Global FPSO Market Dynamics 2010 - 2014

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Julian Callanan, Analyst with Infield Systems, on the global macro overview of FPSO
an how the oil price volatility will make the decision making process for the sector and uncertain one.

Find out about the new market dynamics at the 12th Annual FPSO Congress.

Visit www.fpsoasia.com or enquiry@iqpc.com.sg

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Global FPSO Market Dynamics 2010 - 2014

  1. 1. Global FPSO market dynamics 2010 -2014 Julian Callanan Infield Systems Ltd This presentation is available in electronic format©Infield Systems Ltd 2009 – This document may be circulated internally within the recipients company but may not be distributed, circulated or passed on externally without express permission. Infield maintain fullcopyright on this document and any formal usage, reproduction or direct reference must be accompanied by express permission in writing from Infield Systems Ltd.
  2. 2. Contents• Infield Systems Ltd•Global Macro Overview• Economic crisis; Impact on FPSO Industry • Oil price volatility – decision making uncertainty / field viability • Funding issues • Prospects for Recovery• FPSO market Forecasts (Demand) • Leased vs. Owned • Conversion vs. New Build vs. Redeployment• FPSO availability (Supply) •Fleet availability in different scenarios • FPSO market key concerns 2
  3. 3. Infield•Specialist provider of energy data, analysis, information & due diligence globally Macro, offshore, onshore, fields, platforms, pipelines, subsea, drilling, deepwater, rigs & vessels , yards, plants, companies etc..•Some of our clients:•Peer-reviewed, bottom-up methodology with 22 years experience 3
  4. 4. Global Recession • “The days of boom and bust now over” - Gordon Brown, UK PM, 2007 • Uninterrupted economic growth for a decade driven by a bubble of credit • Financial institutions failed to correctly gauge exposure to poor debtor classes 4
  5. 5. A Truly Global recession – headline statisticsThe US Europe•US unemployment at a 26yr high, 9.7% of • In Britain, unemployment at 1995 levels,the workforce out of a job. 7.8% of the workforce out of a job.• 6.9 million jobless since 2007 downturn. • 9.1% unemployment in France.• US Congress; “worst since the depression • 8.3% unemployment in Germanyof the 1930s”.Asia• In China, in 2008, between 70,000 and 80,000 companies went out of business.• Overall 2008 was the first year when global GDP decreased since 1946. Domestic and Industrial energy consumption forecasts downgraded. Downwards shift in market fundamentals. 5
  6. 6. Oil Price Volatility – undermining contract awards Departure from price fundamentals Rising market average 140 120 • Volatility: 100 • Undermines a stable business environment$/bbl 80 60 40 20 • Measure of volatility like a 0 1980 1985 1990 1995 2000 2005 springboard Oil Price Collapse Gulf War Ongoing Crisis .16Measure of Volatility .12 .08 .04 .00 1980 1985 1990 1995 2000 2005 2009 6
  7. 7. Oil price swings and project viability Type of Field Development $/boe range • Fall back to $40bbl threatened Large deepwater fixed or floating 23 - 55 Large shallow water fixed or floating 20 - 40 project viability Small Subea tie-back 35 - 65 Small Subsea stand alone 27 - 55 Mid - sized tie back 32 - 50 • Uncertainty over future revenue Mid - sized stand alone 32 - 50 generation undermines funding Oil sands 80+ 140 120Economic Price US $ per bbls 2008 av. $99bbl 100 2007 av. $71bbl 80 Q3:2009 $70bbl 60 Q2:2009 $56bbl 40 Q1:2009 $40bbl 20 0 0 1000 2000 3000 4000 5000 6000 Available Oil (billion bbls) 7
  8. 8. Funding Constraints 160 Bumi Armada awarded Price $/bbl Modec awarded Jubilee Hoang Long 140 Nortechs awarded Bilabri 120 HHI awarded Usan 100 Modec awarded Pyrenees FPSOcean bankruptUS$ bbl 80 Ithaca cancel Uisge Gorm contract with Bluewater 60 SBM awarded Aseng contract 40 Nexus abandons talks with Vanguard Oil and Gas 20 Roc abandon talks with BW Petrobras awards Papa Terra offshore for BMG floater contract. Then cancel to cut costs 0 1/10/07 1/11/07 1/12/07 1/10/08 1/11/08 1/12/08 1/1/07 1/2/07 1/3/07 1/4/07 1/5/07 1/6/07 1/7/07 1/8/07 1/9/07 1/1/08 1/2/08 1/3/08 1/4/08 1/5/08 1/6/08 1/7/08 1/8/08 1/9/08 1/1/09 1/2/09 1/3/09 1/4/09 1/5/09 1/6/09 1/7/09 1/8/09 1/9/09 No new contract awards 8
  9. 9. Positive Sentiment• Oil Price consistency • Performance of developing countries • Falling volatility: •36% In Oct 2008 • 17% in May • 16% in June 160 6 • 12% in July 140 Oil ($bbl) 5 • 9% in August Libor (%) Libor Interest Rate (%) 120 • ?% in September 4 Oil Price ($bbl) 100 80 3 60 2• Return of funding 40 1 • Bumi Armada loan 20 Relatively high oil prices and low interest rates suggests good future investment potential oversubscribed 0 0 9
  10. 10. Contents• Infield Systems Ltd•Global Macro Overview• Economic crisis; Impact on FPSO Industry • Oil price volatility – decision making uncertainty / field viability • Funding issues • Prospects for Recovery• FPSO market Forecasts (Demand) • Leased vs. Owned • Conversion vs. New Build vs. Redeployment• FPSO availability (Supply) •Fleet availability in different scenarios • FPSO market key concerns 10
  11. 11. The FPSO in context of the wider offshore industryFPSO market Capex expected to increase relative to other platform markets driven by: • Maturing of shallow water regions • Promotes deepwater growth • Encourages leased assets • Nationalisation of shallow water reserves – Majors & large Indie’s have valuable deepwater experience • Key prospective areas now W. Africa, Brazil, GoM – Lower Tertiary, W.Australia • Far away from exportation FPSO market infrastructure 7% CAGR 11
  12. 12. Plenty of opportunities to play for• FPSO installations by contract status. • Eni, Kitan – Timor • Fast-track project suitable for a redeployment • Blade ,Cadlao - Philippines • First oil targeted for mid-2011 • Afren, Ebok - Nigeria 25 Non-contracted • Total, CLOV – Angola 20 Contracted • New build, Owned vessel • Delayed to 2014FPSO Installations 15 10 • Petrobras, Tupi – Brazil • MV22 Pilot FPSO already on field 5 • Full production expected 2014 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 12
  13. 13. Diverse Regional Demand FPSO installations by region FPSO fabrication tonnage regional dependency 2004 - 2008 Percentage of tonnage fabricated Unknown North America Middle East & Caspian Latin America Europe Asia 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Africa Asia Australasia Europe Latin North America America Country of Installation North America 1% • Note growth in Asia Africa • Key energy demand here relative 30%Latin America 28% to other regions • Asia still limited exportationEurope 8% infrastructure Asia Australasia 14% 19% • Collection of local FPSO expertise makes cost effective option 2005 - 2009 2010 - 2014 13
  14. 14. Change in operator type demand Historic market 2010 - 2014 Large Independent Leased 12% Operator Large 3% Small Independent LeasedIndependent 18% Operator 25% 2% Small Independent Major 41% 14% Major 24% NOC NOC 31% 30% • Significant growth in demand from small independent operators • Impacts the future characteristics of FPSO demand 14
  15. 15. Diverse FPSO types increasingly in demand• Note diversification of FPSO design type 30 Pilot FLNG EWT EPS Production 25 FPSO Installations 20 15 10 5 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 •New design, fabrication and leasing opportunities may be created through this additional unorthodox demand. • SBM’s Versatile Reservoir Unit 15
  16. 16. Deployment Type • Significant and growing trend towards conversions. These can also be redeployment opportunities Historic market 2010 - 2014 Redeployment Redeployment Growth in future 14% Only confirmed redeployments included 10% redeployment market? ?% future redeployment New Build 19% New Build Conversion 29% 57% Conversion 71%• Driven by: • Growing demand from independent operators • Less major discoveries 16
  17. 17. Contract Type • Leased vs. Owned asset dynamics 25 Owned Leased • Undertaken statistical analysis of historic 20 FPSO contracts to forecast future split between leased and owned.FPSO Installations 15 10 •Key considerations include: • Operator type 5 • Size of Reserves • Length of time on a field 0 • Production requirements 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 • Topside configuration • Historic operator contractual preferences • Historic market split fairly even, however consolidation around leased solutions expected 17
  18. 18. Contract TypeThis forecasting methodology does reveal some areas where it will be a close callbetween leasing and owning an asset. 25 Owned Owned, Possible Leased, Possible Leased 20 FPSO Installations 15 10 5 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 These marginal projects will be important in shaping which companies are successful over the next five years. 18
  19. 19. Contents• Infield Systems Ltd•Global Macro Overview• Economic crisis; Impact on FPSO Industry • Oil price volatility – decision making uncertainty / field viability • Funding issues • Prospects for Recovery• FPSO market Forecasts (Demand) • Leased vs. Owned • Conversion vs. New Build vs. Redeployment• FPSO availability (Supply) •Fleet availability in different scenarios • FPSO market key concerns 19
  20. 20. Areas of risk - Operators “Choose your clients carefully” 25 Assess risk: High Medium Low 20 •Operator type / cash positionFPSO Installations 15 • Field Participants • Geo-political risk 10 • Projects placement within operators 5 portfolio 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Understand your business offering: • Marrying up of market leaders (yards / leased FPSO companies) with Majors. 20
  21. 21. Areas of risk - Supply• Available Supply – 2009 – ~12 vessels • Including Leased Vessels recently ending • Available vessels built on speculation: contracts: • Aker Smart 2 • Glas Dowr – Bluewater • Nexus 1 • Munin FPSO – Bluewater • Uisge Gorm - Bluewater • More availability in the pipeline – • Knock Davie – Prosafe Under Conversion / Construction • Rang Dong – SBM • East Fortune – Songa • Aker Smart 3 – Aker • Deep Producer 1 – Ex. • Owned Vessels becoming available: FPSOcean • Bohai Ming Zhu – 3 year window 21
  22. 22. Areas of risk - Supply5040302010 0 2009 2010 2011 2012 2013 2014 High Medium Base • Even in our base case scenario, supply is set to increase substantially over coming years. • We assume available assets would leave the market after 3 years inertia. • This level of supply is without historical precedent. • Posses critical business orientation issues. • day rates • redeployment opportunities • puddle-hopping / development of marginal fields / alternative FPSO projects? • new build and conversion demand, however growth of modifications market • M & A activity, as market consolidates 22
  23. 23. Areas of risk - Supply 60 Non-contracted Demand Base case with exits 50 Number of FPSOs 40 30 20 10 0 2009 2010 2011 2012 2013 2014• Potentially very significant supply - demand imbalance• Some caveats to this: • Regional traps – legislation, climate • Configuration limitations – production, storage, water handling, topside configuration • Age of assets – especially age of converted hulls Not every asset can be redeployed – however indication of tough times to come? 23
  24. 24. Conclusion• After a difficult year, both the short-term and long-term market fundamentals arestarting to align positively for the FPSO market.• We see plenty of future un-contracted FPSO opportunities in the pipeline.• Early indications are that the characteristics of future FPSO demand are going to bechanging• The regional focus, and type of operator contracting FPSO’s also looks set to evolve• This will create new opportunities.• However, the issue of FPSO supply remains as a future cloud on the horizon 24
  25. 25. Thank YouAll Graphs, charts and data taken from Infield Julian CallananSystems FPSO and FLNG market report 2010 – T: +44 20 7423 50292014. Please contact: E: julian.callanan@infield.com 25

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