Global Offshore Prospects 01
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Transcript of 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
RenewablesRenewables
onc us onsonc us ons
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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 $7m since 2006 Source: Offshore June 17
Upstream capital costs have doubled
Source: CERA index May 08
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EnergyEnergy
Oil & GasOil & Gas
OffshoreOffshore
RenewablesRenewables
onc us onsonc us ons
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Offshore production and spend to grow
300
350Asia Pacific
C&S America
E. Europe & FSU
200
250
($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
RenewablesRenewables
onc us onsonc us ons
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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
RenewablesRenewables
onc us onsonc us ons
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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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