Global Subsea Market Outlook from an Asia Pacific Subsea Market Outlook from an Asia Pacific...

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  • Global Subsea Market Outlook

    from an Asia Pacific Perspective

    4th Asian Subsea Conference and Exhibition

    Prepared by

    Kian Zi Chew

    Douglas-Westwood Singapore

  • www.dw-1.com

    LNG

    offshore

    onshore

    downstream

    power

    LNG

    renewables

    Established 1990

    Aberdeen, Canterbury, London, Singapore & Houston

    Activity & Service Lines

    Business strategy & consulting

    Commercial due-diligence

    Market research & analysis

    Published market studies

    Large, Diversified Client Base

    1000 projects, 600 clients, 80 countries

    Leading global corporates

    Energy majors and their suppliers

    Investment banks & PE firms

    Government agencies

    Douglas-Westwood Our Business

  • Transaction Support:

    Mergers & Acquisitions

    (M&A and LBOs)

    Financing Facilities

    (inc. MBOs)

    Initial Public Offerings

    (IPOs)

  • Douglas-Westwood Research

  • Macro-Economic Environment Offshore Market Outlook

    Subsea Market Review

    Conclusions

  • Global Energy Demand Outlook

    1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

    Primary energy demand is the prinicple indicator for all oil & gas related expenditure.

    Global demand is expected to grow by 41% between 2012 & 2035.

    Population growth projected at 24% for the same period.

    Energy intensity per capita is growing...

    8.1btoe

    12.5btoe

    17.6btoe

    Global Primary Energy Demand BP Energy Outlook 2035

  • Global Energy Demand Outlook Asian Import Dependence

    Asian % Share of Global Demand

    22%

    47%

    -100%

    -90%

    -80%

    -70%

    -60%

    -50%

    -40%

    -30%

    -20%

    -10%

    0%

    Gas Balance Oil Balance

    Asia China India Japan S. Korea

    Asian Import Dependency

    40% 22% 5% 4% 2%

    % of global energy demand (2013)

    Asian population and economic the major driver behind projected global energy demand surge.

    Asia will account for 47% of global demand by 2035 compared to 22% in 1990.

    However, Asia is major importer of oil & gas, in particular oil which has a regional import/export

    balance of -71%. Chinas oil imbalance is currently estimated at -58%.

    Major global economies such as Japan and S.Korea are almost exclusively reliant on external oil

    & gas.

  • Global Energy Demand Outlook Growing Importance of Gas

    Global Energy Demand by Sector

    0%

    10%

    20%

    30%

    40%

    50%

    60%

    70%

    80%

    90%

    100%

    1990 2035

    Power Transport Industry

    -

    1,000

    2,000

    3,000

    4,000

    5,000

    6,000

    1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

    Global Energy Demand by Fuel

    Gas 2012-2035 Increase 55%

    Oil 2012-2035 Increase 20%

    The combination of increased energy efficiency throughout OECD states and growing

    economies in Asia is driving demand for power generation at the expense of transportation.

    Natural gas is becoming an increasingly popular fuel for power generation offering a relatively

    safe (compared to nuclear); cheap (compared to oil); and clean (compared to coal) energy

    source.

    Demand for natural gas to increase by 55% over the next 20 years...

    42% 51%

    mtoe

  • Oil Supply Outlook Prices & Sanctioning

    Papa Terra

    Egina Lucapa

    Block 18 West

    Cepu Mars B

    Prirazlom

    Duvernay Shale

    $0

    $20

    $40

    $60

    $80

    $100

    $120

    $140

    $160

    2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

    Bre

    nt

    $/b

    bl

    Europe Brent Spot Price FOB (Dollars per Barrel)

    EIA High Case

    EIA Low Case

    Approval threshold Based on anticipated oil price levels

    Papa Terra

    Egina

    Lucapa

    Block 18 West

    CepuMars B

    $0

    $20

    $40

    $60

    $80

    $100

    $120

    $140

    $160

    2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

    Bre

    nt $/b

    bl

    Europe Brent Spot Price FOB (Dollars per Barrel)

    EIA High Case

    EIA Low Case

    Breakeven Price ($/bbl)

    DW expects oil prices to straddle the $90-$100/bbl mark for the next five

    years.

    The majority of major projects will be viable at these levels.

    Only arctic and some shale

    projects will be threatened.

    Oil Price Outlook and Impact on Offshore Project Sanctioning

  • Gas Supply Outlook Prices & Sanctioning

    0

    2

    4

    6

    8

    10

    12

    14

    16

    18

    2000 2002 2004 2006 2008 2010 2012

    $/m

    mb

    tu US

    Japan (LNG)

    UK

    Europe

    Regional Gas Prices

    Unlike oil the gas market has a more regional pricing

    structure due to historical geographical supply

    limitations.

    Up to 2008 regional prices typically trended together

    however the flooding of US shale gas between 2009-11

    and rapid demand growth in North Asia post Fukoshima

    have created massive price disparity globally.

    With the US poised to become a major exporter of

    natural gas via LNG over the next ten years most

    analysts expect a gradual convergence of regional

    pricing.

    Significant short-mid term arbitrage opportunities for

    North American gas producers.

    Influx of US exports is creating uncertainty in project

    sanctioning for gas projects in exporting nations such

    as Australia (see Browse).

  • Industry Challenges Cost Inflation

    $0

    $20

    $40

    $60

    $80

    $100

    $120

    0

    50

    100

    150

    200

    250

    2000 2002 2004 2006 2008 2010 2012

    $/b

    bl

    Upstr

    eam

    Cost

    Index

    Upstream Capital Costs

    Oil Price

    Upstream Capital Cost Index vs Oil Price BP, CERA

    Upstream capital costs have increased by over 200% since 2000.

    Whilst costs rose rapidly in line with oil prices during 2005-08 they remained high during the oil

    price crash of 2009-10.

    High industry costs are an increasing concern for oil & gas companies and the profitability of their

    new projects.

  • Macro-Economic Environment

    Offshore Market Outlook Subsea Market Review

    Conclusions

  • Global Supply Outlook The Role of Offshore

    Offshore Gas

    Offshore Oil

    20mn boepd

    30mn

    40mn

    50mn

    60mn

    70mn boepd

    100mn boepd

    120mn

    140mn

    160mn

    180mn

    200mn boepd

    Offshore

    Onshore

    Deep

    Shallow

    20mn boepd

    30mn

    40mn

    50mn

    60mn

    70mn boepd

    Global Oil & Gas Production Global Offshore Production Global Offshore Production

    Offshore and natural gas becoming increasing important to global hydrocarbon supply over

    the next ten years.

  • Offshore E&P Spend

    $0

    $50

    $100

    $150

    $200

    $250

    $300

    $350

    2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

    Offshore E&P Expenditure Outlook ($billions)

    $211.9

    $306.8

    $211.9 billion spent in 2011 unprecendented levels of expenditure. An additional $1.4

    trillion to be spent over the next five years at a CAGR of 7.7%.

    76% of anticipated expenditure to be associated with shallow water over 2014-18.

  • Offshore E&P Spend by Segment

    $1.4 trillion

    Offshore E&P Expenditure 2014-18 by Segment

  • Offshore E&P Spend Regional Breakout

    Offshore E&P Expenditure 2014-18 by Region

    Africa 14%

    South - East Asia 17%

    Rest of Asia 7%

    Australasia 3%

    Middle East 5%

    Latin America 13%

    North America 20%

    Western Europe

    19%

    Others 2%

    $1.4 trillion

  • Asia-Pacific

    0

    10

    20

    30

    40

    50

    60 India25%

    China19%

    Malaysia13%

    Indonesia12%

    Viet nam10%

    Thailand7%

    Australia6%

    Brunei Darussalam

    2%

    Russian Federation

    2%

    New Zealand1%

    Sri Lanka1%

    East Timor1%

    Myanmar1%

    APAC Drilling Rig Demand by Country

    Oth

    ers

    APAC Drilling Rig Demand by Operator

    APAC is a large, mature and

    predominantely shallow water area

    controlled by NOCs.

    58% of demand accounted for by three

    largest countries (India, China & Malaysia).

    The region will account for 30% of fixed

    platform expenditure more than any

    other.

    APAC Offshore E&P Spend

    $0

    $20

    $40

    $60

    $80

    $100

    $b

    illio

    ns

    Shallow

    Deep

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