global offshore prospects - energy inst could reach 16.4 million boe/day by 2020 – but huge...
TRANSCRIPT
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Douglas-Westwood Limited
Global Offshore ProspectsEnergy Institute, London
Steve Robertson, DirectorRod Westwood, Associate Director
26st September 2013
Photo: Marit Hommedal / Statoil ASA
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© Douglas-Westwood Limited 2013
© Douglas-Westwood Limited 2013
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Energy Industry Outlook
Oil & Gas Sector Focus
Risk Factors &
Conclusions
Energy Demand – Bullish Outlook
• Energy intensity reaching/reached limits in many OECD countries• Developing economies will continue to drive global energy demand
Global Oil Consumption (BP)
Source: BP 2013
Source: BP 2013
The Supply Mix is Changing Rapidly
• 60% of oil is used in transportation (OECD countries) but in some it is >70%
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100
105
2004 2005 2006 2007 2008 2009 2010 2011
mbp
d
Actual (EIA)
Expected Based on GDP Growth
• Oil demand historically increases by 0.75 * GDP growth (inherent demand growth)
• Implies 20%+ oil consumption growth from 2004-2011
• Actual oil supply growth was only 2%
• By 2008, the world economy was missing a quantity equal to the output of Saudi Arabia
• Today, compared to 2004 Q4, we’re missing a Saudi Arabia + Iraq
• That’s why oil is expensive
Source: EIA. IMF, Douglas-Westwood analysis
Observed Oil Supply; and Oil Demand anticipated based on GDP growth
30% Global GDP Growth
2% Oil Supply Growth
Demand growth = GDP growth – 1.2% annual efficiency gain
Inherent Demand
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Liquids Supply Q4 2010- Q4 2012
• Total production up 1.5 mpbd on 89 mbpd production in 2010
• Up <2% in two years (cc 1% per year)
• US and Canada providing all growth
• World oil supply growth entirely dependent on unconventionalsgrowth
• Indeed, all net supply growth came from US shale oils alone
Source: EIA STEO Jan. 2013
World Liquids Production Growth, 2010 Q4 to 2012 Q4. million barrels per day
-0.5
0.0
0.5
1.0
1.5
USA Canada All Othersm
bpd
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OPEC Liquids Supply Q4 2010- Q4 2012
• But the supply situation is a bit more nuanced..
• Iran down 1,100 kbpd
• Saudi up 770 kbpd, but below levels of 1979
• Of OPEC increase of 1,000 kbpd, 430 kbpd NGLs
• Iraq up 720 kbpd—only real source of OPEC growth
• Ex-Iraq, OPEC oil production is actually down over last two years
Source: EIA STEO Jan. 2013
OPEC World Liquids Production Growth, 2010 Q4 to 2012 Q4, million barrels per day
-1.2-1.0-0.8-0.6-0.4-0.20.00.20.40.60.8
Iran Iraq Saudi All otherOPECm
bpd
Factors driving strong gas demand
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billi
on to
nnes
oil
equi
vale
ntOil
Gas
Oil +66%
Gas +216%
• Gas is abundant, a clean and efficient choice relative to oil, nuclear, coal, etc
• The ideal fuel for power generation (lowest power plant Capex)
• Potential for gas to liquids for transportation fuels
• Growth potential in transportation (marine fuel, road transport)
• Compared to oil, gas is grossly underpriced in many markets
Source: BP
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0246810121416
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0246810121416
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tu)
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Domestic ProductionNet ImportedRegional Gas Price
Regional Disparities: Gas Prices
• Low US gas prices have made headlines
• Booming shale gas production, particularly for ‘wet’ liquids-rich gas
• Gas prices are increasing in many gas-importing countries
• International prices can exceed US levels by 3-5 times
Japa
nC
hina
UK
USA
$18
$12
$9
$3
• Disparities occur due to the local nature of gas markets
• Gas not a globally traded commodity • Oil and gas pricing mechanisms
differ• Fuel switching post-Fukushima• Potential for GTL in low-cost
feedstock areas (e.g. Shell Louisiana $13 billion project)
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1959 1963 1967 1971 1975 1979 1983 1987 1991 1995 1999 2003 2007 2011 2015 2019
mm
tpa
AfricaAsiaAustralasiaEastern Europe & FSULatin AmericaMiddle EastNorth AmericaWestern Europe
Strong growth in LNG supply
• 30% of global gas imports are already via LNG• Growth in recent years driven by Middle East – Qatar and Yemen• In 2014/2015, Australian trains should commence production• Potential future supply from Russia, US shale gas, W & E Africa & Mediterranean• Potential role for FLNG
2001-2010 CAGR +9%
2011-2020 CAGR +7%
Source: Douglas-Westwood
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In development: 26 mmtpa capacity of LNG FPSO projects in 12 key projects
• Partners – GDF Suez, Santos• Size – 2.5 mmtpa• Owned• Fields – Offshore – Petrel,
Tern, Frigate• Onstream: 2019
Bonaparte
Pre-FEED
Partners – Petromin• Size – 3.0 mmtpa• Leased• Fields – Offshore – Papua
basin • Expected FID: 2013• Estimated Onstream: 2017
PNG FLNG
FEED
• Partners – Petronas• Size – 1.2 mmtpa• Owned• Fields – Offshore – Kumong
Cluster, Kanowit• FID: 2012• Estimated Onstream: 2016
Kanowit, Kumong
FID
• Partners – Shell, Kogas• Size – 3.6 mmtpa + LPG &
condensate• Owned• Fields – Offshore – Prelude,
Concerto, Crux• FID: 2011• Estimated Onstream: 2017
Prelude
Under Construction
• Partners – PTTEP• Size – 2 mmtpa• Leased • Fields – Offshore – Cash,
Maple• Onstream: 2019
PTT FLNG
Pre-FEED
• Partners – Petrobras, BG, Repsol
• Size – 2.7 mmtpa• Owned• Fields – Offshore – Santos
basin fields• Onstream: 2017
Brazilian Pre-Salt
FEED
• Partners – Unknown• Size – 3 mmtpa• Leased• Fields – Onshore – Shale gas• Onstream: 2019
Port Lavaca US Shale Gas
FEED
BC LNG
FEED
• Partners – Noble Energy• Size – 3 mmtpa• Leased• Fields – Offshore – Tamar• Estimated Onstream: 2018
Tamar
Pre-FEED
• Partners – Inpex, Shell• Size – 2.5 mmtpa• Unknown – probably Owned• Fields – Offshore – Abadi• Expected FID: 2014• Estimated Onstream: 2018
Abadi
Pre-FEED• Partners – Tom Tatham, Haisla
First Nation• Size – 0.9 mmtpa• Owned• Fields – Onshore – Shale gas• Onstream: 2018
• Partners – Petronas, Murphy Oil
• Size – 1.5 mmtpa• Owned• Fields – Offshore – Rotan, Biris• Estimated Onstream: 2018
Rotan
FEED
Owned14.9mmtpa
Leased11.5mmtpa
• Partners – Pacific Rubiales• Size – 0.5 mmtpa• Leased• Fields – Various• Onstream: 2017• Includes Regas function
Pre- FEED
Colombia coast
FLNG Projects
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FLNG Expenditure
• Expenditure on floating liquefaction vessels is expected to total $28bn 2013-2019• Add 56 mmtpa to the global output capacity • A large proportion of investment will be attributed to Australasia and Asia• Petronas’ Kumang (Kanowit) FLNG is likely to be world’s first baseload facility• Mostly operator owned but some promising leasing options• Excelerate, SBM and Höegh LNG have moved past pre-FEED• Flex, Golar, MODEC and Teekay are also in the market
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AfricaAsiaAustralasiaEastern Europe & FSULatin AmericaMiddle EastNorth America
Tight Oil Has Changed the US Oil Supply Position
• US to be producing nearly as much as Saudi Arabia by the end of this decade.
• Enough to make a massive impact on the US. But…
Source: EIA, AEO 2013
European Development Potential Is Mixed For Unconventional Resources
• Energy portfolio diversification• Import dependency: Russia,
Maghreb, LNG• Energy security: Poland,
Ukraine, Belarus• EU emission targets and
switching from oil• Uncertainty of renewable
developments• Delay/opposition to nuclear
• Onshore rig numbers • Land ownership/mineral rights • Land usage • Population density • Environmental issues • Pipeline infrastructure • Financial intervention and tax
regime • Future LNG supply
Positive Challenges
Energy Industry Outlook
Oil & Gas Sector Focus
Risk Factors &
Conclusions
19EI September 2013
Base Data: Providing a Leading Edge in Market Forecasts
DW databases span the energy industries
• A unique resource – the core of our global information & forecasting processes
•We do not sell the data – but use it in our work for clients
•Continually updated, they include:• offshore oil & gas fields
• onshore oil & gas fields
• floating production systems
• LNG terminals and carriers
• offshore wind projects
• wave & tidal projects
• deepwater fields
• UK power generation
• underwater vehicles
• and more…
© Douglas-Westwood Limited 2012
20EI September 2013
Offshore & Deepwater Supply Growth
• Source: Douglas-Westwood Drilling & Production Forecast 2013• Offshore and deepwater becoming increasing important to global hydrocarbon supply.
Global Oil & Gas Supply 1965-2025
60mn
80mn
100mn
120mn boepd
Offshore oil
Onshore oil
Oil Deep
Oil Shallow
Offshore Supply by Depth 1965-2025
20mn
30mn
40mn
50mn
60mn boepd
10mn
Offshore Gas
Offshore oil
Offshore Supply by Type 1970-2020
30mn
40mn
50mn
60mn
70mn boepd
21EI September 2013
2007 2009 2011 2013 2015 2017
Deepwater Drilling (Indexed to 2007)Shallow Water Drilling (Indexed to 2007)
Global Subsea Expenditure Outlook
Offshore Drilling Trends Fixed Platform Installations Floating Platform Installations
• 2013 expected to usher in a stepchange in subsea expenditure - $106bn of investment expected over the next five years compared to $70bn over the previous period.
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• This change is largely driven by the increasing reliance on deepwater developments.
• IRM market expected to account for 42% of spend whilst field development at 36%.
12.9bn
18.2bn
23.8bn
260207
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22EI September 2013
Subsea Production Forecast
• Source: Douglas-Westwood Drilling & Production Forecast 2013
• 7.9 million boe/day produced from Subsea-completed wells in 2013
• Could reach 16.4 million boe/day by 2020 – but huge investment is required
• Conservative estimate would require upwards of 400 trees per year, every year
• Profile above could reach close to 1,000 trees per year by 2035
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Western EuropeNorth AmericaMiddle EastLatin AmericaEastern Europe & FSUAustralasiaAsiaAfricaSubsea Trees Installed
23EI September 2013
Subsea Production Forecast
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Oil
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as P
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Surface Production
2013-2020
Subsea:
• +8.5m barrels/day
• 4,723 wells drilled
• Source: Douglas-Westwood Drilling & Production Forecast 2013
• Surface production will see minor growth – mainly driven by Middle East
• Production decline is from surface completed wells is a constraint of growth
• 2013-2020: well productivity dramatically higher for subsea: strong surface production decline
• Majority of future production growth will come from subsea
Surface:
• +4.6m barrels/day
• 20,222 wells drilled
24EI September 2013
International E&P Expenditure
• Barclays Capital figures have shown a trend of increasing E&P Capex
• $644 billion international expenditure 2013 –up from $600 in 2012
• Most major E&P companies expecting to increase budgets 2013
BG Group
Gazprom
Lukoil
Eni
ConocoPhillips
Total
BP
Statoil
Petronas
Petroleos Mexicanos (Pemex)
Petroleo Brasiliero SA (Petrobras)
PetroChina
Royal Dutch/Shell
Chevron
Exxon Mobil
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000
2013E 2012E
Source: Barclays Capital
25EI September 2013
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Semisub Jackup
Drillship Drill Barge
Delivered units Oil Price ($m)
Leading Indicators – Offshore Rig Orders
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• Strong correlation between oil price & rig orders • Rising oil prices increases the viability of
exploration in deeper waters • As drilling and depth requirements increase, a
number of rigs are cold stacked or modified• When will the present cycle end?
Source: Douglas‐Westwood & Riglogix
1979 – 1984296 Delivered
2008 - 2013280 Delivered
$/bb
l
No.
of r
igs
orde
red
26EI September 2013
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AfricaAsiaAustralasiaEastern Europe & FSULatin AmericaMiddle EastNorth AmericaWestern Europe
Leading Indicators - Deepwater Capex to soar
Source: DW World Deepwater Report
• Capex expected to more than double to 2017
• $223 billion spent over next five years. 99% increase
• Africa and Latin America (led by Petrobras) continue to lead deepwater growth
• Western Europe will grow but remain a small sector
27EI September 2013
Indicators / Markets: Subsea Tree Installations
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APACEMEAAmericas
• Source: Douglas-Westwood Drilling & Production Forecast 2013
• Conservative forecast would suggest >400 trees installed this year
• APAC posts strong demand growth for subsea equipment
• >600 trees to be installed in 2016, assuming capacity can keep up
Crash Recent Future
28EI September 2013
Indicators / Markets: Vessel Days
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ays
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• Source: Douglas-Westwood Vessel Report 2013
• Construction and IRM vessel days to grow 15% by 2016
• IRM takes larger portion of market as wells and infrastructure continues to mature
Crash Recent Future
29EI September 2013
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S $
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GE Oil & Gas
FMC
Dril-Quip
Cameron
Aker Solutions
6-Month Moving Avg
Subsea Hardware Orders - New Highs
Source: Douglas‐Westwood
• Q1 subsea hardware orders were the best ever—by far
• Aker saw a blow-out quarter with 118 trees ordered; Cameron also posted a record
Subsea Hardware Orders
30EI September 2013
Global Vessel Supply Outlook
• DSVs – Increasing capacity but supply for higher spec DSV still low as deepwater activity grows.
• MSVs – Increase in demand will lead to widening of supply gap with 4-8 high spec MSVs required till 2017.
• Flexlay & Pipelay – Supply gap for flexlays in Africa, Australasia and Asia is expected to widen with dedicated flexlays preffered over outfitted MSVs.
– Reel lay market is currently undersupplied with supply gap of 6-7 vessels.
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Oil
Pric
e ( U
S$ p
/bbl
)
Num
ber o
f Ves
sels
LWIV Total Pipelay totalFLEX total MSV totalDSV Total Oil Price (EIA)
• LWIV – Currently oversupplied and a turnaround unlikely.
185 New Builds (2007-13)
• Investment to support market growth significant over past few years – Despite investment, we expect inability of supply into market to cope with demand growth.
• Few potential new entrants with Tier 1 contractors unable to cope with demand increase.
31EI September 2013
Floating production sustained recovery expected
FPS Capex: $91 billion (2013-17)Source: DW World Floating Production Forecast (2013-2017)
• Market bottomed in 2010, but recovered well
• Leasing sector weak with 85% utilisation at present – profitability of lease contractors is poor.
• $91 billion forecast to 2017 (100% increase)
• 121 FPS units (37% increase)
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32EI September 2013
FPSOs - The Importance of Brazil
• Petrobras – top spender over forecast period
• Local content: Petrobras aiming to source up to 70% of its FPS related equipment from local providers.
• Shell leading spenders in Asia; Total in Africa
0 5 10 15 20
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Shell
Total
Chevron
Inpex
OGX
BP
ENI
ExxonMobil
Premier Oil
Expenditure ($ billions)
AfricaAsiaAustralasiaLatin AmericaNorth AmericaWestern Europe
33EI September 2013
ROVs & AUVs
• ROV demand seeing growth – driven by increased focus on subsea production systems & expansion of drilling fleet.
• AUV market dominated by North American military applications, but commercial opportunities seeing take-up
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ays
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Crash Recent Future
34EI September 2013
Emerging opportunities – decommissioning
Decommissioning Expenditure to 2041Source: DW/Deloitte Decommissioning Report
• ~4 million tonnes platform weight to be decommissioned over the next 30 years.
• Total North Sea decommissioning expenditure is expected to be between $65bn and $76bn
• Changing vessel capability would mean offshore time is reduced, whilst onshore deconstruction time is increased.
35EI September 2013
Energy Industry Outlook
Oil & Gas Sector Focus
Risk Factors &
Conclusions
36
Where is the industry heading?
• Record E&P spending - £678 billion in 2013• OFS & OEM backlogs recovered• Rig building boom tailing off• Oil prices flat (Brent) or lower (WTI) through 2012 and 2013.• E&P expenditure growth slowing? (Barclays reports 8.8% growth in 2012 vs 10%
forecast and 7% forecast for 2013)
• Supply-chain concerns mounting & project execution issues
Source: Barclays CapitalUpstream Spend – Actual and Forecast
37
Risk Considerations
37
• What could de-rail the energy business?
• Capex Compression – Will high costs kill growth?
• Slowdown in economic growth
• Political instability and discontinuity
• Major industry accidents
• Growth constrained by bottlenecks in the supply chain
38
Costs are rising fast
Source: Barclays Capital
• Nearly 11% per year.
• And Brent has fallen by $5 since last year, $10 since 2011
E&P Capex per Barrel
Source: EIA
39
Back to the 1990’s?
Cash Return On Cash Invested (CROCI) of The Global Supermajors vs. Real Oil PriceSource: Graph from Goldman Sachs
CEO Shamsul Azhar Abbas"We have suffered from lower oil prices. But if you look at the costs, they have increased further. If there is a need to defer some of projects, we will do that."
40EI September 2013
Project Execution – On Time and On Budget?
Unit Name Type 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Atlantis FPSS (Green Canyon 743-A) FPSSCidade de Vitoria FPSOCorocoro FPSOFront Puff in FPSOIndependence FPSSKikeh FPSO FPSOKikeh Spar SparOyong Barge FPSOP-52 Petrobras FPSSP-54 Petrobras FPSOPiranema FPSOPlutonio FPSOPolvo FPSOYuum K'ak'naab FPSOAgbami FPSOAlvheim FPSOArmada Perkasa FPSOCidade de Rio das Ostras FPSOCorvina FPSODhirubhai 1 FPSOFroya (Blind Faith) FPSSGimboa FPSOHai Yang Shi You 115 FPSOHai Yang Shi You 116 FPSOHummingbird FPSOMoho Bilondo FPSOMondo FPSONeptune TLPNgujima-Yin FPSOP-51 Petrobras FPSSRaroa FPSORubicon Intrepid FPSORubicon Vantage FPSOSaxi-Batuque FPSOSong Doc Pride FPSOStybarrow Venture FPSOThunder Horse FPSSAkpo FPSOArmada Perdana FPSOAzurite Marine FPSOCidade de Niteroi FPSOCidade de Sao Matheus FPSOCidade De Sao Vicente FPSO
41EI September 2013
FPS Sector as an Example
41
• Project delays and cost over-runs are the norm
• Some projects have suffered very high profile failures or even complete failure
• Few of the major lease contractors are profitable
• Oil companies want to lease production systems to minimise upfront Capex but at present a sustainable business for leasing does not seem to exist.
• Project execution – how do contractors better understand the projects and the associated risk when they are all bespoke?
• Business models - how can project risk, reservoir risk, etc. be effectively and fairly shared?
42
• “2013 will be worse” (Petrobras CEO) February 2013
‐ 2% production decline in 2012 to 2 mbpd‐ 0% to ‐2% production change in 2013‐ Implicit 11% natural decline rate‐ 17% QoQ underlying lifting cost increase (11% excluding wage increases)‐ High exploration expenses
‐ And Petrobras is the hope of offshore oil production!
Brazil – Struggling with Project Execution
43
Industry Capacity – Construction Vessel Shortages?
• Vessels: “number of vessel days in deep waters is set to increase by more than 50% over the next five years.” - The World Subsea Vessel Operations Market 2011-2015, Douglas-Westwood (ROVSV, DSV, Flexlay, LWIV and Pipelay )
• Heavy lift:• $70 billion of N. Sea decommissioning to occur - UK; 260 platforms, 2.4
million t. steel, 5,000 wells• $160 billion investment in UK offshore wind
The wild cards
• Global economy, particularly the EU• More Arab uprisings /instability • Saudi‘s own growing oil demand • US becomes an energy exporter?• Industry over-reaction to market cycles
44
Conclusions
45
• The offshore business is seeing record levels of activity.
• Technology requirements are being driven by the monetisation of gas, deepwater oil and harsh/sour environments.
• Zero growth in oil prices + cost inflation in equipment/services is not sustainable in the long run, ceteris paribus.
• E&P companies are not going to put up with supply chain failure in the long-run. Is ‘standardisation’ the answer?
• There are emerging offshore sectors with potential cross-over for some upstream oil industry technology.
• The energy world is not universally rosy… but holds plenty of opportunity.
