Offshore Industry Review - Gas/Electric · PDF fileOffshore Industry Review 2013 Offshore Power and Rotating Equipment Conference R. Michael Haney Director ... FSRU: Floating Storage

1

Douglas-Westwood

Offshore Industry Review

2013 Offshore Power and

Rotating Equipment Conference

R. Michael Haney

Director

April 18, 2013

Our Business

LNG

offshore

onshore

downstream

power

LNG

renewables

About Douglas-Westwood:

• Established 1990

• Aberdeen, Canterbury, Houston,

London, New York & Singapore

Activity & Service Lines:

• Business strategy & advisory

• Commercial due-diligence

• Market research & analysis

• Published market studies

Large, Diversified Client Base:

• 800+ projects, 400+ clients, 70

countries

• Leading global corporates

• Energy majors and their suppliers

• Investment banks & PE firms

• Government agencies

© Douglas-Westwood, Inc. 2013

Industry-Leading Published Research

‘An amazing and comprehensive report’ Riverside (USA)

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Douglas-Westwood are the sector study experts’ Woodside (Australia)

© Douglas-Westwood, Inc. 2013 3

Energy Sector Trends

FPSO Market Review

Floating LNG Market Review

Other Offshore Developments

Risk Factors

Conclusions

Mike Haney: text questions to 713-385-2588

Oil & gas to dominate future global energy supplies

Source: IEA

5

The problems of oil

•Spare production

capacity challenges

•Growing oil demand 2012 car sales 80+ million (new record)

Chinese economy improving

•Supplier instability Arab spring still ongoing

Iran/US tension

Source: Credit Suisse Global Commodities Research

6

-

1.0

2.0

3.0

(2.0)

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

1995-2004 2005-2010

US

$ t

rillio

ns

Ch

an

ge i

n c

rud

e o

il p

rod

ucti

on

- m

bp

d

Change in CrudeOil ProductionOver Period (left)

Cumulative Capexover Period (right)

Each marginal barrel will be more expensive to extract:

• 1995-2004: $2.4 trillion capex increased crude oil production by 12.3 mbpd

• 2005-2010: $2.4 trillion capex saw crude oil production falling by 0.2 mbpd

Source: Barclays Capital, BP Statistical Review:

Productivity of Upstream Capital Expenditure 1995-2010

Worrying Trends – Oil Industry is Mature

7

Oil production by key IOC’s and NOC’s

8

Source: Company Reports

Increasing Reliance on Offshore Oil Production

• Offshore oil:

25% of production in 1990, 31% in 2000, 33% in 2010, 34% by 2020

• Deepwater:

0% of production in 1990, 2% in 2000, 9% in 2010, 13% by 2020

Global Oil Production 1950-2025

0

10

20

30

40

50

60

70

80

90

100

1930 1937 1944 1951 1958 1965 1972 1979 1986 1993 2000 2007 2014 2021

mill

ion b

arr

els

of

oil

per

day

Bitumen and Oil Sands

Offshore Deep

Offshore Shallow

Conventional Onshore

9

Natural Gas – fuel of the future

• A major energy resource

• Options: LNG, FLNG and GTL

• Growing impact of unconventional gas

• Gas demand to grow 50% by 2030

• New gas provinces (East Med; East Africa)

• Supply growth in deepwater gas

• Costly to transport long distances

• Local supply issues, incl. short-term disruptions

0

10

20

30

40

50

60

70

80

90

100

1930 1937 1944 1951 1958 1965 1972 1979 1986 1993 2000 2007 2014 2021

million b

arr

els

of o

il eq

uiv

ale

nt p

er d

ay

Africa

Asia

Australasia

Eastern Europe & FSU

Latin America

Middle East

North America

Western Europe

10

Gas – lowest Capex for power plants

11

1.0

2.42.8

3.1

3.94.1

4.7 4.8

5.35.6

6.0

0

1

2

3

4

5

6

Capex ($ m

llion / m

W)

Source: EIA Nov 2010

Factors driving strong gas demand

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

bill

ion to

nnes o

il eq

uiv

ale

nt

Oil

Gas

Oil +66%

Gas +216%

• Gas is abundant, a clean and efficient choice relative to oil, nuclear, coal, etc

• The ideal fuel for power generation (lowest power plant Capex)

• Potential for gas to liquids for transportation fuels

• Growth potential in transportation (marine fuel, road transport)

• Compared to oil, gas is grossly underpriced in many markets

Source: BP

12

13

0

2

4

6

8

10

12

14

16

0

100

200

300

400

500

600

700

2006 2007 2008 2009 2010 2011 2012

Re

gio

nal G

as P

rice

($U

S

per

mill

ion B

tu)

Gas C

onsum

ption (

bcm

)

0

2

4

6

8

10

12

14

16

0

100

200

300

400

500

600

700

2006 2007 2008 2009 2010 2011 2012

Re

gio

nal G

as P

rice

($U

S

per

mill

ion B

tu)

Gas C

onsum

ption (

bcm

)

0

2

4

6

8

10

12

14

16

0

100

200

300

400

500

600

700

2006 2007 2008 2009 2010 2011 2012

Re

gio

nal G

as P

rice

($U

S

per

mill

ion B

tu)

Gas C

onsum

ption (

bcm

)

0

5

10

15

20

0

100

200

300

400

500

600

700

2006 2007 2008 2009 2010 2011 2012

Re

gio

nal G

as P

rice

($U

S

per

mill

ion B

tu)

Gas C

onsum

ption (

bcm

)

Domestic ProductionNet ImportedRegional Gas Price

Regional Disparities: Gas Prices

• Low US gas prices have made

headlines

• Booming shale gas production,

particularly for ‘wet’ liquids-rich gas

• Gas prices are increasing in many

gas-importing countries

• International prices can exceed US

levels by 3-5 times

Jap

an

C

hin

a

UK

U

SA

$18

$12

$9

$3

• Disparities occur due to

the local nature of gas

markets

• Gas not a globally traded

commodity

• Oil and gas pricing

mechanisms differ

• Fukushima impact on gas

prices felt across Asia

13

0

100

200

300

400

500

600

1959 1963 1967 1971 1975 1979 1983 1987 1991 1995 1999 2003 2007 2011 2015 2019

mm

tpa

AfricaAsiaAustralasiaEastern Europe & FSULatin AmericaMiddle EastNorth AmericaWestern Europe

Strong growth in LNG supply

• 30% of global gas imports are already via LNG

• Growth in recent years driven by Middle East – Qatar and Yemen

• In 2014/2015, Australian trains should commence production

• Potential future supply from Russia, US shale gas, W & E Africa & Mediterranean

• Potential role for FLNG

2001-2010 CAGR +9%

2011-2020 CAGR +7%

Source: Douglas-Westwood

14

Major Chinese Investments 2011 & 2012

15

Major Chinese investments in 2011 & 2012 Source: Various public sources

Brazil:

1) $4.8 billion for 30% stake in Galp Energia

2) $7.1 billion for a 40% stake in Repsol’s Brazil

operations. (Dec 2010)

3) $20 bn by Sinopec for BG’s Santos stake

Australia Increased

stake to 25% in APLNG.

USA

1) Sinopec, CNOOC and Saudi

Aramco in $2.2 bn bid to acquire

share of FracTech, a US fracking

services company

2) Sinopec, Total is possible

collaboration in US shale

exploration

Argentina Bridas deal cancelled

Afghanistan $200-300 m

to develop 3 oilfields

Canada

1) $2.5 bn for 100% stake in Mackay River & Dover Projects

2) $5.4 billion for 50% stake to develop Cutback Ridge

3) $2.13 billion for oil sands fields in Calgary-Alberta region

4) $570 million for 33.3% stake in Niobrara and OPTI Canada

Bangladesh CHT exploration

China

1) Shell +Petro China investing in shale

2) Sinopec + ENN bid $2,15 billion for

75% stake in China Gas Holding

3) Petronas, CNPC in CBM talks

4) CNPC to double pipeline network by

2015, +64,000 km pipe

5) Hess pulls out of Daqing shale study

6) PetroChina and Shell is Ordos CBM

project

Uganda 1/3rd stake in

Tullow Oil’s operations.

Kurdistan Sinopec JV in

FEED to expand oil

production by 90 kbpd

Thailand Two Thai units of CNPC have signed a

contract with unlisted Thai Petroplus to jointly

seek petroleum exploration rights in Thailand

Iran CNPC looking at two oil and

gas export pipelines to China

Iraq CNPC, CNOOC make

the cut in 4th round licensing

Cuba CNPC LOI for

E&P, refinery refurb,

EOR projects

Tension builds offshore China

16

• Tensions between China, Philippines

and Vietnam over the South China Sea

• Included in new Chinese passport map

• China has potential to double it gas

reserves?

• East China Sea: tensions between

China and Japan who turns to US

• Hu Jintao urged the next Chinese

leaders to turn the country into “a

maritime power” to “resolutely safeguard

China’s maritime rights & interests”

• Wang Yilin (head of CNOOC) “lay aside

disputes and develop it jointly with

IOCs”

Source: FT November 11 2012 Sept 2012

Nov 2012

Viability of Oil and Gas Developments ($/bbl)

17

0 50 100 150 200 250 300 350

2011 E&P Budget Assumptions

Arctic Oil

Coal to Liquid

Oil Shale

Canadian Oil Sands

Venezuela Orinoco Belt

Deepwater

Brazil Pre-Salt

Other Conventional Oil

Middle East

US $/bbl

Co

nv

en

tio

na

lN

on

-Co

nv

en

tio

na

l

Viable Projects Non- Viable Projects

0 50 100 150 200 250 300 350

2011 E&P Budget Assumptions

Arctic Oil

Coal to Liquid

Oil Shale

Canadian Oil Sands


Deepwater

Brazil Pre-Salt


Middle East

US $/bbl

Middle East


Brazil Pre-Salt (Deepwater)

Deepwater


Canadian Oil Sands

Oil Shale

Coal to Liquid

Arctic Oil

Source: Financial Times; Barclays Capital; Company Data


FPSO Market Review



Risk Factors

Conclusions


• Deepwater – increasing activity

• Remote locations – more will be developed

• Re-deployable – cost can be amortised over several fields

• Can be leased – lower up-front costs. 44% of FPSOs currently operating on a

leased basis

• Small fields can be economically produced – many of them via tiebacks

• Increasing uptake of subsea field development technology

• Fast route to first oil – speeds project cash flow.

FPSO Market Drivers

19

Leading Indicators – Increasing Offshore Production

0

10

20

30

40

50

60

70

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

mil

lio

n b

op

ed Deep Gas

Deep Oil

Shallow Gas

Shallow Oil

• Rapid growth in offshore

production to exceed 60 million

boepd (including gas) by 2020

• Shallow oil will remain flat while

gas increases in dominance from

Middle East & Australasia

• Deepwater triangle (West Africa,

Latin America, North America) to

dominate production volume over

next decade

20

Leading Indicators – Offshore Rig Orders

21

• Strong correlation between oil price & rig orders

• Rising oil prices increases the viability of

exploration in deeper waters

• As drilling and depth requirements increase, a

number of rigs are cold stacked or modified

• When will the present cycle end?

Source: Douglas-Westwood & Rigzone

0

20

40

60

80

100

120

0

10

20

30

40

50

60

70

80

90

100Drillship

Semisub

Jackup

Oil Price1979 – 1984

284 Delivered 2008 - 2013

276 Delivered

Leading Indicators - Deepwater Capex to soar

Deepwater Capex: $223 billion (2013-17)

Source: DW World Deepwater Forecast

• Golden Triangle – GoM, West Africa and Brazil (led by Petrobras) continue to

lead growth in water depths greater than 500m

• $223 billion will be spent over next five years – 99% increase over last 5 years

22

Deepwater Capex by Component

• Drilling and completion capex will total $76 billion during 2013-17, more than

double the prior five year period

23

Deepwater Capex: $223 billion (2013-17)


Global FPSO Fleet

24

Floating Production System Capex by Region

25


Floating Production System Capex by Type

26


• Local content: Petrobras aiming to source up to 70% of its FPS related

equipment from local providers.

• OGX also planning to source most of its units from Brazilian shipyards, in

particular those owned by its parent company EBX.

The Importance of Brazil

27


FPSO Market Review



Risk Factors

Conclusions


The LNG & FLNG Value Chain

Onshore

Terminal

PRODUCTION

Onshore

Terminal

LIQUEFACTION

LNG FPSO

FSRU: Floating Storage

& Regas Unit

TRANSPORTATION REGASIFICATION

GAS

LNG

Offshore

Reserves

Offshore

Production

Platform

Onshore

Reserves

Onshore

Production

Facility Distribution

Pipelines

LNG CARRIER

RV: Regasification

Vessel

ONSHORE

OFFSHORE

29

FLNG Market Penetration

Floating regasification – several in service, becoming increasingly popular

• Cheap compared to onshore

• Short lead times (18 months)

• Ease of construction

• Seasonal/temporary fix

Floating Liquefaction – emerging industry

• Enables production from stranded gas fields – no long pipelines to shore

• Combined production & liquefaction

• Possible cost advantages compared to onshore plants

Key Analysis

• Still considered a niche technology for specific applications

• Prelude and Petronas projects approved – backed by supermajor and NOC

• Can smaller operators handle these projects?

30

FLNG Focus Areas Around the World

31

Brazil –

Pre-salt Petrobras

developments

Africa –

Stranded gas,

gas flaring and

new discoveries

Parts of the Middle

East –

Security concerns

Western Europe and the

Mediterranean Rim –

Stranded gas and security

concerns

Timor Sea –

Stranded gas

South East Asia –

Stranded gas and rapidly

growing consumption in

cities

North America –

Unconventional gas

production

Arctic –

Remote locations

Douglas-Westwood Modelling Methodology

32

• Project data from DW database, compiled from industry referencing and public domain sources.

• Project-by-project scrutiny to build a realistic view of project timing/success

• Expenditure model – Capex phased over the lifecycle of the project

• Expenditure segmentation – applied on a % basis to segment overall capex into key

expenditure segments

• Allows forecasts to be presented split by facility type, region, or service.

In development: 26 mmtpa capacity of LNG FPSO projects in 12 key projects

• Partners – GDF Suez, Santos

• Size – 2.5 mmtpa

• Owned

• Fields – Offshore – Petrel,

Tern, Frigate

• Onstream: 2019

Bonaparte

Pre-FEED

Partners – Petromin


• Leased

• Fields – Offshore – Papua

basin

• Expected FID: 2013

• Estimated Onstream: 2017

PNG FLNG

FEED

• Partners – Petronas


• Owned

• Fields – Offshore – Kumong

Cluster, Kanowit

• FID: 2012


Kanowit, Kumong

FID

• Partners – Shell, Kogas

• Size – 3.6 mmtpa + LPG &

condensate

• Owned

• Fields – Offshore – Prelude,

Concerto, Crux

• FID: 2011


Prelude

Under Construction

• Partners – PTTEP

• Size – 2 mmtpa

• Leased

• Fields – Offshore – Cash,

Maple

• Onstream: 2019

PTT FLNG

Pre-FEED

• Partners – Petrobras, BG,

Repsol


• Owned

• Fields – Offshore – Santos

basin fields

• Onstream: 2017

Brazilian Pre-Salt

FEED

• Partners – Unknown


• Leased

• Fields – Onshore – Shale gas

• Onstream: 2019

Port Lavaca US Shale Gas

FEED

BC LNG

FEED

• Partners – Noble Energy


• Leased

• Fields – Offshore – Tamar


Tamar

Pre-FEED

• Partners – Inpex, Shell


• Unknown – probably Owned

• Fields – Offshore – Abadi

• Expected FID: 2014


Abadi

Pre-FEED

• Partners – Tom Tatham, Haisla

First Nation


• Owned

• Fields – Onshore – Shale gas

• Onstream: 2018

• Partners – Petronas, Murphy

Oil


• Owned

• Fields – Offshore – Rotan, Biris


Rotan

FEED

Owned

14.9 mmtpa

Leased

11.5 mmtpa

• Partners – Pacific Rubiales


• Leased

• Fields – Various

• Onstream: 2017

• Includes Regas function

Pre- FEED

Colombia coast

FLNG Projects

33


FPSO Market Review



Risk Factors

Conclusions


Subsea Vessel Types

35

Subsea Vessel Market Forecast

36

Offshore wind

37

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

An

nu

al A

dd

itio

nal C

ap

acit

y (M

W)

UK

Germany

China

Netherlands

Denmark

Belgium

Others

Source: Douglas-Westwood

• Europe: German ramping up with 4.7 GW of new capacity expected. UK has been

the largest market but has stalled due to uncertainty over electricity market reform.

• Asia: China accounts for almost all demand in the period.

• Planned projects for the Republic of Korea, Taiwan and Japan with some

demonstration project activity towards the end of the forecast period.

The largest offshore

wind turbine

manufacturer Siemens

is reporting a

slowdown in UK

orders. Vestas and

Repower report no

orders in the UK since

October 2011.


FPSO Market Review



Risk Factors

Conclusions


What could derail the FPSO and FLNG business?

• Widespread recession and associated fall in oil/gas demand and prices

• Political instability and discontinuity

• Competing sources of natural gas in certain markets

• Growth constrained by bottlenecks in the supply chain

• Technology barriers to adoption

39

40

FPSO Supply Chain

40

41

Contractor Overview

42

FLNG Supply Chain

Potential for Construction Vessel Shortages

• Vessels: “number of vessel days in deep waters is set to increase by more

than 50% over the next five years.” - The World Subsea Vessel Operations Market 2011-2015,

Douglas-Westwood (ROVSV, DSV, Flexlay, LWIV and Pipelay )

• Competing needs for Heavy lift vessels:

• $70 billion of N. Sea decommissioning to occur - UK; 260 platforms, 2.4

million MT steel, 5,000 wells

• $160 billion investment in UK offshore wind 43

Delays to Project Sanctioning and Commissioning

44

Delays to Project Sanctioning and Commissioning (2)

45

Will unconventional gas spoil or join the FLNG party?

• Huge potential resources. Wildly varying and fluctuating estimates

• Unconventional gas piped delivery is a competitor to LNG

currently – North America; future – China, Europe?

• But many markets remain beyond economic pipeline length

• Unconventional gas could also become a major feed for LNG

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Africa Asia Australasia FSU & Eastern

Europe

Latin America

Middle East North America

Western Europe

% o

f to

tal g

as

re

se

rve

s

Conventional

UnconventionalSource: Kawata & Fujita

picture: gohaynesvilleshale.com

46

47

• Oil field services (OFS)

headcount levels surging

• Recession proved a minor

setback, but employment

anticipated up 12% again this

year

• Halliburton will hire 5,000

engineers and geologists this

year

• FMC to hire 240 in Bellshill and

Dunfirmline. Reporting

engineering shortages in recent

update

0

50

100

150

200

250

300

350

2004 2005 2006 2007 2008 2009 2010

OF

S J

ob

s (

tho

us

an

d)

Includes Baker Hughes, Schlumberger, Halliburton, NOV , Weatherford, BJ

Services and Smith

Headcount from Leading OFS Companies 2004-2010

Skills Shortages


FPSO Market Review



Risk Factors

Conclusions


Conclusions

• Long-term industry energy fundamentals are sound

• The offshore business is busier than it has ever been: many OFS

companies report record backlogs and/or orders

• Fundamental drive to develop offshore hydrocarbons has not changed

• Strong demand for deepwater oil is driving FPSO demand

• Gas has a major role to play in power generation and as an oil substitute

• FLNG is becoming an increasingly adopted regasification option, and

FLNG liquefaction is on the way

• Unconventional gas is both a competing and complementary source

• Industry needs to consider supply-side constraints and plan accordingly

49

50

Thank you

Mike Haney, Director, Houston Office

Email: [email protected]

www.douglaswestwood.com Mike Haney: text questions to 713-385-2588

Documents

Offshore Industry Review - Gas/Electric · PDF fileOffshore Industry Review 2013 Offshore Power and Rotating Equipment Conference R. Michael Haney Director ... FSRU: Floating Storage