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Arctic Oil & Gas Prospects for The Final Frontier
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Arctic Oil & Gas Prospects for The Final Frontier

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Douglas-Westwood Chairman, John Westwood speaks at the seventh annual Arctic Oil & Gas conference.

Douglas-Westwood Chairman, John Westwood speaks at the seventh annual Arctic Oil & Gas conference.

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Arctic Oil & Gas Prospects for The Final Frontier Presentation Transcript

  • 1. Arctic Oil & Gas Prospects for The Final Frontier John Westwood Chairman, Douglas-Westwood Douglas-Arctic, Oslo, 29 Nov 2011 1
  • 2. www.dw‐1.com Our Business History and Office Locations • Established 1990 • Aberdeen, Canterbury, London,                New York & Singapore Activities & Service Linesoffshore power • Business strategy & advisory  • Commercial due‐diligence ld dl • Market research & analysis • Published market studies Published market studies Large, Diversified Client Baseonshore • 750 j t f li t i >70 750 projects for clients in >70  LNG LNG countries worldwide • Leading global corporates gg p • Energy majors and their suppliers • Investment banks & PE firms • Government agencies Arctic, Oslo, 29 Nov 2011downstream © Douglas-Westwood Limited 2011 renewables 2
  • 3. Energy macro factors Arctic regions – a grand tour Realities ConclusionsArctic, Oslo, 29 Nov 2011 3
  • 4. The drivers • Oil demand is growing • Gas is top power gen fuel • Supplies are limited • Lowest Capex plant • Depleting at 3Mb/d • Impact of Fukushima • Oil prices will rise • Shortages in some markets • New sources are needed • Strong growth in demand • Oil prices can jjustify Arctic E&P p y (up 50% by 2030. Shell CEO)Arctic, Oslo, 29 Nov 2011 4
  • 5. 33 significantoffshore Arcticproduction d tifacilities &terminalsexisting orplannedSource: Worley ParsonsArctic, Oslo, 29 Nov 2011 5
  • 6. 412 bn boe yet to find?• Over 400 fields discovered. 240 bn boe?• 13% of the world’s undiscovered oil ?• About 30% of the world’s undiscovered gas• Approx 84% offshoreArctic, Oslo, 29 Nov 2011 source:USGS 6
  • 7. Energy macro factors Arctic regions – a grand tour Realities R liti ConclusionsArctic, Oslo, 29 Nov 2011 7
  • 8. AlaskaArctic, Oslo, 29 Nov 2011 8
  • 9. Alaska • Shell operator for new production • Acquired OCS leases in 2005 for $2.2 bn • Had drilled these areas b f H d d ill d th before • Multiple smaller fields in Beaufort • Larger fields in Chukchi • Start drilling again 2012? • Conoco-Phillips and Statoil important but a few years behind Sh ll f b hi d Shell • BP looking to develop viscous / heavy oil from existing Prudhoe Bay fields • Overall plans for Alaska are ambitious • Re-fill Trans Alaska Pipeline • = larger volume than GoM production • = 12% of US total consumption p • Economy: 155,000 jobs in prospect? • Blighted by bureaucracyArctic, Oslo, 29 Nov 2011 9
  • 10. Key Shell Alaskan projects • Beaufort • Seven smaller fields offshore (OCS) • Seven Se en platforms • Relatively near Trans Alaska Pipeline • 235 total miles pipeline length • Relatively simple reservoir structure • Shallow water • First oil cc. 2020 • 0.6 0 6 mbpd oil production • 6.4 bbl cumulative oil production to 2057 • Chukchi • Four large fields • 680 miles total pipeline on/offshore • First oil 2022 • 1.2 mbpd oil production • 6.0 bbn cumulative production to 2057 • Total investment: >$30 bn Shell Leases in the Chukchi and Beaufort • Total value of oil: $1 2 trillion $1.2 Source: Shell • Total value all hydrocarbons: $2.4 trillionArctic, Oslo, 29 Nov 2011 10
  • 11. Trans Alaska pipeline at risk TAPS 2011  ♦ Throughput Viability threshold? Trans Alaska Pipeline Through-put: “As is” and with OCS Increment Source: Shell graph (volumes only), EIA, other sources for TAPS viability threshold • V t majority of Alaskan oil production t Vast j it f Al k il d ti transported via th TAPS t d i the • Pipeline capacity: 2.1 Mbpd; but in 2011 0.56 Mbpd expected • Minimum volumes for continued operation: 0 3 mbpd ? 0.3 • Without the TAPS, Alaskan oil resources would be materially stranded • Shell first oil still ten years away. Can BP heavy oil fill the gap? • Will complacency about the future of TAPS turn into panic?Arctic, Oslo, 29 Nov 2011 11
  • 12. CanadaArctic, Oslo, 29 Nov 2011 12
  • 13. Canada • Extensive drilling in the 1970s &1980s • $18 billion has been invested to date • Many complex fractured reservoirs • G transportation a big issue Gas t t ti bi i • Atlantic offshore estimated at 178 mcm oil and 25 bcm gas • Offshore production Newfoundland (oil) ( ) & Nova Scotia (mostly gas) • Projects: Sable Island fields, Hibernia, Terra Nova, White Rose, Deep Panuke Nova Rose • Statoil very active. Successful bidders offshore Newfoundland and Labrador, west of Statoil’s Mizzen discoveryArctic, Oslo, 29 Nov 2011 13
  • 14. GreenlandArctic, Oslo, 29 Nov 2011 Source: Cairn 14
  • 15. Greenland – few wells to dateArctic, Oslo, 29 Nov 2011 Source: Cairn 15
  • 16. Greenland – E&P activityMelville Sub Basin (MB) Five licences – • W t Greenland – 7 operators Western G l d t Awarded 2011 • Cairn, ConocoPhillips, DONG, Husky Energy, Maersk Oil, PA R E M k Oil Resources, Shell and Nunaoil (NOC) West Disko Blocks (WD) Nine licences – • C i h ld 11 out of th 20 li Cairn hold t f the licences. Awarded 2007, 2008, 2011 • Cairn – five-well programme • Northeast Greenland – 2012 Round will open further exploration Ungava Area (UA) Two licences – Awarded 2002 & 2005 • The 2013 Round will open to all interested companies • Opportunities in W Iceland waters? Southern Greenland (SG) Four licences – Awarded 2008 & 2009 A d dArctic, Oslo, 29 Nov 2011 16
  • 17. NorwayArctic, Oslo, 29 Nov 2011 17 Picture Statoil
  • 18. 180 160 140 production • Despite recent finds, 120 llion) consumption Norwegian production 100 T.O.E (mil is in decline 80 Source: BP & Douglas-Westwood 60 40 20 0 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 100 Manufacturing & Marketing 90 80 Natural Gas International E&P • Since 2004 Statoil’s largest spend has been outside of Norway Billion NOK 70 E&P Norway 60 Future • To assure continued national spend 50 levels development of the High 40 North is essential 30 Statoil Annual Capex 20 Source: Statoil & Douglas-Westwood 10 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Arctic, Oslo, 29 Nov 2011 18
  • 19. 2010 2000 1990 1980 1970s The great northern 1960s migration Stavanger 29 Aug 2011 continuesArctic, Oslo, 29 Nov 2011 19 19
  • 20. TMDC signed 15 September 2010, Norway  and Russia signed the Treaty on  Maritime Delimitation and  Cooperation in the Barents Sea  Cooperation in the Barents Sea and the Arctic Ocean. Arctic, Oslo, 29 Nov 2011 20
  • 21. Barents Sea bonanza? • Skrugard a breakthrough in this area? • Opens up a new oil province •CCurrent estimate f t ti t from the operator: 150- th t 150 250 million barrels boe + 250 million boe • 1,250 m WD , • Norvarg gas find in the Barents SeaArctic, Oslo, 29 Nov 2011 21
  • 22. RussiaArctic, Oslo, 29 Nov 2011 22
  • 23. Russian Barents Sea – considerable prospects• Fields discovered in the 1970s still undeveloped• Conflicting interests among Russian state bodies have b di h stalled decisions E&P on Barents acreage• Many planned Russian projects in WD <100mArctic, Oslo, 29 Nov 2011 23
  • 24. Russia – a determination emerges “Exxon and Rosneft will invest $3.2bn (£1.9bn) in  developing East Prinovozemelsky Blocks 1, 2, and  3 in the Arctic Kara Sea and the Tuapse licensing  block in the Black Sea”.    FT 30 Aug 2011 “Russia can double its oil reserves if the  government is determined to exploit the  government is determined to exploit the potential in the Arctic”:                                    Sergey Chaplygin, CEO Lukoil Dow Jones, 7 Sept 2011 “Russia will consider shifting the tax burden for high  cost offshore oil drilling from taxes on revenues to  ff h il d illi f taxes on profits to encourage development of the  Arctic,” Deputy Finance Minister Sergei Shatalov.                   Reuters 27 Nov 2011Arctic, Oslo, 29 Nov 2011 24
  • 25. Energy macro factors Arctic regions – a grand tour Realities R li i ConclusionsArctic, Oslo, 29 Nov 2011 25
  • 26. E&P – Arctic offshore poses great challenges Exploration Drilling Production • All the challenges of deepwater + the Arctic environmentArctic, Oslo, 29 Nov 2011 26
  • 27. Key challenges for Arctic production platforms Engineering & Design • Metocean, Seismic, Ice considerations  • Off loading system interruptions, Emergency shutdown and Offshore supply strategy  • Off‐loading system interruptions Emergency shutdown and Offshore supply strategy • Extreme weather protection ‐ Icing due to sea spray, Effective Winterization  (insulation, heating, power demand)  • Weight management – effect of Ice weight on Topsides and Sea Ice loads  • Weight management effect of Ice weight on Topsides and Sea Ice loads • Ice compliant floatable escape and evacuation system  • Ice compliant disconnect and reconnect systems for FPSOs  • Environmentally compliant produced/drains water treatment and disposal  Construction  • Construction and commissioning issues using Topsides Floatover technique  • Offshore Operations Limitations for Construction Vessels  • Logistics – Handling and transport issues, Ice breakers  • Metallurgy and Interface management  Metallurgy and Interface management Operation  • Operation in hostile environment  • Transportation of personnel to/from installation  • Transportation of personnel to/from installation • Harsh weather evacuation and safety systems for broken and fast ice  • Reliable, Available and Maintainable production facility in Icy conditions  • Platform Re‐Supply logistics challenges  Pl f R S l l i i h ll Source: Worley Parsons / Offshore Magazine Arctic, Oslo, 29 Nov 2011 27
  • 28. Environment – a unique ecosystem • Arctic oil spills may set off ff irreversible ecological chain- reactions • Problems of a late season blowout • Fisheries production is worth more than $2.5 billion and 80% takes place in the three main Arctic offshore E&P areas • Many unique species of marine mammal Source: Greenpeace • Impact on local communitiesArctic, Oslo, 29 Nov 2011 28
  • 29. What do the 4.2 million Arctic people want?Arctic, Oslo, 29 Nov 2011 29
  • 30. Cost – arctic oil is high cost But similar to other unconventionals Arctic $40‐100 Source: IEAArctic, Oslo, 29 Nov 2011 30
  • 31. Energy macro factors Arctic regions – a grand tour Realities R liti ConclusionsArctic, Oslo, 29 Nov 2011 31
  • 32. The Final Frontier • Huge technical challenges for E&P operations • Extreme environmental hazards • Long range logistics Long-range • Fragile ecosystem • Environmental protestors • Major fishery • Local communities (economics v traditional lifestyle) • Politics – disputed borders • Strategic military concerns • A vast hydrocarbons resourceArctic, Oslo, 29 Nov 2011 32
  • 33. The final oil & gas E&P frontier Great challenges Great prizesArctic, Oslo, 29 Nov 2011 33
  • 34. "It is the project of a generation" It generation Norwegian Foreign Minister Jonas Gahr Stoere 18 Nov 2011 Thank youArctic, Oslo, 29 Nov 2011 34