Global Offshore Future of the North Sea - Subsea UK · Global Offshore Prospects and the Future of...

Subsea Integrity and Efficiency Conference - London

Douglas-Westwood Limited

Global Offshore Prospects and the

Future of the North Sea

Marina Ivanova, Research AnalystIva Brkic, Research Analyst

Subsea Integrity and EfficiencyConference

London1 December 2015

Douglas-Westwood: Spanning the Energy Industries

• Market leader in OFS market analysis and commercial due diligence • Two offerings: Research & Consulting• 25 years of commercial insight into the global energy industries• 1,100 projects for clients in more than 70 countries• Experience of some 250 niche energy segments• Over 20 industry awards• Global coverage with one of the largest sector-focused teams• Based in the Americas, Europe and Asia

“Top energy research group Douglas-Westwood”Financial Times

2


Key Topics

• Macro Drivers and Oil Price• Offshore/Subsea markets• UKCS Outlook• Conclusion


Average Annual Spot Price Forecasts, 2010–2020Source: EIA, WB, IMF, IEA, RBC, Goldman Sachs, Platts, S&P, Citi, Soc Gen

Historical Brent and WTI Oil Prices, Jan-2010 – Oct-2015Source: EIA

Macro Drivers & Oil Price

Macro Overview - Background

Future Oil PriceHistoric Oil Price

4

0

20

40

60

80

100

120

140

Jan-

2007

Aug

-200

7

Mar

-200

8

Oct

-200

8

May

-200

9

Dec

-200

9

Jul-2

010

Feb-

2011

Sep-

2011

Apr

-201

2

Nov

-201

2

Jun-

2013

Jan-

2014

Aug

-201

4

Mar

-201

5

Oct

-201

5

$/bb

ll

Brent WTI

0

20

40

60

80

100

120

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Ave

rage

Spo

t Pr

ice

(USD

/bbl

)

Spread Mean


0

20

40

60

80

100

120

0 10 20 30 40 50 60 70 80 90 100

Brea

keve

n O

il Pr

ice

in $

/bbl

2020 Crude Oil Production in Mbbl/d

● Rumaila

● US GoM Tiebacks

Onshore Middle East Offshore Shallow <250m Heavy Oil Offshore 250-1000m

Onshore Russia Onshore RoW Deepwater >1000m US Light Tight Oil

Oil Sands Average Breakeven Price

● Majnoon

● Tengiz expansion

Oil Supply Cost Curve for 2020Sources: Morgan Stanley, Credit Suisse, Douglas-Westwood

Oil Supply Cost Curve


25

40 5354

55 5762

81

Average Breakeven Price

5


Global Onshore Oil and Gas Wells Drilled by Region, 2010-2021Source: Douglas-Westwood World Drilling & Production Market Forecast

Global Offshore Oil and Gas Wells Drilled by Region, 2010-2021Source: Douglas-Westwood World Drilling & Production Market Forecast

Drilling & Production


Offshore WellsOnshore Wells

6


Key Topics



Offshore Oilfield Services

Offshore & Subsea Markets

• Strong decline in Offshore OFS expenditure.

• Return to 2014 pricing levels for OFS unlikely.

• Pricing pressure weighing on OFS providers – a major contributor of decline, plus some volume reduction.

• Africa will remain robust driven by ultra-deep drilling activity.

Source: Douglas-Westwood

Offshore OFS Expenditure

8


39%

14%8%

39%

53%

8%

11%

27% <250m

250-499m

500-999m

>1000m

Subsea Hardware (Trees Shown)


• Record orders in 2013 led to strong installation activity in 2015.

• Offshore Brazil & Angola expected to be the main drivers of activity.

• Shallow water opportunities becoming limited; the development of deepwater reserves accelerates.


Global Subsea Hardware Capex by Water Depth

2010 - 2014 2015 - 2020

Subsea Tree Installations Forecast

9


1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

4Q10

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

3Q13

4Q13

1Q14

2Q14

3Q14

4Q14

1Q15

2Q15

Num

ber

of T

rees

Aw

arde

d

GE Oil & GasFMCDril-QuipCameronAker Solutions12-Month Moving Avg

Subsea Hardware



1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

4Q10

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

3Q13

4Q13

1Q14

2Q14

3Q14

4Q14

1Q15

2Q15

Subs

ea B

ackl

og (

$bn)

GE Oil & GasFMCDril-QuipCameronAker Solutions12-Month Moving Avg


Key Manufacturers Subsea Tree Orders Key Manufacturers Subsea Backlog

10


Floating Production Systems

• Capex on new-builds, upgrades and conversions

• Expenditure allocated to the year FPS come on-stream

• Global orders severely impacted in 2015

• Global capex revised down

• Forecast capex expected to increase by 49%

• Key projects in 2017 (big in size):

1) Total’s Kaombo FPSO (Angola)

2) Total’s Egina FPSO (Nigeria)

3) Petrobras’s Lula Central (Brazil)

4) Inpex’s Ichthys (Australia)Source: Douglas-Westwood


FPS Capex

11


Decommissioning

• High oil price has extended the life of North Sea assets and delayed abandonment and decom. of fields

• Low oil price has accelerated decom consideration – is decom going to happen? (900 P&A wells and 248 topsides)

• Decom. is not a value added activity – operators are risk averse

• Delaying decom costs more in the long run (higher maintenance, engineering + removal costs)

• Highly regulated sector – 25 legislative items (environmental, safety, regulatory and legislation barriers)

Country Steel Jacket Concrete Substructure

Subsea FPSO Total Tonnes (thousand)

UK 227 12 56 17 312 2290

Norway 69 13 54 9 145 1750

Netherlands 118 2 7 0 127 340

Denmark 39 0 0 0 39 114

Type, location, number & size of North Sea O&G

installation

Source: KIMO International


12


Key Topics



36%

49%

15%

North Sea Outlook – Subsea Trees Installations

UKCS Outlook

• Projects that have already been signed off will support the subsea activity in the North Sea.

• Redevelopment projects and greenfield projects. Most of them due to 2016-2017.

• Lack of sanctioned projects will lead to significant drop in activity.


Subsea Hardware Expenditure in Western Europe

2010-2014 2015-2019

41%

49%

9%

UK

Norway

RoWE

Subsea Tree Installations Forecast in the North Sea

14


North Sea Outlook – Subsea Vessels

UKCS Outlook

• Majority of the activity is in shallow water.

• Major problem with over supply of subsea vessels.

• Vessel dayrates will continue downward trend.

• Vessel demand is expected to increase as large projects in UK (Rosebank, Kraken) and Norway (Maria) have been sanctioned.


45%

7%

34%

15%Field Development

Pipeline

IRM

Subsea Intervention

2010-2014 2015-2019

40%

11%

37%

12%

Subsea Vessels Forecast in the North Sea

North Sea Vessel Expenditure by Sector

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14%

13%

37%

11%

12%

13%AfricaAsiaEuropeSouth AmericaMiddle EastNorth America

How do you view the future of the UK oil & gas industry?

Survey and Key Findings

UKCS Outlook

440participants

11%

17%

36%

20%

17%CEO/Director

Senior Manager

Middle/Junior Manager

Skilled Manual

Other

Some Survey Participants …Key Findings

16


• Xx

• Xx

• xx

• Offshore drilling volumes less affected in the short term• Uncertainty around oil price recovery – pressure on high-cost activities• Lack of sanctioned projects – lower growth in subsea hardware• Decom. – more relevant in low-for-longer environment• Subsea activity in North Sea going forward on the back of a number of projects

In Conclusion

17


Douglas-Westwood Limited

THANK YOU!

Iva Brkic, Research [email protected]

Marina Ivanova, Research [email protected]

Global Offshore Future of the North Sea - Subsea UK · Global Offshore Prospects and the Future of...

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