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August / 22, 2013
DONGKUKSTEEL R&D CENTER
ContentsContents
1. Global energy trend
2. Introduction of offshore business
3. Offshore market outlook
4. Applied offshore structural steel
5. Status of principal and demand forecast for plate
6. Summary
.• Energy demand will continue to grow with increasing population and development world economies
• Traditional energy sources are expected to continue to dominate (Oil, Coal, Natural gas)
- Status : Economical benefit, Enough infra., Easy transportation
• Renewable sources such as wind, solar, geothermal, wave/tidal will also grow
- Status : Low Economical benefit, Not enough infra., Immature technology
• Nuclear is uncertain
1 / 29
Sq
ua
dri
llio
n[1
01
5]
Btu
(2
.93
x1
01
1k
Wh
)
Sq
ua
dri
llio
n[1
01
5]
Btu
(2
.93
x1
01
1k
Wh
)
Source : U.S. Energy Information Administration, Report DOE/EIA-0484 (2011)
A. Which sources are dominating the energy market?
1. Global energy trend
B. Short & Long-term oil price dynamics
2 / 29
Source: Infield Systems, BP (2013)
0
20
40
60
80
100
120
140
2000 2002 2004 2006 2008 2010 2012
$/b
bl
Brent
Mid. oil price
[ Brent annual average price ]
High oil price
Low. oil price
1. Global energy trend
B. Short & Long-term oil price dynamics
3 / 29
Source: Infield Systems, EIA (2013)
0
30
60
90
120
150
180
210
2002/01 2004/01 2006/01 2008/01 2010/01 2012/01 2014/01 2016/01 2018/01 2020/01
$/b
bl
Brent Unsustainable Short-Run Spikes
Source: Infield Systems, BP (2013)
[ Long-term Brent price scenarios ]
• Supply and demand fundamentals are sufficient so as to support oil price appreciation in the long-run
1. Global energy trend
4 / 29
[Global oil supply and demand balance in 2020 ]
103.498.9 94.6
10599.5 95
0
20
40
60
80
100
120
140
High Case Base Case Low Case
Demand Supply
mb
pd
Source : Infield Systems, IMF (2013)
C. Global oil supply and demand balance
1. Global energy trend
-1%
0%
1%
2%
3%
4%
5%
1971-75 1976-80 1981-85 1986-90 1991-95 96-2000 2001-05 2006-10 2011-15 2016-20
Avearge Global GDP Demand Growth Rate Avearge Oil Demand Growth Rate
5 / 29
[ Global oil demand/global GDP growth rate ]
Source : Infield Systems, IMF (2013)
C. Global oil supply and demand balance
1. Global energy trend
• Supply and demand fundamentals are strong enough to support oil prices appreciate in the long-run.
• Supply and demand for oil market are well balanced by 2020
6 / 29
[ New oil project sanction price/quantity ]
0
5
10
15
20
25
30
30 40 50 60 70 80 90 100 110
mil
lio
n b
bl/
d
$/bbl
Ultra-Deep Water Deepwater Traditional Heavy Oil Shale Oil
Source : Infield Systems, Goldman Sachs, BP (2013)
D. New supply potential
1. Global energy trend
7 / 29
• The average marginal cost of supply for the most expensive new oil projects has exceeded $95/bbl.
- Canada's oil-sands need an oil price of $100/bbl to achieve an adequate return on capital
- If oil price stays below $95 for a sustained period a number of marginal fields will be shut down,
including supply from small U.S. shale oil producers
[ Fiscal budget breakeven oil price in the middle east ]
Source : Infield Systems, Goldman Sachs, BP, (2013)
E. Up and downside pressure for oil price
0 20 40 60 80 100 120 140
Iran
Bahrain
Iraq
Oman
UAE
Saudi Arabia
Kuwait
Fiscal Breakeven Oil price
2012 Brent Average
1. Global energy trend
* OPEC Average $95/bbl(2012) → $109/bbl (2017)
[ Production Cost Curve ]
Source : Infield Systems, Goldman Sachs, BP, (2013)
E. Up and downside pressure for oil price
1. Global energy trend
8 / 29
Gas Development
Production
Condensate
LNG Liquefaction
Transportation
LNG Regasification
Power plant /Large industry
Power plant /Large industry
Transportation
Pipeline Transportation MidstreamProcess(NGL)
Household/smallerindustry
Exploration
Discovery
Distribution
Oil Development
Production
GatheringCenter
PipelineTransportation
Refining
Petrochemfeedstock
Petrochemical
Plant
Bulkproducts
Specialtyproducts
Wholesale
Retail
Industry
Industry
Industry
Cars, trucks, etc..
Exploration Drilling / Production P. T. S
Oil refinery and petrochemical
Natural gas
Upstream Midstream Downstream
* P. T. S : Processing, Transportation, Storage
2. Introduction of offshore business
9 / 29
A. Value chain for oil & gas
10 / 29
2. Introduction of offshore business
Source : Offshore magazine (2012)
B. What is offshore structure?
11 / 29
3. Offshore market outlook
0
20
40
60
80
100
120
0
50
100
150
200
250
300
350
400
450
500
550
600
650
700
750
800
1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
2005
2008
2011
2014
2017
2020
$ p
er
barr
el
Num
ber
of
Units
Year of Build
Support Production
Development Oil Price(2009 $s)
1970sThis offshore
boom followedthe 1973 "Oil Crisis"
2000sThis boom
accompaniedthe oil price
rise
Source : Clarkson research (2011)
A. Investment correlated with oil prices
3. Offshore market outlook
12 / 29
Source : Clarkson research (2011)
※ CAGR : Compound Annual Growth Rate
01000020000300004000050000600007000080000
2011 2012 2013 2014 2015
North Sea
01000020000300004000050000600007000080000
2011 2012 2013 2014 2015
North America
01000020000300004000050000600007000080000
2011 2012 2013 2014 2015
Brazil
01000020000300004000050000600007000080000
2011 2012 2013 2014 2015
West of Africa
01000020000300004000050000600007000080000
2011 2012 2013 2014 2015
Asia Pacific
Ship yards in Asia
Counted through operation in regions where operated
(Unit, $ : Million)
12% might be increased within 4 year
B. World oil producing regions & growth rat
13 / 29
3. Offshore market outlook
Projection based on 180 fields currently under developments 1079 potential development fields (oil)and 1006 gas fields
0
5
10
15
20
25
30
35
1980
1985
1990
1995
2000
2005
2010
2015
2020
Million B
PD
Year
N. America NW. Europe
M. East & ISC S. America
Asia Pacific W. Africa
Caspian Black Sea Stagnation
?
Forecast
Source : Clarkson research (2011)
C. Offshore oil production and forecast
14 / 29
Source : Douglas Westwood (2012)
200mn boepd
180mn
160mn
140mn
120mn
100mn boepd
70mn boepd
60mn
50mn
40mn
30mn
20mn boepd
70mn boepd
60mn
50mn
40mn
30mn
20mn boepd
Growingoffshoreproduction
Growingdeepwaterproduction
Growingoffshore gasproduction
Global Oil & Gas Supply 1970-2020 Offshore Supply by Depth 1970-2020 Offshore Supply by Type 1970-2020
OffshoreOnshore
DeepShallow
Offshore GasOnshore Oil
3. Offshore market outlook
D. Principal trend for world energy business
15 / 29
3. Offshore market outlook
Source : Pareto research. ODS-Petrodata
E. Deepwater : Golden triangle
16 / 29
3. Offshore market outlook
Source : Pareto research. ODS-Petrodata
F. Africa is on the move
17 / 29
3. Offshore market outlook
Source : Pareto research. ODS-Petrodata
0
5
10
15
20
25
30
35
40
45
50
2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E
Rig
s (f
leets
)NCS rig fleet : current + additions
G. North sea : increasing by more than 50% from 2011 to 2015
§ 18 new high-end jackup likely before 2015§ New demand expect to be for replacing unit and support vessels
18 / 29
3. Offshore market outlook
§ Total undiscovered oil in the Artic : 90 billion barrels - 13% of world undiscovered oil- 30% of world undiscovered natural gas- 20% of world undiscovered natural gas liquids
§ Top 7 location for oil & gas in the Artic
- 87% of the total undiscovered Artic
Source : www.geology.com (2012)
Petroleum provinceCrude oil(Bill. Barrels)
Natural gas(Tril. Cubic feet)
Natural gasLiquid(Bill. Barrels)
Total(Oil equivalentIn Bill. Barrels)
West Siberian Basin 3.66 651.50 20.33 132.57
Artic Alaska 29.96 221.40 5.90 72.77
East Barents Basin 7.41 317.56 1.42 61.76
East Greenland Rift Basin 8.89 86.18 8.12 31.39
Yenisey-Khatang Basin 5.58 99.96 2.68 24.92
Amerasia Basin 9.72 56.89 0.54 19.75
West Greenland-East Canada 7.27 51.82 1..15 17.06
H. Artic : Preparing for the future
19 / 29
3. Offshore market outlook
[ Operating environment in the arctic area]
§ The most reliable and robust technology have to be developed as “zero-leakage”, and “maintenance-free” solutions must be sought and qualified. § The development of arctic oil and gas fields will require new low temperature High Strength Steels,
including welding, and integrity management capable of significantly reducing the probability of failure in critical extreme environments methods and acceptance criteria must be available.
H. Arctic : Preparing for the future
20 / 29
3. Offshore market outlook
Source : Douglas-Westwood (2012)
[ FPS market forecast for deepwater ]
I. FPO market forecast
Source : Douglas-Westwood (2012)
21 / 29
3. Offshore market outlook
Source : Douglas-Westwood (2012)
[ Forecast for each type of unit ]
Units 2012 2013 2014 2015 2016 2017
FPSO 14 13 17 17 23 24
FPSS 0 2 3 2 1 1
SPAR 0 0 3 0 2 2
TLP 0 1 1 3 1 5
Total 14 16 24 22 27 32
I. FPO market forecast
SMYS
Standard
Top side Hull side
API 2W EN 10225 NORSOK M-120 Ship building DNV OS-B101
355MPa API2W50 S355 Group MDS-Y20A/D/E
AH/DH/EH/FH 36NV A/D/E 36
NV AW/DW/EW 36
420MPa API2W60 S420 Group MDS-Y30A/D/E
AH/DH/EH/FH 40NV A/D/E/F 420NV DW/EW 420
460MPa S460 Group MDS-Y40NV A/D/E/F 460NV DW/EW 460
500MPa MDS-Y50NV A/D/E/F 500NV DW/EW 500
550MPa NV A/D/E/F 550
620MPa NV A/D/E/F 620
690MPa NV A/D/E/F 690
22 / 29
4. Applied structural steel
A. Main steel grade
Z-direction Properties
• Reduction of area : above 35%
• Required process
: Soft reduction, Ca treatment, etc.
23 / 29
High Strength
• YP 420MPa → YP 460 & 500MPa
• High strength & Low Ceq. (below 0.42)
• New process : AcC + T Process
Good weldability & CTOD Properties
• Heat input : 7kJ/cm ~ 50kJ/cm
• CTOD Properties
- Design Temp. : -10℃→ -20 ~ -40℃
- Required CTOD : above 0.25mm
Subsea pipe
• YP 450MPa → YP 560MPa
• Thickness : 25mm → 41mm
• Sour resistance : Below CLR 10%~15%
Strain-aged / PWHT
• Strain-aged CVN Impact Test @ -40℃
- condition : 5~8%strain, aging 250℃x1hr
• Simulated PWHT : 580℃ 1hr/inch
B. Required properties of structural steel and subsea pipe
4. Applied structural steel
§ Hull side
§ Top side
Applied steel grade : API2W, EN10225, NORSOK
Applied steel grade : Ship building, DNV OS-B101
24 / 29
High strength, Low temp. fracture toughness
TopSide
Past Present Future
SMYS : 355, 420MPa
Thick. : up to 60mmt
Opt. : -
Applied : offshore str.
SMYS : 420, 460MPa
Thick. : up to 100mmt
Opt. : CTOD -20℃
Applied : offshore str.
SMYS : 500, 550 ~ 690MPa
Thick. : 100mmt
Opt. : CTOD below -20℃
Applied : offshore str.
HullSide
SMYS : 355MPa
Thick. : up to 80mmt
Opt. : -
Applied : Ship build.
SMYS : 420MPa
Thick. : up to 100mmt
Opt. : Z-Prop.
Applied : Ship build.+ offshore str..
SMYS : 420MPa
Thick. : up to 100mmt
Opt. : Z-prop.Applied : Ship build.
+ offshore str.
C. Design change for applied steel
4. Applied structural steel
5. Status of principal project and demand forecast for plate
25 / 29
Nigeria
Norway
Republic of the Congo
Australia
Vietnam
Indonesia
UAE
Russia
UK
Papua New Guinea
Malaysia
Israel
USA
Brazil
Gendao Gehem
Ichthys FPSO
Lavaca Bay FLSO
Gina Krog P/J
Mariner Platform
WheatStone
Dong Platform
Yamal P/J
Hebron P/J
Carigali Hess
Moho Nord_TLP
RoseBank_P/J
Point Thomson
Adma-Opco
Ichthys CPF
Statoil_FSU
Mafumeira
Matin Linge
Egina
Petronas FLNG2
Petronas FLNG1
Moho Nord_FPU
Bressey_Platform
Upper Zakum
Aasta Hansteen
A. On-going principal project
26 / 29
5. Status of principal project and demand forecast for plate
Items Fixed Platform MODU* / MOPU*
On going P/J
• Wheaststone_Chevron
• Dong Hejre_Dong Energy
• Mafumeira_Chevron
• Mariner_Statoil
• Dagny_Statoil
• Hebron_ExxonMobil
• Carigali Hess_Petronas
• Ichthys_Inpex FPSO
• Petronas FLNG
• Statoil FSU
• Gendalo Gehem FPU
• Lavaca Bay Excelerate FLSO
• Aasta Hansteen Statoil TLP
Main steel gradeAPI 2W50, 60
NORSOK Y20, Y30, Y40, Y50
• Top side : API 2W50, 60
EN S355, S460, S500
NORSOK Group
• Hull side : Ship’s Class
* MODU : Mobile offshore drilling units* MOPU : Mobile offshore production units
Fixed Platform FPSO FLNGTLP
A. On-going principal project
27 / 29
5. Status of principal project and demand forecast for plate
Project Country Order P/J Type Budget (USD bn)
1. Brass LNG
2. Moho Bilondo
3. NASR
4. UAE Zadco
5. PNG
6. Rotan LNG
7. Shtokman
8. Bock-B gas
9. Black A-18
10. Tamar gas
11. Luno
12. Barossa
13. Browse
14. Browse
15. Wester Isles
16. Heidrun
17. Luva
18. Greenland Offshore
19. Nom con son 2
20. Abadi LNG
21. ConocoPhilips
Total
B. On the bidding project (EPC, 2013~2014)
28 / 29
5. Status of principal project and demand forecast for plate
Project type
Plate & Section demand prospect (Unit, ton)
2013 2014 (At present)
Drilling
Jack-up rig
Semi-sub
Drill ship
Production
Fixed platform
TLP
Spar
FPSO / FLNG
The others
Total
Plate
Section
Sub total
ReferenceDouglas Westwood report_2012
Rig Zone Report_2013Infield Systems_2013
Boston Consulting_2010Clarkson research_2011
IR report (DSME, SHI, HHI)* Total amount of used plate & Section = Average weight for each unit × the number of Unit
1.98 2.00
2.02 2.02
2.08
2.14
2.06
2.16
2.27
1.80
1.85
1.90
1.95
2.00
2.05
2.10
2.15
2.20
2.25
2.30
2013 2014 2015
Ste
el dem
and (
million t
on)
Low
Base
High
C. Demand forecast for plate and section
Annual growth around 4%~5%
6. Summary
29 / 29
ü Taking into economical consideration, traditional energy sources is expected to
continue to dominate next decade.
ü Offshore units are mainly operated in nine spots, such as Middle East, West Africa,
North America, Asia Pacific, South America, Northwest Europe, Russia etc.
Among the these area, West Africa, Northwest Europe, South America lead a
deepwater development which is related with FPSOs order.
ü Mainly used steel grade in recently project are yield strength level 350Mpa to
460Mpa according to API2W, EN10225, NORSOK standard.
Next year yield strength 500Mpa grade is going to be reflected in design for
structural use. Also, they need resistant to low temp. fracture toughness for severe
operating condition.
ü Total demand for steel plates and sections might be around 2 million ton in 2013.
and steel quantity used in offshore market might be increase around 4%~5%
annually by 2015.