Renewable energies | Eco-friendly production | Innovative transport | Eco-efficient processes | Sustainable resources

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Session 2: Experiences and Session 2: Experiences and Session 2: Experiences and Session 2: Experiences and views of market players views of market players views of market players views of market players

2A: Views on demand: Operators in 2A: Views on demand: Operators in 2A: Views on demand: Operators in 2A: Views on demand: Operators in offshore oil development offshore oil development offshore oil development offshore oil development

Jerome Jerome Jerome Jerome SabathierSabathierSabathierSabathierEconomics and Environment Evaluation Economics and Environment Evaluation Economics and Environment Evaluation Economics and Environment Evaluation

Department Head Department Head Department Head Department Head

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� World demand 2014:

92.4mb/d the smallest

annual increase in five

years

� Ample supply from non-

OPEC countries: US

production over 9 mb/d

� OPEC production over its 30

mb/d allocation

� Large disequilibrium oil

supply/demand balance

� Crude oil price falling back

to 2010 levels

� In this context, what

future for Offshore

Development2

Global Petroleum Context What Impact on Offshore Development

Sources: IFPEN, Argus, IEA

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Offshore Offshore Offshore Offshore Oil & Gas developmentsOil & Gas developmentsOil & Gas developmentsOil & Gas developments

� Offshore Oil & Gas Reserves Offshore Oil & Gas Reserves Offshore Oil & Gas Reserves Offshore Oil & Gas Reserves � Offshore contribution to world hydrocarbons Offshore contribution to world hydrocarbons Offshore contribution to world hydrocarbons Offshore contribution to world hydrocarbons

reservesreservesreservesreserves� Recent Exploration ActivityRecent Exploration ActivityRecent Exploration ActivityRecent Exploration Activity

� Most Promising ZonesMost Promising ZonesMost Promising ZonesMost Promising Zones� Current and Future Offshore ActivityCurrent and Future Offshore ActivityCurrent and Future Offshore ActivityCurrent and Future Offshore Activity� Exploration & Production Investment Exploration & Production Investment Exploration & Production Investment Exploration & Production Investment –––– Past Past Past Past

and Future trendsand Future trendsand Future trendsand Future trends

3

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OilOilOilOil and and and and GasGasGasGas ReservesReservesReservesReserves2013: 3037 2013: 3037 2013: 3037 2013: 3037 GboeGboeGboeGboe

ME, LA, NA: 78% of Oil Reserves – ME, CIS, FE: 75% of Gas Reserves

Sources: IFPEN, IHS

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Region Oil Gboe Gas Gboe Total Gboe

Australasia 5 35 39

C.I.S. 28 60 88

Europe 20 29 49

Far East 20 57 76

Latin America 84 30 114

Middle East 114 297 411

North America 7 3 9

Saharan Africa 4 14 18

Sub-Saharan Africa 45 51 96

World 325 576 901

Oil Offshore: ME, LA, Sub AF: 75% / Gas Offshore : ME, FE, CIS: 75%

OilOilOilOil & & & & GasGasGasGas Offshore Offshore Offshore Offshore ReservesReservesReservesReserves901 901 901 901 GboeGboeGboeGboe: 30% of World : 30% of World : 30% of World : 30% of World ReservesReservesReservesReserves

Sources: IFPEN, IHS

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Oil and Gas Remaining Reserves

� Offshore holds today about 20% of oil reserves and 45% of Gas reserves.

� Current tendency is: � small discoveries onshore, � large discoveries in the deep to ultra deep-offshore and

mainly natural gasSources: IFPEN, IHS

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Oil & Gas recent exploration activity Oil & Gas recent exploration activity Oil & Gas recent exploration activity Oil & Gas recent exploration activity New discoveries mainly in deep offshore…New discoveries mainly in deep offshore…New discoveries mainly in deep offshore…New discoveries mainly in deep offshore…

7777

� Smaller discoveries onshore� Giant fields discovered offshore� DEEP and L’ULTRA-DEEP OFFSHORE: strategic zones

for Oil & Gas companies but exploration remains ver y capital intensive

2011number of number of number of number of discoveries discoveries discoveries discoveries

volu

me

Gbe

p

2012number of number of number of number of discoveries discoveries discoveries discoveries

volu

me

Gbe

p

Gas Oil

Number of discoveries announced 152 (2014) vs. 177 (2013

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ExplorationExplorationExplorationExplorationToday’sToday’sToday’sToday’s Most Most Most Most PromisingPromisingPromisingPromising ZonesZonesZonesZones

� ONSHOREONSHOREONSHOREONSHORE� Irak and Iran� China (mainly for non conventional

hydrocarbons)� OFFSHOREOFFSHOREOFFSHOREOFFSHORE

� Reevaluation of existing zones (ex.: North Sea)

� DEEP OFFSHOREDEEP OFFSHOREDEEP OFFSHOREDEEP OFFSHORE� Brazil and West Africa continental

margin (« subsalt »)� East Africa (Mozambique,

Tanzanie)� Mainy other opportunities

� Mexican Gulf� Mediterranean. � Australia.

� ARCTICARCTICARCTICARCTIC

8888

North SeaBrazil

Mediterranean

East AfricaMediterranean

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sARCTICARCTICARCTICARCTIC

Oil & Gas PotentialOil & Gas PotentialOil & Gas PotentialOil & Gas Potential

9999

PROVED RESERVED• Limited potential – Mainly western Siberia

• Oil: 84 Gboe• Gas: 54 Tcm (318 Gboe)

• More Gas than Oil• Complex et diversified regions: mountains,

ultradeep offshore,...

YET TO FIND• Difficult to assess as very limited exploration• Not so big: between 62 Mbep (TOTAL) and 412

Mbep (USGS).

Source IFPEN – Note Technique : Potentiel pétrolier et gazier de l’Arctique (2012) + Article Eschard, Vially et Bénard (2012)

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Offshore ActivityOffshore ActivityOffshore ActivityOffshore ActivityHydrocarbons LiquidsHydrocarbons LiquidsHydrocarbons LiquidsHydrocarbons Liquids

� Oil offshore production: 21.5 mb/d. About 26% of world production in decline since 2010 as activity in main zones reduced: Europe, Middle East, Africa, North America

� Though offshore projects have recently experienced a slowdown in investment Though offshore projects have recently experienced a slowdown in investment Though offshore projects have recently experienced a slowdown in investment Though offshore projects have recently experienced a slowdown in investment levels, this decline is part of a natural cycle, and activity levels are expected to levels, this decline is part of a natural cycle, and activity levels are expected to levels, this decline is part of a natural cycle, and activity levels are expected to levels, this decline is part of a natural cycle, and activity levels are expected to increase again. Both increase again. Both increase again. Both increase again. Both DeepwaterDeepwaterDeepwaterDeepwater and and and and UltradeepwaterUltradeepwaterUltradeepwaterUltradeepwater are necessary to develop in are necessary to develop in are necessary to develop in are necessary to develop in order to meet our demand outlook order to meet our demand outlook order to meet our demand outlook order to meet our demand outlook

� Perspectives: Rebound in production likely as onshore will continue to decline (Offshore developed by IOC vs. NOC onshore)

10 Sources: IFPEN, IHS, Rystad

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Offshore ActivityOffshore ActivityOffshore ActivityOffshore ActivityNatural gasNatural gasNatural gasNatural gas

� Gas offshore production: 90 Bcfd� About 26% of world production in slight decline since 2010 as

activity in main zones is reduced: Middle East, Europe, North America

� Perspectives: rebound in offshore production likely to reach 30% of total production by 2025

11 Sources: IFPEN, IHS, Rystad

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� Past few years saw a rapid increase in upstream costs (capital and operating cost)

� Many projects are vulnerable to an oil price drop below US$80/bbl (Brent).

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Global petroleum context Global petroleum context Global petroleum context Global petroleum context Its impact on offshore developmentIts impact on offshore developmentIts impact on offshore developmentIts impact on offshore development

Around one-third of these new projects - amounting to about 3.5 million b/d in 2020 - could be at riskSources: IFPEN, Wood Mackenzie

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OffshoreOffshoreOffshoreOffshore and Onshore and Onshore and Onshore and Onshore drilling Marketdrilling Marketdrilling Marketdrilling Market

� Offshore market : in 2013, activity increasing in all regions

� Number of offshore wells: +10% in 2013 (mainly in GoM, AS and AF)

� Slowdown expected in NA and mainly in LA (Brazil – financing issues).

� Main activity to be located in AF, Australia, India.

� Offshore drilling market increasing by 14% in 2013 to 56 G$

� In 2014, should reach 61 G$ (+10%)

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� Turnover 2013 +6%

- onshore dirilling: +1%

- offshore drilling: +14%

- Fracturation: -4%

(x2 since 2008)

� Turnover 2014 +6%

- onshore drilling: +3%

- offshore drilling: +10%

- Fracturation: +5%

� Turnover 2015 +5%

Sources: IFPEN, Baker Hughes, Spears

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Offshore platform construction Offshore platform construction Offshore platform construction Offshore platform construction activity and market activity and market activity and market activity and market

14

� Turnover 2013 +7%- Const. offshore 2%

- Equipment subsea 20%

- Services prod. offshore 5%

� Estimation 2014 +5%

� Forecast 2015 +3%

Construction Sector mi-2014• FPS/FPSO: -10%,

• Subsea stable

• Jackups drilling rigs +15%,

• Semisubs drilling rigs +17%,

• Drilling ships -14%

-8 à -10% for constructions without

future contract

� Project Complexity for deep and ultra

deep offshore

� No standardization

� Local content requirement in some

countries

� Large project delayed or cancelled

Sources: IFPEN, Baker Hughes, Spears

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� oil industry is known for cyclicality

� In 2015, total E&P investment still increasing

but at moderate rate (+ 4%)

� Majors: stabilize or even decline slightly

� Investment in EU expected to drop

significantly

15151515

Overall Exploration and Production Investment

� NOC and independents keep on investing

� US activity remains high (shales)

� Offshore investment somewhat less impacted

� given world’s need for oil, exploration and

production market is ready to ramp up again

to reach new records

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