Global Offshore Oil and Gas Outlook

John Ferentinos – Infield Systems

Gas/Electric Partnership 2013
 Disclaimer

The information contained in this document is believed to be accurate, but no representation or warranty, express or implied, is made by Infield Systems
Limited as to the completeness, accuracy or fairness of any information contained in it, and we do not accept any responsibility in relation to such information
whether fact, opinion or conclusion that the reader may draw. The views expressed are those of the individual contributors and do not represent those of the
publishers.

Some of the statements contained in this document are forward-looking statements. Forward looking statements include, but are not limited to, statements
concerning estimates of recoverable hydrocarbons, expected hydrocarbon prices, expected costs, numbers of development units, statements relating to the
continued advancement of the industry’s projects and other statements which are not historical facts. When used in this document, and in other published
information of the Company, the words such as "could," "forecast”, “estimate," "expect," "intend," "may," "potential," "should," and similar expressions are
forward-looking statements.

Although the Company believes that its expectations reflected in the forward-looking statements are reasonable, such statements involve risk and uncertainties
and no assurance can be given that actual results will be consistent with these forward-looking statements. Various factors could cause actual results to differ
from these forward-looking statements, including the potential for the industry’s projects to experience technical or mechanical problems or changes in
financial decisions, geological conditions in the reservoir may not result in a commercial level of oil and gas production, changes in product prices and other
risks not anticipated by the Company. Since forward-looking statements address future events and conditions, by their very nature, they involve inherent risks
and uncertainties.

© Infield Systems Limited 2013

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Infield Systems Ltd.
A globally recognised oil & gas consultancy with a dedicated international team of
cross-sector specialists
Office Locations Key Global Personnel
James Hall (Director)
London
james.hall@infield.com +44 207 423 5024

Anna Karra (Consultant)

London
ioanna.karra@infield.com +44 207 423 5026
Aberdeen
London Gregory Brown (Consultant)
London
gregory.brown@infield.com +44 207 423 5032
Houston
Luke Davis (Senior Analyst)
London
luke.davis@infield.com +44 207 423 5023
Singapore
John Ferentinos (Analyst)
London
Head Office
john.ferentinos@infield.com +44 207 423 5036
Regional Office
JV/Representative Office

Steve Adams (International Sales Manager)

34 Energy Professionals covering all geographic regions London
steve.adams@infield.com +44 207 423 5000

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Products & Services
A leading offshore oil and gas and associated services consultancy

Data, Reports & GIS Mapping Business Strategy & Analysis Transaction Services
• Market matching and market tracking
• Offshore specific data covering
– “Match & Track”
production infrastructure, rigs, • Pre IPO due diligence
• Complete market intelligence
specialist vessels, construction yards, • Market overview IPO
outsourcing
contracts and OFS providers • Debt financing analysis
• Bespoke sector services
• Sector specific reports • Distressed asset purchases
• Market entry strategy
• GIS mapping services covering • Buy/sell side market due diligence
• Procurement strategy advisory –
operational and forecasted production • Opportunity identification
“Project Flow”
infrastructure
• Ad-hoc sector analysis

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Agenda

I. Macro Market
• Oil – Gas Prices
• Key Industry Trends

II. Offshore Gas Frontiers

• Shale Gas Impact
• East Africa
• Arctic

III. Offshore Capex

• Platforms
• Subsea

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Oil Price 2012
Brent will likely be traded within a relative narrow range between $100 - $120/bbl
A Tight Trading Range for Brent
• $90/bbl floor:
150
Would spur supply responses from oil
$/bbl

Demand Responses producing countries (i.e. Saudi Arabia)

Riyadh’s 2013 budget: US$219bn (+19%),
130
requires c.$70 oil price minimum

• $120/bbl ceiling:
110
High prices already driving exploration
and development of new resources (tight
oil, oil sands, biofuels, ultra-deepwater,
90 harsh environments)
Substantial drag on global economic
Supply Responses
growth
70

Trading Range BRENT

6
Sources: Infield, EIA
 Gas Price Dynamics
Price divergence between key markets will narrow
Gas Price Forecast
20 16.5
• Price shocks in the wake of
Fukushima etc.
15
$/mmbtu

10
2012:
5
• Global gas consumption grew by 2%
0
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Japan EU US • Non–OECD consumption grew 2.8%
Global Gas Demand
OECD Non-OECD China Japan
• OECD consumption grew by 1%.
3000

• Non-OECD will account for 76% of

Bcm

2000

1000 global gas demand growth to 2030

0
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020

7
Sources: Infield Systems, BP
 Offshore Production Gains Ground…
• Onshore production has levelled-out
• More E&P activity is taking place in deeper waters, remote locations & harsh
climates.
• 30% of the world’s oil production comes from offshore areas

Onshore vs. Offshore Oil Production

Onshore Offshore Shallow Water Offshore Deep Water
9%
80
Million barrels per day

24%

60

40
67%

20

0
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 Percentage %

8
Sources: Infield Systems, BP
 Marginal Fields…
Fields On-Stream Year by Reserve Size and Water Depth
3,000m.
2,500m.
Metres

2,000m.
1,500m.
1,000m.
500m.
0m.
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Fields by Reserve Size & Production Rate

Oil Fields Gas field Smaller Fields with

Average production

16,000 higher production rates

rate (boepd)

12,000

8,000

4,000
Year on-stream
0
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

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Source: Infield Systems
Further – Remote – Harsher
• Installation location of production platforms - 10km in 1970
Present: Husky’s SeaRose FPSO, Canada – 350km from shore
• Chasing viability of marginal fields enables longer tiebacks
• Lack of existing offshore infrastructure or onshore refining capacity in new frontiers

Increasing Tieback Length

Maximum tieback length Average tieback length
200 KM
Gorgon LNG Phase 1
175 KM Albatross
150 KM Tamar, Israel

125 KM MC Mensa

100 KM
Saurus, Egypt
75 KM
50 KM
2012: 13Kms
25 KM 2000: 10Kms
0 KM
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

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Sources: Infield Systems
Shale Gas Reserves
6,600tcf in 33 countries.
Latin America 1,900tcf , China 1,275tcf, US 482tcf, Canada 388tcf, South Africa 485tcf

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Sources: Infield Systems, EIA
 Effects of Shale Gas
• US could become a net exporter of NG over the next decade
• US currently supplied from Canada and Mexico & LNG shipments from Africa
• US exports might put pressure on Australian LNG and CBM (Coal Bed Methane)
projects - Shtokman
US Gas Production (TCF/year) (EIA)

30

25 Consumption

20 Shale gas
TCF/year

15
Tight gas
10
Onshore conventional
5
Offshore
0
Coalbed methane
1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

12
Sources: Infield Systems, EIA, BP
Effects of Shale Gas on US GoM
Dramatic effect on US shallow water investment
Shallow Platform Installations vs. E&A Wells
• Continued expectation of low platform
600 installation numbers in the US

500 • Drillers, service providers and

construction operators continue to
400 report low utilisation and have had to
switch focus
300

200
• However, opportunities do lie in the
deeper waters of the GoM
100 ‐ Tiber, Lucius, Hadrian…

0
1970 1975 1980 1985 1990 1995 2000 2005 2010

E&A Wells Platform installations

13
Sources: Infield Systems, EIA, Reuters, BOEMRE
US GoM Drilling Trends
Shallow water gas market depressed, deep water drilling activity robust
US GoM Permit Approvals (new wells only)

400

350

300

250

200

150

100

50

0
2007 2008 2009 2010 2011 2012
Deep Shallow
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Source: BOEMRE
East Africa – New LNG Frontier
According to the UGS over 250 Tcf of natural gas may lie off East Africa
New Gas Fields Offshore East Africa

70,000

60,000

50,000

Gas Reserves BCF

40,000

30,000

20,000

10,000

0
2007 2008 2009 2010 2011 2012
Mozambique Tanzania

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Source: USGS
Arctic Resources
412Bboe of Undiscovered Resources - 84% of it is thought to be Offshore

Hebron
Hibernia

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Sources: Infield Systems, USGS
Offshore Arctic Resources
There are 174 discovered fields in the offshore Arctic - 137 Bboe
Discovered Natural Gas Reserves (Bcf) by Country
• The offshore Arctic is primarily a natural 600,000
gas play 500,000
400,000
300,000
• 85% is natural gas against 13% are oil 200,000
100,000
0
• Discovered resources are 83% Russian Canada Canada Norway
(Arctic
Russia Russia USA
(Sakhalin) (Alaska)
(high Arctic and Sakhalin Island): Ocean)
Discovered Oil Reserves (Mbbl) by Country
5,000
• Large number of super-giant fields
4,000
3,000
2,000
1,000
0
Canada Canada Norway Russia Russia USA
(Arctic (Sakhalin) (Alaska)
Ocean)

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Source: Infield Systems
Offshore Arctic – Stop or Go?
Offshore Arctic faces an extremely uncertain future
Shtokman – Indefinitely Delayed

• Two speed Arctic

‐ Oil better than gas
‐ Sub-Arctic/ice-free areas better than
high-Arctic
‐ Onshore better than offshore

• Unconventional and deepwater Kulluk drill rig grounded – Jan 2013

resources will continue to hold back
Arctic
• Long lead times: a decade until new
production

18
Source: Infield Systems, www.vancouversun.com
Global Capex
• A 800$bn Industry until 2018
• Subsea investment is growing faster – 14% GAGR

Global Capex by Infrastructure

160,000
Pipeline Platform Subsea ControlLine SPM
140,000
120,000
US$(m)

100,000
80,000
60,000
40,000
20,000
0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
19
Sources: Infield Systems, EIA, BP
 Offshore Capex 2012-2018
A migration to deeper waters albeit with conventional demand remaining buoyant
10%
11%

56 21 86%
84%
% %

North America:US$66bn Europe:US$135bn

89 Asia:US$146bn
%
21%
35% M.E :US$74bn

44% 16
20% 27
%
%
Africa:US$120bn
58
% 84
18%
62% %
Latin America:US$107bn
Austalasia:US$54bn

Global:US$706bn Shallow Water Deep Water Ultra Deep Water

0-499 m 500-1499m 1500m+

NOTE: Global infrastructure spend by region includes subsea, pipeline, platform, control line
and SPM installations. Capex in this analysis include EPIC but excludes drilling.
Operational Platforms in 2012
Operational Fixed: 10,700 Installations Fixed: 185
Operational Floaters: 395 Installations Floating: 28

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Sources: Infield Systems
Operational Platforms in 2018
Operational Fixed: 9,060 Installations Fixed: 280
Operational Floaters: 540 Installations Floating: 60

Energy Engines
Cernambi North 98 MW 4 units
Lula Alto P66 96 MW 4 units
Guanabara FSRU 49 MW 2 units

Energy Engines Energy Engines

Egina FPSO 126 MW 5 units Ichthys Floaters 250 MW 10 units
CLOV FPSO 109 MW 5 units Sunrise FLNG 135 MW 5 units
Prelude FLNG 120 MW 3 units

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Source: Infield Systems
 Subsea Market
Subsea Tree Installations are increasing… Ultra-deep Rig Fleet is increasing…

670 Midwater
700
Deepwater
600 400 Ultradeep Water 217
136
500
Tree Installations

300 60%
400 327

Rig units
300 200

200
100
100

0 0

2013
1990
1998
2000
2002
2004
2007
2009
2011

2015
2017
2019
2021
Installation Year Operational Year

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Sources: Infield Systems
Field Sanction Points
Current oil price is sufficient to support the vast majority of developments
Average Field Sanction Point by Water Depth

0m
• Shallow water reserves clustered
Shallow between $10-30/bbl
500m
Deep
• Conventional fields easily viable in all
1,000m
price scenarios
1,500m
Ultra
Deep • Deepwater fields: $36 - $80/bbl
2,000m across regions and operator types.
Water depth (m)

2,500m

3,000m

3,500m
$0 $10 $20 $30 $40 $50 $60 $70 $80 $90$100$110

Sanction Price ($/bbl)

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Source: Infield Systems
 Questions?

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