global offshore prospects 01

8/8/2019 Global Offshore Prospects 01

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o a s ore rospec so a s ore rospec s

John WestwoodJohn Westwood

Douglas-Westwoodwww.douglas-westwood.com

12 September 2008

Douglas-Westwoodwww.douglas-westwood.com

12 September 2008


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Our Business

Established 1990 Offices in Aberdeen & Canterbury

Activities & service lines

Market research & analysis Commercial due-dili ence Business strategy & advisory Published market studies

offshore power

Industry sector coverage Oil & Gas

Renewable Energy

Clients in 37 countries

LNGonshore

LNG

>530 projects completed for:

government agencies

2

investment banks & PE firms

downstream renewables


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Active Projects 8 Sept 08

3

or mar e s u es


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Recent Financial Sector Credentials

To date over 530 projects have been completed in oil& gas, renewable energy, conventional and nuclear

Fund-raising for rignewbuild

programme

75.5 million MBO$719 million IPOAGT Energy acquisitionof 50% share of OilflowSolutions from Vienco

Management buyout ofESS Steel Holdings

.

Further information may be found at www.dw-1.com

Acquisition by SCFPartners

670 acquisition byFerd Private Equity

Acquisition byCable Solutions

Group Inc.319 million IPO

130m debtfacility to financethe constructionof two specialist

vessels

Epcon Offshore ASacquisition by M-I

SWACO.

$180 million projectfinancing of FSO 'Cidade

de Macae MV15

Sale of MotherwellBridge to KuwaitFinance House

Arcapita completes

Songa Drilling

34 5 million RovtechAcquisition, GrowthPerry Slingsby

Ac uisit ion bacquisition of Roxar535m nance

facility

.acquired by Fugro

FacilitiesRefinancing

acquired by TritonGroup Holdings

$768 million IPO$305 million projectfinancing of FPSO RJS-

409 (Espadarte Sul)

Inflexion

Private Equity

Inflexion Private EquityBacks 22m MBO of

Viking Moorings

$280m acquisition ofKBR Production

Services

Serimer Holdingsacquisition of the

UMAX group

UMAX Ltd

Expro Group $675macquisition of Powerwell

Services

15 million MBO ofMotherwell Bridge

50 million creditfacility for Sovereign'sacquisition of Forfab

RecapitalisationInvestor syndicate$925m acquisitionof ABB Oil & Gas

142macquisition by

Close BrothersPrivate Equity


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Published Market Reports

5 The source of much of the data in todays presentation


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EnergyEnergy

Oil & GasOil & Gas

OffshoreOffshore

RenewablesRenewables

onc us onsonc us ons


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ENERGY growing demand & historic underinvestment

3500

4000

4500

.

Oil (Mt)Gas (Mtoe)

Coal (Mtoe)

Nuclear (Mtoe)

H dro Mtoe

Source: BP Statistical Review 2008

Massive demand growth since 1990: Oil +28%

2000

2500

3000

tonnesoilequiv oa +

Gas +47%

Nuclear +37%

500

1000

1500

Million

Primary Energy +37%

But problems with energy shortages:0

1965

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007 Gold and platinum prices hit recordhighs South Africa's mines forced to

close due to lack of power FT 26/1/08

Oil

Nuclear

Energy

6%

Hydro

Electric

6%

2007 - oil was35% of primary

energy demand

Shandong PI production down. Nickelproduction down 61% CBI China 21 Aug 08

35%

Coal

29%

Hydrocarbonswill dominate

demand for

Electricity bills could be 65% higheras Dubai acts to curb consumptionUAE: March 02 2008

7

Natural

Gas

24%

decades ahead

Russian electricity prices to increaseby 25%, gas 28% FT 7 May 2008


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China the giant has woken

There lies aThere lies aChina - Electricity Generation

3000

3500

s eep ng g an .

Let him slee !

s eep ng g an .

Let him slee !15002000

2500

awat

t-hours

For when heFor when he500

1000Ter

move the worldmove the world0

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

Napoleon BonaparteNapoleon Bonaparte

-

And more to come:

Global energy demand to grow . . Doubled in past five years 2000-2007: coal demand up 84%

50% by 2030. China & India to

account for 45% of this (IEA)

8

at 8% p.a.


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Happy 100th birthday Model T

Transport Fuel Demand

70

80

OECD

Non-OECD

50

60

nBtu

20

30

40

Quadrilli

0

10

1908: Model T Ford production began

Forecast transport fuel

Car and oil demand is growing No existing alternative to oil as a fuel

-

OECD +27% -

Non-Opec oil supply in long-term decline

Source: DOE / EIA March 2007

9


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EnergyEnergy

Oil & GasOil & Gas

OffshoreOffshore




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2008 the largest increase in real oil prices since 1861

11 July 08: $147

2 Jan 08: $100

"

barrel in the foreseeable future"Alexey Miller, Gazprom chairman 11 June 08

chart: BP Statistical Review June 2008


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Why has the oil price increase happened?

Growing demand From the developing countries

Low fuel prices In some DCs & former exporters

Reducin su lies Non-O ec countries e. . North Sea

Historic underinvestment Upstream & downstream

The falling dollar US economic declineSpeculators Some impact

Was it predictable ? Events yes, precise timing no!

o er energy pr ces r se ur er es

All the above events are linked!


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In many places low fuel prices cause over-demand

billion a year or 0.7% of world GDP

Russia $40 bn, Iran $37 bn

The USA with 1/20th of

the worlds population

consumes 1/4 of the

worlds oil production.

The reason low prices

o s ng su s es on oss ue s coucut world greenhouse gas emissions by

up to 6% and also nudge up world

Source: The Economist 31 May 2008

economic growthU.N. Environment Programme, August 08


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The US$ and oil prices are strongly linked

Oil prices

Euro:$ rates

Many oil exporters are selling oil in $ but buying imports in Euros Abu Dhabi urged GCC nations to peg to a basket of currencies Reuters, July 6 2008 But would uncoupling cause a $ collapse? July 08 dollar rises and oil price falls but what is driving what?


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Two decades of low oil prices have resulted in underinvestment

120 Newbuild Drilling Rigs

100

Oil Price ($2007)

But very limited

supply chainSupply

chain

60

waiting times and

very high prices

capacity

reduced

20

40 More than 140 rigs

on order (presentpopulation 600-ish)

Delivery 3-4 years

Low investment

0

1971 1975 1979 1983 1987 1991 1995 1999 2003 2007

The oil & gas industry (onshore & offshore )

needs to spend $10 trillion by 2030


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$10 might actually be too optimistic.

We may be heading for $5

There is little evidence to support the

doctrine of peak oil in its extreme form


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Is peak oil happening?


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Have 10 out of the top 13 IOCs already passed peak?

verage ru e/ s

Production 2002 2003 2004 2005 2006 2007

ExxonMobil 2,496 2,516 2,571 2,523 2,681 2,616

BP (IFRS) 2,018 2,121 2,531 2,562 2,475 2,414PetroChina 2,109 2,120 2,233 2,270 2,276 2,312Royal Dutch Shell (IFRS) 2,359 2,379 2,253 2,093 2,030 1,899Petrobras (USGAAP) 1,535 1,701 1,661 1,847 1,908 1,920Chevron 1,897 1,823 1,737 1,701 1,759 1,783Total (IFRS) 1,589 1,661 1,695 1,621 1,506 1,509

ConocoPhillips 891 1,237 1,242 1,447 1,698 1,644Eni (IFRS) 921 981 1,034 1,111 1,080 1,020StatoilHydro (US GAAP) 1,113 1,133 1,136 1,102 1,508 1,070Repsol-YPF (IFRS) 584 594 567 554 525 483Occidental 410 446 460 456 467 450Marathon 207 194 170 191 236 201

Source: Petroleum Review May 2008peak year?

19


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High oil prices but high costs hit oil co performance

232 oil companies performance 2007 vs. 2006

15.0%

11.0%

Lifting costs ($/boe)

Finding & dev spend ($bn)

-1.5%

1.3%

Proven oil reserves (bn boe)

O&G production (bn bl)

-3.5%

-

Return on capital

Average oil rices increased by 58% in 2007 Revenue per barrel was the same as in 2006 ($13) Exxon stock up 86% since 2004, but OFS giant Schlumberger 231%

20Source: HIS Herold (FT 4 Sept 08)

And reserves fell


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Oilfield production decline cannot be replaced

Worlds fields average production declining at 4% per annum

=

Global production decline = 3.3 million bpd

.

Arabia every THREE years just to offset production decline!

Plus.

or nese per cap a o use o reac uropean

levels we need FOUR more Saudi Arabias

21


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The national oil companies now control global oil reserves

96.5

112.5

259.4

Kuw ait Petroleum

Iraq NOC

Saudi Aramco

NOCs

100%29.5

77.2

89.7

.

Libyan NOC

PDVSA (Venezuela)

National Iran Oil Co

National Oil Company

Other

IOCs70%

80%

ilassets

15.5

24

.

15.2Lukoil

Qatar NOC

Nigerian NOC

40%

50%

rolofglob

al

10.1

10.4

10.9

.

Shell

Yukos

Petrochina

IOCs10%

20%Cont

8.9

7.7

8.8

BP

ChevronTexaco

Petrobras

1970 2008

Control of Global Reserves2 data: James A Baker IPP; FT 3 Jan 2008

5.3

5.4

5.1

.

ConocoPhillips

Pet Dev Oman

Sonangol

Major Oil Reserve Holders

1.1

.

0 50 100 150 200 250 300

Anadarko

Liquids Reserves (bn bbl)

Source: Oil & Gas Journal

22


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The easy oil has gone the remainder is in difficult places

Iraq

Venezuela

The Arctic

23Nigeria


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And even the politically stable places have their problems

Houston

Forecast track of

hurricane Ike

Saturday 07:00

r ay :

Thursday 07:00

452 of 717 (63%) manned platforms evacuated

24

81 of 121 (67%) offshore drilling rigs evacuated

95.9% of the estimated 1.3 million bpd shut-in 73.1% of the 7.4 billion cubic feet of natural gas shut-in

Source: MMS & Rigzone


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NATURAL GAS huge global reserves / local shortages

A clean fuel

. . ,

Major investments ongoing, e.g. $20

on as an p pe ne o e u

Surge in LNG trade

Most remaining reserves controlled

by NOCs & Russia

Gas prices soaring


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Increasing gas imports as European sources deplete

8090

100

Top European gas markets (bcm)

3040

5060

10% as LNG 01020

>40% of EUs as is im orted. About half comes from Russia Europes production is falling Imports to rise to 75% by 2030 UK particularly exposed


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Gazprom the second Russian revolution

Gazprom holds16% of theworlds gas reserves

Jan 1, 2006: supplies cut to

Ukraine (and parts of Europe)

Jan 1, 2007: doubles gas price toBelarus & Georgia

Jan 2, 2008: to more than doublegas price to Lithuania

Jan 26, 2008: to buy Serbias oil

& gas monopoly at bargain price Sept 3, 2008: J.V. with NNPC to

develop energy projects

azprom e s ng e

most important

instrument of the

27Abel Conference 10 Aug 2007 Moving into North Africaphoto:Jim Catanach, Intec

Russian state" FT editorial


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Global LNG Capex growth and project delays

35Import Terminals

20

25

30

x($

billion). LNG Carriers

Liquefaction Plants

10

15Cape

0

5

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Based on in-service date

carr ers o e e vere , or ere or -

2009 5 liquefaction plants to come on line, delayed from 08

-

28

Production to grow 86% by 2016? Linda Cook, Shell

Dubai to build LNG import terminal near The Palm


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E&P spend (onshore & offshore) continues to grow

INCREASED SPEND

Oil & gas companies expect offshorespend to increase

Increase to be mainly in deepwater308 332

418

350

400

450

nternat ona spen to growSource: Lehman Brothers E&P Spend Surveys

207238

261

200

250

300

$billion

INCREASED COSTS

Offshore UK: lifting costs soar from50

100

150

2005 $15/bbl, 2007 $25 Source: Oil&Gas UK

Malaysia shelf expl. well increase from

Jun-

05

Dec-

06

Jun-

06

Dec-

06

Jun-

07

Dec-

07

Jun-

08

as the above does not include some NOCssuch as Saudi Aramco

$2m to $7m since 2006 Source: Offshore June 17

Upstream capital costs have doubled

Source: CERA index May 08


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EnergyEnergy

Oil & GasOil & Gas

OffshoreOffshore




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Offshore production and spend to grow

300

350Asia Pacific

C&S America

E. Europe & FSU

200

250

($billion).

West Africa

N America

W Europe

100

150

Capex&Opex

0

50

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

NW Europe spend in decline mature region & lack of deepwater activity West African s end to row dee water is the driver

Source: Oil & Gas Production & Spend Forecast 2008-2012

EnergyFiles & Douglas-Westwood

31


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Continuing growth in deepwater O&G production & spend

250

300 Shallow Water

Deep Water

150

200

pe

x($bn)

50

100

Capex&

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

-Shallow water 20%

Dee water 99% growth

Global spend growth 2007-12:

Deepwater 74% growthSource: Oil & Gas Production & Spend

Forecast 2008-2012EnergyFiles &Douglas-Westwood 32


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Offshore Drilling record levels of expenditure

60

40

($

billion). s a ow wa er

deep water

20

pex&Opex

0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

C

Surge in expenditure driven by escalating oil prices / rig shortages

2007 spend of $68 bn. To reach $82 bn in 2012 Shallow water spend to grow 14% Deepwater spend to grow 38% But shallow-water still largest Source: Offshore Drilling Spend Forecast 2008-2012

EnergyFiles & Douglas-Westwood33


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Field Operations a massive aging offshore infrastructure

160

180

200

). Capex

80

100

120

140

Op

ex($billio Opex

20

40

60

Capex&

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

, xe p a orms, oa ng

175,000 km subsea pipelines

3,300 subsea wells operating 635 offshore drilling rigs Growing maintenance, major

,

Future decommissioning issues 34Source: Oil & Gas Production & Spend Forecast 2008-2012EnergyFiles & Douglas-Westwood


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EnergyEnergy

Oil & GasOil & Gas

OffshoreOffshore




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Windpower serious amounts of steel is heading offshore

3.0

3.5Belgium

China

Denmark

2.5

nditurebn

Germany

Netherlands

Sweden

UK

1.5

.

lcapitalexpe t ers

0.5

1.0

A

nnu

0.0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

15 bn forecast 2008-2012 2008 annual ex enditure 1.3 bn, risin to 4.2 bn in 2012


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Oil & gas and offshore wind compete for resources

All energy sectors competing

60

70

Energy contractors

overwhelmed with work Major contractors

40

50.

g$billion Capacity sold for years ahead

Wind turbine backlog $12 bn

10

20

30

Ba

cklo

Shortages of raw materials

-

2003 2004 2005 2006 Q3 2007

offshore vessels skilled people

vera resu t s t at t emay face a shortfall of 7.6 GW

ource: mmons ompany n erna ona

37


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UK power generation shortfall

4

4.5

2.5

3

3.5 DWL forecast

RAB central scenario

1.5

2G

0

0.5

Comparative Forecast: Annual Installed UK Renewable Energy Capacity

.scenario

Offshore wind ma or su l chain,

Source: Supply Chain Constraints on theDeployment of Renewable Electricity Technologies

A report to BERR by Douglas-Westwood Limited

infrastructure and market issues


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EnergyEnergy

Oil & GasOil & Gas

OffshoreOffshore




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An unprecedented demand for energy

Unless government policy changes, world.

Despite all the attention given to wind, bio,

solar, the reality is we are still heading for afossil future 84% of the overall increase to

come from oil, gas, and coal

$45 trillion of investment, or roughly 1% of thewor s , wou e necessary o ac eve

the [greenhouse gas] target, including building

,nuclear power plants every year between now

and 2050

Nobuo Tanaka, the executive director of the IEA. 26 Aug 2008


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