more confident if we could find someone educated and experienced in the field, but still creative and innovative.  If you know anyone like that, email .  Ideally they’d take on a part-time Project Manager role (we’re writing up the job req now), but more specialized engineers would be useful too.

More scattered thoughts

Capstone had a booth, and I was pleased to see that they’ve finally gotten some uptake, and in fact currently have a big backlog of orders for their micro-turbines.

I talked to a couple people at Siemens, while they tried to figure out if some company they bought did structure design work.  One guy (who worked on something else) seemed pretty excited about seasteading.  When they finally found a guy in the right group, it turned out they just make software for design work.  That guy was rather pessimistic, and said “see you in 20 or 30 years”.  He thought that’s how long it would take to design and build a large, novel structure.  Tells you what the industry is like – slow and expensive.  Going to be a challenge to overcome!

The redundancy and overengineering of these structures is crazy.  And the key question I don’t yet understand is: is this required for the harsh environment?  Or is it because oil is so valuable that getting a 1% decrease in downtime or increase in extraction is worth vast amounts of money?  The answer to this will determine whether we can get the big improvements in engineering cost that we need for seasteads to be economically viable.

An example of a problem we don’t need to solve: toilets.  I saw a zero-water vacuum toilet.  They said they also have saltwater toilets.  Their toilets are used on 70% of cruise ships.  We need zero innovation here.  There are a lot of other things like this.

In general I had a poor impression of big companies for design work – they aren’t very interested, not used to dealing with small clients.  For example, I spoke to someone at a company, I’ll just call “Big”.  Big has lots of semisub experience.  Had trouble understanding that I wanted to do a small prototype first.  Said that concept eval would be cheap, but that the full design and classification would cost $25M-$50M.  I reminded him that I just wanted to start with a small prototype.  He said it depended on its classification, whether it counts as a passenger ship.  I think there may be a “research vessel” classification which will help us.  This guy didn’t seem very creative or interested in thinking in a “can do” fashion, but it did make it clear that we have our work cut out for us into fitting our round pegs into their square holes.

There were enough US-based companies that I didn’t talk to many non-US companies.  They may be good/innovative, but distance, language barriers, lack of local shipyard connections, difficulty of face-to-face contact seemed to argue against it.  Given that there is a huge offshore industry in Texas, I think we should try there first.

Found a company (MARIN) that does live simulations of structure/vessel response, showing the ocean and the structure, letting you steer.  Could be really fun as a 3d app on the site.  Or could do a virtual webcam of an actual ocean location – “how would a seastead be moving in the waves if it was floating here?”.  Probably expensive, though

I found a few small companies with spar/semisub experience that looked promising for consulting.

Only big company that seemed promising was Aker, I talked to an engineer there a fair about about the design lifecycle.  Initial consultations are cheap, ranging from a few thousand to a few tens of thousands, depending how involved they are.  You bring them some concepts/designs, they do some high-level engineering analysis and advise you on modifications / what is likely to work / etc.  They apparently worked on America World City, which I found amusing.

I’m thinking we may want to do several initial consults, both to get a diverse set of ideas on our design decisions, and to evaluate the consultants to find ones that are innovative, excited about our vision, and understand our unusual requirements – incrementalism, low cost, minimal innovation.

Some things that are already done by the industry: Many of these platforms have habitation.  So living at sea is done.  Some even have modular habitation.  Design/construction/modular mating of enormous structures.

On my way out, I went past all the professional societies, and grabbed a handout from the IEEE Ocean Engineering society.  The guy at the booth said “Hey, we have student memberships!”.  Heh – only off by a decade, buddy.  I think that looking young and having a weird project meant that some people automatically discounted me as a customer, which was frustrating, but I’m not sure it’s a bad thing, because I think it mostly tends to filter out the sort of people we wouldn’t want to work with anyway.

Conclusions:

• The confidence intervals around how much seastead engineering/construction will cost is huge.  Oil platforms are very expensive, and we don’t know how much is due to (pro) their unusual requirements, high budgets/income (1% downtime, or 1% efficiency increases = megabucks), classification/regulation we can avoid or (con) the ocean’s harsh and unforgiving nature, classification/regulation we can’t avoid or don’t want to (like if it’s necessary for safety).
• We are going to be in the weird position where sometimes, standard solutions will be perfect for us, other times, they will need to be adapted, and others, we will need to invent practically from scratch.  We need to learn what these are.  Many of our DRP projects should be focused on finding and pricing best solutions from the cruise and offshore industries.  Only if the best solution is wrong for us should we innovate.  (Basically, this is what the infrastructure section of the book is – but let’s do it in more detail, with actual products and price/performance, on the wiki).
• We need to either find an innovative consulting firm, or hire an Eng PM who is innovative, or Wayne/Patri will have to spend substantial time on engineering innovation.  Preferably a good Eng PM!
• We may need to come up with an innovative design process to lower costs while maintaining safety, such as using open-source design and the many-eyes theory, as well as volunteers and students.  Again, a good PM will be essential.
• If we can be useful to even a tiny slice of this industry, that’s big $$$.  For example, a traveling resort that visits manned oil platforms to give crew a party-break.  However, it seems very unlikely that our structural designs will be directly useful to them – they have plenty of engineers of their own.
• We should consider having a booth at OTC next year, especially if we are close to having a product to offer, or can offer consulting/research services.  Pros: huge flow of people, often with big budgets.  We are very different, and may attract attention.  Cons: people have very different mindset/focus.  Not clear we will interest them or be useful to them.
• We should firm up our design, along with some alternatives, and get a concept eval done.
• We should design the structure to have modular infrastructure, so that we can innovate after it is built.  That is, it will take substantial effort to override conventional thinking and implement our own novel solutions, or solutions customized for our use.  We want to do minimal initial innovation to save time.  Yet we (eventually) want to do substantial innovation to improve comfort and lower costs.  This dictates a design where, for example, we have good access to the cables and piping so that we can change the power or blackwater systems if necessary.
• I find it easy to believe that there are profit opportunities (such as seasteading) that the current industry has missed – when your eye is on black gold, it’s hard to see anything else.  (Same goes for seasteading vs. cruise ships – while a few cruise ship condo lines are starting to emerge, in general the cruise industry has a narrow, profitable business, focused on vacations, and it’s easy to imagine they might be totally missing a related industry that does not yet exist).