ubs global oil & gas conference, dubai changing relationships in … · 2020. 5. 21. ·...

UBS global oil & gas conference, Dubai

Changing relationships in the oil service sectorSeptember 2007

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Agenda

2. Petrofac: a brief introduction

3. Development of the oil service sector

4. New partnership models

5. Petrofac’s positioning

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Petrofac is a leading international provider of facilities solutions to the oil & gas production and processing industry

We provide project development, engineering, construction and facilities operation, maintenance and training services; we also invest alongside our clients, delivering our engineering and operations services service capability in complete alignment

Our clients include many of the world’s leading integrated, independent and national oil and gas companies

Note: all figures presented above are for the group’s continuing operations (US$ millions)

34.3 38.446.1

75.4

121.9

2002 2003 2004 2005 2006

8851,097

1,740

3,244

4,173

2002 2003 2004 2005 2006

391

629

952

1,485

1,864

2002 2003 2004 2005 2006

Revenue Net profit Backlog

48% CAGR 37% CAGR 47% CAGR

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Aberdeen

Houston

LondonWoking

Moscow

Algiers

Lagos

Khartoum

Damascus

Baku

Tehran

Bishkek

AhmadiSharjahDoha

Abu DhabiMumbai

Kuala Lumpar


Our core geographic focus is on the Middle East, North Africa, the UK Continental Shelf, the Commonwealth of Independent States and the Asia Pacific region

Petrofac operates out of four strategically located international centres, in Aberdeen, Sharjah, Woking and Mumbai and a further 16 offices worldwide :

We are a people business, with over 9,500 employees

Delivering world class competency with local resources and with strong focus on HSE

Tunis

Chennai

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Petrofac designs and builds oil & gas facilities; operates and manages facilities and trains personnel; and, where it can leverage its service capability, develops and co-invests

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2. Development of the oil service sector

Integrated Major Oil Companies (IOCs)

Increasingly focusing on long-term, multi-billion-$ opportunities where national oil companies are daunted by scale &/or technical complexity

Finding access to conventional oil in conventional regions is more challenging

National Oil Companies (NOCs)

Increasingly asserting their power, dis-intermediating IOCs - both where NOCs have ready access to international finance and where they do not

Independent Oil Companies

Generally niche exploration, and less commonly, mature-asset focused

Service companies

Finding, therefore, that the customer-base is shifting

The upstream oil & gas industry has four categories of major “actors” - and their inter-relationships are changing:

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2. Development of the oil service sector: 1960s

Integrated oil: the traditional modelLarge oil companies, horizontally integrated, broad skill-set

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2. Development of the oil service sector: by 1990

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Outsourcing begins to transform the industry

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2. Development of the oil service sector: 2000s

Specialisation and the emergence of new business models:

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More capable service companies, increased integration of services

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3. New partnership models

Pre-OPEC 1, IOCs had access to equity oil throughout the world; power was based on access to technology, capital and integrative capability; relatively limited alignment of interests between IOC and NOC

Production Sharing Contract (PSC) model shifted balance of power in direction of NOCs - and somewhat improved IOC/NOC alignment

Even in a PSC, alignment is in question, particularly as fields become mature and returns more marginal:

− Tax-take is the point of friction

− Pressure has increased for sovereign governments/NOCs not to ‘sign away’ reserves

− The wealthier NOCs do not require IOC capital and are reluctant to pay high returns for it

− IOCs want to book oil & gas reserves and are focused on reserve replacement

− NOCs are primarily interested in capability, now less dependent on IOCs than pre-OPEC 1

Thus there has been a growing trend for the disintermediation of the IOC

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Our relationships with NOCs encompass the provision of both our engineering and operations service capabilities and as development partner through Energy Developments

Malaysia, Petronas

Kuwait, Kuwait Oil Company UAE, Dubai PetroleumTunisia, ETAP

Oman, Ministry of Oil & Gas and PDO

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Algeria, Sonatrach

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Kuwait Oil Company, Kuwait

5 year full maintenance services contract, including provision of management and technical support team and systems

Preventative, corrective and predictive maintenance execution using 650 maintenance personnel

General services including site accommodation and catering services

Major overhauls on rotating equipment

Site workshops

Reimbursable materials

Measured extra works (Brownfield Engineering)

Training of company’s personnel (nationalisation)

Engineering services and spare parts for control and shutdown systems

In addition, Petrofac is also undertaking a US$680m lump-sum facilities upgrade project for KOC

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Service operator contract for the provision of well and facilities management services for all offshore oil & gas assets

Assets comprise four offshore fields, 70 platforms, 400 wells, approximately 600 full-time employees and 500 contractors

Full operating responsibility transferred to Petrofac in April 2007

Alignment through profit sharing of upside

Material increase in scale for Petrofac’s international Operations Services business

Dubai Petroleum, UAE

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Why Dubai Petroleum is important

First time a government entity has chosen to exploit its hydrocarbon resources through direct contracting with an international service provider

Dubai gets the capability it requires without relinquishing reserves or control of reserves

Though the fields are mature, because they were initially quite large, considerable potential remains

In contrast to most UKCS mature-field examples therefore, there are major developments planned alongside the rejuvenation of the mature operation itself

For Petrofac - a reputation-making opportunity

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Early days yet, but…

As expected, the inherited organisation itself - its attitude to business - bore the imprint of more than 35 years of “business as usual”

Many opportunities for short-term production increase have been identified, and some already secured

The economics are different pre- and post-changeover: governments are looking at “100% economics” and this makes a lot more investment opportunities attractive

We have demonstrated that the risks of transfer of operatorship - the area of most concern to any resource owner contemplating change - are manageable

This transition activity has been carried out by Petrofac many times in UK but never before in an international context with an international workforce

The ability to do this - and particularly, the track record of having done it so many times - is a key Petrofac differentiator

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Where next?

Not all governments are as action-oriented as Dubai - so complete replication will not be easy

This example however - and others where service companies are extending the boundaries of previous service provision - are beginning to catch the attention of some more forward-thinking NOCs

We know that many NOC-operated operations where IOCs have largely been absent for decades are inefficient; considerable scope exists for efficiency improvement leading to increased productivity

It is possible that other regional players will conduct experiments in ring-fenced areas in the use of turn-key service provision

Against this theoretical opportunity has to be set the conservatism and the “old-think” contractor relationship attitudes still prevalent in many NOCs

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Appendix 1: Petrofac’s positioning, examples

ETAP, Tunisia

Chergui gas field

Petrofac owns a 45% interest in the Chergui gas concession from ETAP for a cash consideration of approximately US$30m; ETAP hold 55% interest

Commencement of production from the field is expected early 2008, with plateau rates expected to be maintained for around four years with a further eight years of operation beyond that

Hasdrubal gas plant

US$400m lump-sum turnkey contract for BG Group and Entreprise Tunisienne d’Activites Petrolieres (ETAP)

Scope includes: project management, detailed design, procurement, construction, pre-commissioning and start-up performance testing of the new gas plant processing facility and the liquefied petroleum gas production facility

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Cendor PM304 field undeveloped for years but with proven reserves estimated at 24.6m barrels

Petrofac is operator with a 30% interest; partners are Petronas Carigali, Kuwait Foreign Petroleum Exploration Company and PetroVietnam Investment Development Company

Petrofac’s full range of capabilities, Engineering & Construction, Operations Services and asset management, deployed to provide optimal solution

Asset management focus on developing innovative solutions for smaller fields

From farm-in to full production in less than two years, ahead of the prescribed timetable and below budget

First oil achieved in September 2006; daily production approximately 14,000 barrels

Petronas, Malaysia

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Ministry of Oil & Gas and PDO, Oman

Harweel development cluster, PDO

Turnkey project value approximately US$1 billion

Scope includes: project management, detailed engineering, procurement, construction and pre-commissioning

Training and support during commissioning of the project

Kauther gas plant, Ministry of Oil & Gas

US$246m lump-sum engineering, procurement and construction project with (initial) one-year operation

Will draw capability across the Petrofac Group from Engineering & Construction to Operation Services

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Ohanet is a large gas field development located in Illizi province

Risk Services Contract (RSC) with Sonatrach; partners are BHP Billiton (Operator), Japan Ohanet Oil & Gas Co and Woodside Energy

Average daily production is approximately 14.6 million m3/d gas, 24,240 bpd condensate, 2,770 tonnes per day LPG

Petrofac investment US$100 million; US$1 billion total project value

Pioneered the partnership business model

First time non-recourse financing used in Algeria

Sonatrach, Algeria

UBS global oil & gas conference, Dubai

Changing relationships in the oil service sectorSeptember 2007

ubs global oil & gas conference, dubai changing relationships in … · 2020. 5. 21. ·...

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