Floatec Opportunities and Challenges in the Oil and Gas Production Sector

7/18/2019 Floatec Opportunities and Challenges in the Oil and Gas Production Sector

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© FloaTEC 2008

Opportunities and Challenges in the Offshore

Oil & Gas Production Sector

- What is Driving Today’s Deepwater Market?

Presented by:

Eric H. Namtvedt

President

FloaTEC, LLC



© FloaTEC 2008

Introduction to FloaTEC

Putting Things in Perspective Deepwater Market Drivers

GOM Deepwater Market

Prospects and Opportunities

Deepwater Market Challenges

Summary

Presentation Overview



© FloaTEC 2008

Deepwater Technology Focus

50:50 JV - J Ray McDermott & Keppel

Established September 2005

Unmatched FPS Portfolio

Integrator of Resources and Capacities

Unbiased and Concept-neutral Feasibility Studies Access to:

Engineering Knowledge and Proven Solutions

Execution Knowledge and Experience

Current Fabrication and Installation Benchmark Data

VISION

Be the global leader in floating production systems,

providing value through our proven and innovative solutions - from concept to delivery!

FloaTEC – A Vehicle to Create More

Value in Deepwater



© FloaTEC 2008

Unbiased approach to selection

Owner of multiple concept solutions

ETLP, DeepDraft Semi, Truss Spar As IP owner, can develop hybrids

Parent Company delivery experience

Cost and schedule certainty

Empirical data, cost, schedule, rate metrics JV Parent Company constructability input

25 global fabrication yards and shipyards

Fleet of installation equipment

Key Strengths



© FloaTEC 2008

FloaTEC Corporate Structure



© FloaTEC 2008

FloaTEC Organization

Global Performance – CK YangGlobal Performance – W YangGlobal Performance & Risers – HS Lee

Global Performance & Risers – A GuptaGlobal Performance & Risers – G ShenGlobal Performance & Risers – L BinRisers – H MukundanHull Structures - ST Lee

Project Director – MJ Taylor Project Manager – P KrishnaswamySr. Project Mgr (Construction) – A Afify

Drilling Advisor – C CowgillProject Engineering Mgr – S BernardTechnical Advisor – J KuangSr. Project Engineer – J MirandaProject Engineer – S ShahProject Engineer – J Mark

Principal Naval Architect – A ZhangPrincipal Structural Eng. – G ChoiPrincipal Riser Eng. – YS Chou

Principal Engineer – V TekumallaPrincipal Engineer – B ZurbuchenSr. Engineer Mooring – B PadmanabhanSr. Engineer Risers – J WeiDesign Supervisor – G GreenSr. Drafter – N MackaySr. Drafter – T Renfroe

Project Controls Mgr – M GavulaEstimating & Risk Mgr – S PotnisCost Control Specialist – J Vancura

Office Manger – V LewisSr. Admin Asst – K StatonProject Secretary – D Waddell Admin Asst – S Staton

Additional Resources:

3rd Party Resource Pool:JRMKFELS


3rd Party Resource Pool:JRMEKFELS

HOE (Strategic Partner)


3rd Party Resource Pool:JRMEKFELS DTG


3rd Party Resource Pool:JRM - GlobalKOM -Global


3rd Party Resource Pool:IT, Accounting, Legal,Treasury, Insurance,

Tax, etc. (JRM)

Project safety Mgr. K McKinnis



© FloaTEC 2008

Deepwater Market Drivers

Putting Supply and Demand in Perspective



© FloaTEC 2008

Demand Is The Cycle Driver / Killer

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

1972 1977 1982 1987 1992 1997 2002 2007e

G l o b a l D e m a n d - A

n n u a l %

C h a n g e

0

10

20

30

40

50

60

70

Cr u d e Oi l P r i c e $

Demand

Oil Prices

*Source: Pickering Energy

Countershistoricalnorms!



© FloaTEC 2008

Global Oil Demand vs GDP Growth

Source: IMF and BP Stats



© FloaTEC 2008

Source: ExxonMobil

1.1%

0.4%

1950 1950 1950

0 0 0

50

100

150

200

250

300

350

10

20

30

40

50

60

70

80

2

4

6

8

10

1990 1990 19902030 2030 2030

0.9%

Average Growth/Yr.2000 - 2030

2.2%

2.8%

4.7%

0.7%

2.4%

1.6%

Energy DemandMBDOE

GDPPopulation

Trillion (2000S)Billions

Non-OECD

OECD

High Energy Demand Will Continue

World population to grow

by 1.8 B by 2030

Consumption growth since

1965

Total energy: 284%

Oil: 268%

Gas: 435%

1.7%



© FloaTEC 2008

2008 Global Demand Outlook –

Positive, But with Risks



© FloaTEC 2008

Global Field Decline Rates

Average global decline rate est. at 4%

World needs 3.2 million b/d of new oil

each year to keep output flat

In order to grow the supply base by 10

million b/d to the needed 96 million b/d

by 2012, the world needs to bring on

stream 26 million b/d of new supply in

only 5 years!



© FloaTEC 2008

Existing Production vs

World Oil Demand



© FloaTEC 2008

Supply Crunch / Peak Oil?

CERA suggests that the depletion rate of

the world's 811 biggest fields is around

4.5% a year.

IEA suggests daily output of conventional

crude oil alone, now about 73 million

barrels, will plateau at 84 million barrels.

………however huge

potential resources are

yet to be discovered in

deepwater and arctic!



© FloaTEC 2008

Where Will the Energy Come From?

Increasing resource

nationalization and diminished

access

Non-OPEC struggling to

increase production

Little OPEC spare capacity

Depletion is real

Super majors will be compelled

to focus on organic growth



© FloaTEC 2008

Where is the Non-OPEC

Supply Response?



© FloaTEC 2008

Non-OPEC Winners and Losers 2007-2012



© FloaTEC 2008

Non-OPEC Production Peaking?

Non-OPEC supply excl. FSU no

higher than 10 years ago.

North Sea output down 30% from

2000-2006.

The total output from BP, Shell,

ExxonMobil, Chevron and

ConocoPhillips fell 0,7 million b/d

2H-2007 to 2H-2008. Their decline

rate in Q4-07 was 7.1%, for 2007 it

was 4,3%.



© FloaTEC 2008

Mature Non-OPEC Regions in

Sharp Decline



© FloaTEC 2008

Are High Oil Prices Here to Stay?

Fears and expectations trumping economic rules

More exaggeration than ever before

Marked increase in speculators entering oil markets

Oil traders‘ reflexes trumping market fundamentals

$135 barrier broken

Some say $70 of this is based on speculation and notmarket fundamentals

Weak dollar contributes

$ has fallen > 35% vs Euro in 5 years

Weak $ pushes the price of USD assets higher

Geopolitical tensions; potential supply disruptions

Continued high demand / limited supply growth

USD vs. Euro



© FloaTEC 2008

Expanding Activity - Deeper & Harsher



© FloaTEC 2008

Robust FPS Expenditures Forecast

Market fundamentals have never been stronger

Deepwater capex is predicted to rise to US $90 B between 2006-2010

Around 25 new floaters p.a. : 94 new FPSO’s by 2011; +30 others (mainly FPS’s)

26% of installations in W. Africa – Brazil becoming the industry ‘darling’

Global increase in deepwater units means continued tight market

Source: Douglas-Westwood



© FloaTEC 2008

Deepwater Production Growth Bodes Well

Source: Douglas-Westwood

Total deepwater production

6 mm BOE/D in 2007

11 mm BOE/D in 2011

Offshore production 2007-2011 Shallow water: 18% growth

Deepwater: 78% growth



© FloaTEC 2008

Summary

Population & economic growth driving oil & gas demand

The evidence of global oil demand being impacted by high oil prices and weakening

economic activity is growing

High oil prices seem set to continue

US economic problems weakens dollar and supports high prices

Declining non-Opec oil production, particularly in shallow water

The remaining major offshore oil prospects are hard to find

Deepwater, harsh environments or frontier regions

FPS demand will likely outstrip the market’s ability to deliver

Lead time for developing new energy sources will leave the world dependent on

oil & gas for years, probably decades to come



© FloaTEC 2008

The Gulf of Mexico Deepwater Market

Putting Things in Perspective



© FloaTEC 2008

GOM Production Trends – “Free Fall”

-

2

4

6

8

10

12

14

16

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

b c f / d a y

Deepwater

GOM Shelf

Total




© FloaTEC 2008

GOM - Production Rates per Well

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

0 3 6 9 1 2 1 5 1 8 2 1 2 4 2 7 3 0 3 3 3 6 3 9 4 2 4 5 4 8 5 1 5 4 5 7 6 0 6 3 6 6 6 9

Months on Production

M c f e p e r D a y

1995 2000 2005


GOM Shelf Deteriorating Prospect Quality



© FloaTEC 2008

Active GOM Leases

Source: Rigzone GOMExplorer



© FloaTEC 2008

GOM Deepwater Production is Growing

Source: MMS



© FloaTEC 2008

Central GOM

Lease 205 Top 10 Operators

Source: Rigzone GOMExplorer



© FloaTEC 2008

GOM Exploration Success

Rate by Deepwater Area

2004 – 2007 (185 Total)

2631

16

6 7 5 3 5 3 3 1 1 1 1 1

20 12

13

7 5

23 2 2

1

1 1 1

0

5

10

15

20

25

30

35

40

45

50

M i s s i s s

i p p i C

a n y o n 5 7 %

G r e e n C a n y o n

7 2 %

G a r d e n

B a n k s

5 5 %

E a s t B r

e a k s

4 6 %

A t w a t e r

V a l l e y

5 8 %

A l a m i n o

s C a n y o n

7 1 %

L l o y d R i d g

e 5 0 %

W a l k

e r R i

d g e 8

3 %

E w i n g

B a n k 6 0 %

K e a t h l e y

C a n y o n

6 0 %

D e S o t o C a n y o n

5 0 %

E u g e n e

I s l a n

d 5 0 %

V i o s c a

K n o l l 5

0 %

S o u t h P

a s s 1

0 0

W e s t C a m e r o n

1 0 0 %

Discovery Dry HoleSource: Quest

2004-2007 (185 wells total)



© FloaTEC 2008

GOM vs ROW Offshore

Exploration Success 2003-2006

541 Exploration Spuds Worldwide

GoM accounts for 41% of all

deepwater spuds (>1500 fsw)

0

50

100

150

200

250

300

350

<=1,500 FSW >1,500 FSW

N o .

E x p l o r a t i o n W e l l s

GoM Discoveries GoM Dry Holes ROW Discoveries ROW Dry Holes

258 ROW

Spuds

29 GoM Spuds

151 ROW

Spuds

103 GoM Spuds

0.61 0.57

GULF OF MEXICO has 61%

SUCCESS RATE in exploration

drilling above 1,500 FSW

0.41

0.5

REST OF WORLD (ROW) 41%

SUCCESS RATE in

exploration drilling above1,500 FSW

Source: Quest



© FloaTEC 2008

GOM MODU Contracts

Source: RigLogix

As of February 25, 2008 there were 57,779 rig days Contracted in the GOM.



© FloaTEC 2008

MODU’s Currently Deployed in GOM

Source: Quest

0

2

46

8

10

12

14

N o .

F l o

a t i n g

R i g s

0-1500 1501-3500 3501-7500 >7501

Water Depth Rating

Deployed To-be Deployed



© FloaTEC 2008

Summary

Gulf of Mexico deepwater drives innovation

Deepest water depth (10,011’) for well in the Perdido Fold Belt

Drilling depth record (34,189’) for the GOM at Knotty Head Deepest successful well test in the U.S. Gulf of Mexico with Jack 2 (28,175’)

Some of the most economic potential recovery is in deepwater GOM

Number of rigs and capital commitment validates potential of deepwater GOM

Prices and economics will fluctuate somewhat

Long-term growth in activity and production is basically assured

Many challenges lie on the drilling side

Well non-productive time > 20% Some wells never get drilled

High development drilling costs

Potential loss of lease



© FloaTEC 2008

Prospects and Opportunities




© FloaTEC 2008

GOM Deepwater Structures

Source: MMS



© FloaTEC 2008

HUB Facilities Should Drive Activity

Source: MMS



© FloaTEC 2008

GOM Deepwater Start-ups 2005-2010

Source: MMS



© FloaTEC 2008

Projects Are Stacking Up



© FloaTEC 2008

What’s Now Being Built (FPSs)

Current backlog (to be delivered between 2008 and 2011)

65 production floaters (29 newbuilds; 30 conversions)

4 FSRUs (modification to existing LNG ships)

10 floating storage units (3 newbuilds; 7 conversions)

2 jack-up MOPUs (purpose built harsh environment jack-ups with storage)

Breakdown

1TLP (new)

46 FPSO vessels (16 new, 29 conversions, 1 redeploy)

9 production semis (8 new, 1 redeploy)

3 production spars (new)

2 production barge/FPU (1 new, 1 conversion)

4 FSRUs (modifications)

2 MOPUs (new)

10 FSO vessels (3 new, 7 conversions)



© FloaTEC 2008

Most yards are currently operating at or near capacity

What’s Now Being Built (FPSs)



© FloaTEC 2008

Source: Rigzone.com

What’s Now Being Built (MODUs)

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

2008 2009 2010 2011

Drillships

Semisubs

Jackups

Fabricated MODU tonnage to be delivered per year

Current backlog (to be delivered between 2008 and 2011)

79 jack-ups

45 semi-submersibles

29 drillships



© FloaTEC 2008

What’s Expected to be Built - FPS Activity

IMA have identified 130 to 158 production floaters and 40 to 50 storage/offloading

floaters over the next five years.

134 actual known projects currently in the bidding, design or planning stage

39 of the planned projects are in the bidding or final design stage, likely to start in 2008 and 2009(with fabrication starts in 2010 and 2011, representing over 780,000 tonnes)

95 projects are in the appraisal or concept development stage, likely to start in 2010, 2011, 2012

(with fabrication starts in 2012 and 2013, representing over 1,900,000 tonnes)

These orders are expected to generate capital expenditures of $65.3 to $80.8 billion

over the 5 year period

Fabrication capacity will be stretched through 2015



© FloaTEC 2008

4

5

2

1

3

5

3

0

1

2

3

4

5

6

2005 2006 2007 2008 2009 2010 2011

Hull Award Year

A w a r d C o u n t s

GOM FPS Awards 2005 (a) – 2011 (e)

• Blind Faith Semi

• Independence Hub Semi

• Neptune TLP

• Tahiti Spar

• Chinook-Cascade EPS FPSO

• Exmar Semi- Spec Unit

• Mrage MinDOC

• Phoenix MOPU

• Shenzi TLP

• Thunderhawk Semi

• Perdido Hub Spar

Williams Unnamed Spar EPS-Spec Unit

• Tubular Bells Spar or TLP

• Knotty Head FPS*

• Pony TLP*

• Big Foot FPS*

• GUMBO TLP*

• Kaskida Spar*/Semi*

• St Malo Spar*/Semi

• Jack Spar*/Semi

• Chuck EPS FPSO

• Sturgis FPS

• Stones Spar*

*Candidates for dry tree units

Source: Quest Offshore - 2007

Why the Trough?

Asia Pacific FPS Market



© FloaTEC 2008

7

4

9

11

13

1011

0

2

4

6

8

10

12

14

2005 2006 2007 2008 2009 2010 2011

Hull Award Year


Bunga Orkid FPSO

Blackbird/Dua FPSO

Sakhalin 5 FPSO

Kikeh Spar

Basker/Manta/Gummy FPSO

Wenchang FPSO

Tui FPSOStybarrow FPSO

Puffin FPSO

Vincent Phs 1 FPSO

Gumusut Semi

Montara FPSO

Galoc FPSO

Block H Sabah FPSO

Scarborough Semi

Echuca Shoals Semi

Kerala-Konkan FPSO

Pandora FPSO

Dhirbubhai FPSO

Rotan Spar

Petrel FPSO

Chaoshan FPSO

KG-DWN-98/2 FPSO

AC/RL3 Methanol FPSO

Liwan Semi

Ichthy’s Semi

Sunrise FLNG

MA D6 FPSO

Van Gogh FPSO

Bombay FPSO

Camago-Malampaya FPSO

Pyrenees FPSO

Asia Pacific FPS Market

Actual and Possible Awards


Africa FPS Market



© FloaTEC 2008

6

4

6 6

7

10

6

0

2

4

6

8

10

12

2005 2006 2007 2008 2009 2010 2011

Hull Award Year

A w a r d C o

u n t s

Agbami FPSO

Oudna FPSO

Antan FPSO

Mobim Bilondo FPU

Kizomba C Phase 2 FPSO

Kizomba C Phase 1 FPSO

Jimbao/Gimboa FPSO

Bilabri, Orobiri, Owanare FPSOBosi/Bosi North EPS FPSO

Usan, Usan West, Ukot FPSO

Azurite Marine FPSO

Bonga SW FPSO

Pazflor FPSO

Block 31 Northeast FPSO

Bosi/Bosi North FPSO

Block 31 Southeast FPSO

CLOV FPSO

Negage, Gabela, Lucapa, Malange FPSO

Block 31 Southeast-South FPSO

Venus FPSO

Kizomba D FPSO

Belinda Semi

Ibhubesi TLP Nord Marine FPSO

Block 32 FPSO

Block 15 FPSOGiove, Medusa FPSO

Ofrima North FPSOBaraka South East FPSO

Awa FPSO

Mahogany FPSO

Mer Profonde Nord FPSO

Block 32 FPSO



North Sea FPS Market



© FloaTEC 2008

2

3 3

1

2

4

6

0

1

2

3

4

5

6

7

2005 2006 2007 2008 2009 2010 2011

Hull Award Year

A w a r

d C o u n t s

Alvheim FPSO

Chestnut Roundship FPSO

Dumbarton FPSO

Ettrick FPSO

Gjoa Semi

Shelley FPSO (Sevan)

Skarv FPSO

Millburn FPSO (Sevan)

Pilot FPSO (Sevan)

Sevan 5 FPSO

Sevan 6 FPSO

Acorn/Beechnut FPSO

Rosebank/Lochnagar FPSO

Goliat Semi

Helvick FPSO

Luva Semi

Connemara FPSO

Skipper Semi

Spanish Point TLP

Crawford FPSO

Luva Semi



Gulf of Mexico FPS Market



© FloaTEC 2008

4

5

2

1

3

5

3

0

1

2

3

4

5

6

2005 2006 2007 2008 2009 2010 2011

Hull Award Year


• Blind Faith Semi

• Independence Hub Semi

• Neptune TLP

• Tahiti Spar

• Cascade EPS FPSO

• Exmar Semi- Spec Unit

• Mrage MinDOC

• Phoenix MOPU

• Shenzi TLP

• Thunderhawk Semi

• Perdido Hub Spar

Williams Spar EPS

• Tubular Bells Spar or TLP

• Knotty Head FPS*• Pony TLP*

• Big Foot FPS

• Mars Basin II TLP*

• Kaskida Spar*/Semi*

• St Malo Spar/Semi

• Jack Spar/Semi

• Chuck EPS FPSO

• Sturgis FPS

• Stones Spar*

*Candidates for dry tree units



S. America FPS Market



© FloaTEC 2008

33

55

7

4

3

0

1

2

3

4

5

6

7

8

2005 2006 2007 2008 2009 2010 2011

Hull Award Year

A w a r d C o

u n t s


Marlim Leste FPU

Espadarte FPSO

Golfinho Module 2 FPSO

Polvo FPSO

Frade FPSO

MPF 1000 EPS

Camarupim FPSO

Jabuti FPSO

Peregrino FPSO

Albacora FPSO

Espadarte-22 FPSO

Golfinho Module 3 FPSO

Posa FPSO

Tambau-Urugua FPSO Papa Terra FPSO

Papa Terra TLPShell Park FPSO

Roncador Module 3 Semi

Cachalote, Baleria Franca & Ana FPSO

Jubarte Phase 2 FPSO

Marlim Sul Module 3 Semi

Roncador Module 4 FPSO

Atlanta TLP

Atlanta FPSO

Marlim Sul Module 4 Semi

BM-S-22 FPSO

ES-11 FPSO

Carapicu, Caratai FPSO

Manganga, Catua FPSO

Pirambu FPSO




© FloaTEC 2008

Deepwater Market Challenges


Project Timelines are Getting Longer



© FloaTEC 2008

For IOC’s it can take up to 7 years to go from discovery to production

For Independents, it can still take up to 5 years

Appraisal programs adding to schedule

Emphasis at the front end to “get it right”

Lessons learned fosters conservatism

Project Timelines are Getting Longer

The Desire to “Get it Right”



© FloaTEC 2008

Influences Cycle Time

Reservoir Appraisal is Key



© FloaTEC 2008

Reservoir Appraisal is Key

GOM Deepwater Discoveries – 2001 to 2007



© FloaTEC 2008

GOM Deepwater Discoveries 2001 to 2007

Development will Challenge

T diti l M th d



© FloaTEC 2008

Traditional Methods

Appraisal Represents a Challenge



© FloaTEC 2008

Appraisal Represents a Challenge

Development will Challenge

T diti l M th d



© FloaTEC 2008

Traditional Methods

Rising Costs Are A Major Concern



© FloaTEC 2008

g j

Capital costs for Upstream

development projects increased ~

70% in the last 3 years Further cost inflation could slow down

projects even further

Lack of experienced staff; supply

bottlenecks are major factors

Delays and longer delivery times

pushing projects to right, further

stretching resources

Crude oil prices have followed same

trend – with forward projections to

stay at this (or higher) levels

Costs Are Eroding Returns



© FloaTEC 2008

The industry is suffering from cost explosion

Eroding ability to deliver satisfactory returns

Capital outlays have doubled in 5 years but production growth remains

flat or is in decline

Spending is up…but is investment up?

Lifting costs increasing

Costs have almost doubled in less than 3 years

Operators are looking for greater opportunities, more discipline and

better returns

Drilling and Spending More –

No Effect on Production



© FloaTEC 2008

No Effect on Production

Project Delays Are a Major Concern



© FloaTEC 2008

Project Delays Are a Major Concern



© FloaTEC 2008

Project Delays – The Reasons



© FloaTEC 2008

Portfolio gap

Resource constraints within oil

companies

• Lack of experienced staff

• Limited rig availability delaying appraisal

programs

• Delayed or extended projects extending

resources

Limited supplier capacities causing

delivery bottlenecks

Partner issues and alignment

Rising costs impacting project

economics

New Technology Qualification

Stretches Schedules



© FloaTEC 2008

Stretches Schedules

Technology can dictate pace of developments (increase of 5-6 years) Need regulatory approvals

Emphasis on system design; all pieces should fit together First Oil

Appraise FEED ExecutePROJECT

HPHT Eqpt . Qualification & Delivery

Specify& Order

FieldTest

Engineering& Design

Qualification &Limits Testing

ID/ManageGaps

FeasibilityStudies

Equipment Qualification & Delivery

Specify& Order

FieldTest

Engineering& Design

Qualification &Limits Testing

ID/ManageGaps

FeasibilityStudies

Concept Select

?? YearsGOM Deep Gas XHPHT

12 yearsShearwater

7-9 years?GOM Deepwater Deep Oil

9+ yearsMississippi Canyon Developments

11 yearsMobile Bay

Discovery to First Gas/OilDevelopment

HPHT Challenges



© FloaTEC 2008

GoM HPHT projects dominated by drilling and completion cost/technology

Dry and wet tree HPHT development options look feasible

Projects paced by technology development

Fundamental gaps exist in both wet and dry tree concepts making it difficult to make a

competent decision on the development strategy, cost and schedule,

Extensive FEED required

Materials technology development is central to progress

With qualified technology, HPHT projects can be developed with acceptable cost

and schedules

Key is reducing drilling and completion costs

HPHT Project Cost Structure



© FloaTEC 2008

High HPHT Drilling and Completion Costs make riser technology and operations critical

Source: BP

Consolidation Has Impacted

Projects and Opportunities



© FloaTEC 2008

j pp

1997

36 Independents

2007

12 Independents

Also from 1997-2007

The Birth of the Supermajors



© FloaTEC 2008

The bigger puddles of oil have also been coalescing

BP, Amoco, Arco BP

Chevron, Texaco Chevron

Conoco, Phillips ConocoPhillips

Exxon, Mobil ExxonMobil

Statoil, Hydro, Saga StatoilHydro

TOTAL, Fina, Elf TOTAL

Shell Shell199716 Majors

20077 Majors

Ultra-Deepwater: Drilling

Technical Challenges



© FloaTEC 2008

Storms and hurricanes

Loop and eddy currents

Unpredictable high pressure gasand faults near surface

10,000’ thick salt canopy with

unpredictable layers of highly

variable trapped sediments

Unpredictable base of salt – rapid

pressure differentials

“Thief zones” of significantly lower

pressure which cause lost

circulation – fluid loss

Ultra-deep reservoir with high

temperatures, high pressures and

low natural flowability

SeaLevel

40,000’

8,000’

16,000’

24,000’

32,000’

Allochthonous SigsbeeSalt Canopy

Cretaceous

Upper TertiarySediments

Autochthonous Salt

Basement

SuprasaltSediment

Gulf ofMexico

Empire State Building~500 Meters

LowerTertiary

GOM Trend – Emerging Bias Towards

Dry Tree Units



© FloaTEC 2008

Source: MMS

Wet Completions Face Depletion Challenges

Dry completion features and benefits:

Direct vertical access for well intervention

Enhances reservoir testing, monitoring, inspection and maintenance operations

Drilling and workover capabilities

Lower operating costs because of well intervention ease

Summary



© FloaTEC 2008

Cost and availability of Mobile Offshore Drilling Units (MODU’s)

Access to human resources

Inflation in the oil business has run at 30% a year over the past two years,

and will continue to rise by at least 15% a year this year and next.

Themes include strong industry fundamentals/dayrates - but higher costs

Increased cost of goods and services

Longer lead times for raw materials and major equipment items

Summary



© FloaTEC 2008

Access to fabrication and shipyard capacity

The only thing that is stopping the market from growing at a faster rate is a

global shortage of resources ranging from deepwater drilling rigs to

experienced engineers

Access to deepwater technology

The technological know-how to develop deepwater reserves is critical and lie primarily

with IOC’s

Technology is a major driver of success

Proprietary hull designs, limited players, mean business “not as usual”

…It Will Always be About the People



© FloaTEC 2008

Success in this business is not about:

Access to capital

Ownership of iron

It is about:

Engineering expertise

Operating experience

The absence of these (in the right combination) will lead to:

Poor performance (at best) or safety and environmental incidents

Enablers of long-term success



© FloaTEC 2008

Access to Technology Innovation, Engineering Resources & Fabrication Capacities -with Delivery & Operating Experience

For more information contact: Chris BartonDirector - Business Acquisition

Email: [email protected]: +1-281-701-1933

Documents

Floatec Opportunities and Challenges in the Oil and Gas Production Sector