9 november 2015 sustainable oceans summit marina...
TRANSCRIPT
Outlook for the Global Offshore Oil and Gas Sector
9 November 2015
Sustainable Oceans Summit
Marina Mandarin, Singapore
Prepared by Douglas- Westwood Singapore
Jason Waldie, Director
www.dw-1.com
LNG
offshore
onshore
downstream
power
LNG
renewables
• Established 1990
• 50 professional staff
• Aberdeen, London, Houston,
Singapore
Activity & Service Lines
• Business strategy & advisory
• Commercial due-diligence
• Market research & analysis
• Published market studies
Large, Diversified Client Base
>1,020 projects, >450 clients
>72 countries, >230 sectors
• Clients include the top-10:
• Oil & Gas Companies
• Oilfield Services
• Investment Banks
• Private Equity firms
• Government Agencies
Our business: research and consulting
11/03/2015
Global Energy Demand Outlook Growing Importance of Gas
Global Energy Demand by Sector
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1990 2035
Power Transport Industry
-
1,000
2,000
3,000
4,000
5,000
6,000
1990 1995 2000 2005 2010 2015 2020 2025 2030 2035
Global Energy Demand by Fuel
Gas 2020-2035
Oil 2020-2035
• The combination of increased energy efficiency throughout OECD states and growing
economies in Asia is driving demand for power generation at the expense of transportation.
• Natural gas is becoming an increasingly popular fuel for power generation offering a relatively
safe (compared to nuclear); cheap (compared to oil); and clean (compared to coal) energy
source.
• Demand for natural gas to increase by 55% over the next 20 years...
42%51%
mtoe
Primary Energy Demand – Bullish Outlook
• +30% growth by 2035. From 86% to 81% use of fossil fuels. Liquids at 110 Mboe/d.
• Driven by Asian economies, power generation and industry.
• China + India = 60% of GDP growth, 50% of primary energy growth
• Natgas +40%, Oil +20%, Coal +20%, Nuclear +40%, Hydro +40%, Ren +240%
OECD / Non-OECD (Btoe)
0
2
4
6
8
10
12
14
16
18
20
2015 2020 2025 2030 2035
Non-OECD
OECD
China
0
1
2
3
4
5
6
7
8
9
2015 2020 2025 2030 2035
Transport Power
Industry Others
0
2
4
6
8
10
12
14
16
18
20
2015 2020 2025 2030 2035
Renewables HydroNuclear CoalNatural Gas Liquids
Demand by fuel (Btoe) Demand by sector (Btoe)
Source: BP Energy Outlook 2035, Feb 2015 issue
A more gaseous world
Natural Gas production (Btoe) New energy supply (Btoe)
• Unconventionals (shale gas, tight oil) and renewables account for 50% of energy growth.
• Global gas production boosted by US shale revolution, unlikely to be exported.
• 2035, USA: 60% tight oil and 30% shale gas exploited.
• 2035, elsewhere: 5% tight oil and 5% shale gas exploited.
• More diverse gas supply. LNG supply is set to overtake gas pipes in 2035
0
1
2
3
4
5
2015 2020 2025 2030 2035
Asia Pacific Africa
Middle East Europe & FSU
Latin America North America
Source: BP Energy Outlook 2035, Feb 2015 issue
• The whole American continent is expected to reach energy independence in 2020.
North America emerge as an established net energy exporter, +560 Mtoe in 2035.
• By 2035, the only net energy importers will be Europe and Asia.
While Europe remains flat (~900 Mtoe), Asia would have almost double its imbalance in 20 years (-
2,200 Mtoe in 2035).
• Asian economies are highly dependent on oil and gas imports.
China’s oil imbalance is currently estimated at -60%.
-100%
-90%
-80%
-70%
-60%
-50%
-40%
-30%
-20%
-10%
0%
Gas Balance Oil Balance
Asia China India Japan S. Korea40% 22% 5% 4% 2%
% of global energy demand
Shifting Energy Trades
Net Primary Energy Balances (Btoe) Asian Oil and Gas Import Dependency
-4
-3
-2
-1
0
1
2
3
4
2015 2020 2025 2030 2035
Asia Pacific EuropeAfrica Latin AmericaNorth America FSUMiddle East
Source: BP Energy Outlook 2035, Feb 2015 issue
Douglas-Westwood Limited
Exploration Drilling and Production Wildcards
Supply Side Demand Side
Rising Costs Are Also Not Sustainable
E&P Capex per Barrel
• Cyclicity = opportunity
• Since 2000, E&P costs risen faster than oil price (10.9% year)
• Prior to the oil price downturn, E&Ps were looking closely at capital costs, as the cost escalation simply was not sustainable.
• Cost re-alignment expedited. Already felt throughout supply chain.
Oil Majors in Trouble a Year Ago at $100/bbl!
Cash Return On Cash Invested (CROCI) of The Global Supermajors vs. Real Oil Price
CEO Shamsul Azhar Abbas"We have suffered from lower oil prices.
But if you look at the costs, they have increased further. If there is a need to
defer some of projects, we will do that."
Source: Goldman Sachs
Oil Majors – End of Business as Usual?
Majors’ Oil Production
Source: Douglas-Westwood & Company Reports
Production (000
b/d) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Royal Dutch Shell 2,359 2,379 2,253 2,093 2,030 1,899 1,771 1,680 1,709 1,666 1,633 1,541
Statoil 1,112 1,132 1,135 1,102 1,058 1,070 1,055 1,067 967 945 966 964
Total 1,589 1,661 1,695 1,621 1,506 1,509 1,456 1,381 1,340 1,226 1,220 1,167
Eni 921 981 1,034 1,111 1,079 1,020 1,026 1,007 997 845 882 833
BP 2,018 2,121 2,531 2,562 2,475 2,414 2,401 2,535 2,374 2,157 2,056 2,013
ConocoPhillips 701 953 924 926 1,489 1,433 1,371 1,429 1,268 866 871 867
Exxon Mobil 2,496 2,516 2,571 2,523 2,681 2,616 2,405 2,387 2,422 2,312 2,185 2,202
Chevron 1,897 1,823 1,737 1,701 1,759 1,783 1,676 1,872 1,923 1,849 1,764 1,731
Petrobras 1,533 1,701 1,661 1,847 1,920 1,918 1,975 2,112 2,150 2,167 2,119 2,040
Petrochina 2,109 2,119 2,265 2,270 2,276 2,299 2,380 2,311 2,350 2,428 2,504 2,556
Control of Oil Reserves
Source: ENI Review 2014 Oil Discoveries & Production
Source: BP Energy Outlook 2035
NOCs79%
IOCs3%
Others18%
0
10
20
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100
0
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00
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90
20
00
20
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20
20
30
Oil
Pro
duction (
mboed/d
)
Dis
coveries (
bn b
/d)
Discovery
• IOCs face major challenges
• NOCs control 80% of reserves
• IOCs forced to focus on high cost projects
• Too big for unconventionals?
• The days of ‘easy oil’ are over.
-35%
-15%
-30%-18%-5%-10%-12%-5%+20%+21%
0
50
100
150
200
250
Mid
dle
East
Oth
er
Co
nven
tio
na
l O
il
Bra
zil
Pre
-Salt
De
ep
wate
r
Ve
ne
zu
ela
Ori
noco
Be
lt
Ca
na
dia
n O
il S
an
ds
Oil
Sh
ale
Coa
l to
Liq
uid
Arc
tic O
il
Conventional Unconventional
Viability of oil developments ($/bbl)
Unviable
Viable
Sources: Douglas-Westwood
WTI $60
“To grow oil production, the North American E&P industry needs $85-90 WTI” Simmons & Co,
WTI $110
Source: Douglas-Westwood D&P, Jan 2015
• Low oil price, spiralling E&P costs, softening demand activity slowdown
• Natural production decline rates (with well maintenance) average around 5% p.a.
• Unconventional wells decline much faster: 40-50% p.a. (Haynesville, Bakken)
• Important in the context of declining US activity with low oil prices – recent additions
to production capacity will be eroded very quickly as activity slows – quick correction
Production Decline Will Erode Excess Capacity
Production Outlook – Existing Wells and Required Additions
0
20
40
60
80
100
120
140
160
180
2014 2015 2016 2017 2018 2019 2020
Pro
du
ctio
n (
mb
oe
/d)
Legacy Production Required Additions
0
20
40
60
80
100
120
140
160
180
2014 2015 2016 2017 2018 2019 2020
Pro
duction (
mboe/d
)
Legacy Production Required Additions
Where is the industry heading?
• Many offshore projects are long term and rarely cancelled post-FID.
• Momentum following several years of high oil prices 2011-mid 2014 will carry the industry through a flat period of spend to 2017.
• Recovery 2018 onwards.
-
100
200
300
400
500
600
2008 2010 2012 2014 2016 2018 2020
$b
illio
ns Stagnation
Sustained Investment
Offshore Capex – Actual and Forecast
Source: Douglas-Westwood, Jan 2015
Africa13%
Asia25%
Australasia5%
Eastern Europe & FSU
2%
Latin America
16%
Middle East7%
North America
17%
Western Europe
15%
2015-20 Spend by Region
• Evercore view - revised downward:
• “Sharp recession in the oilfield”
• “Middle East the only Bright Spot”
• “Disappearance of new offshore rig orders”
• “Rapid fall in US activity and bottoming of rig count in Q3 or Q4”
• “Recovery in 2016”
+7.9%
-15%
$200
$250
$300
$350
$400
$450
$500
$550
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
International: -15%
4863
89 96119
8298
128 140 146174
-30%
25
30
36 33
38
25
38
4944 43
51
$0
$25
$50
$75
$100
$125
$150
$175
$200
$225
'04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14E '15E
North America: -30%
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Rest of the World
Canada
United States
Actual Estimates
Recovery: Circa 7% p.a. 2016 & 2017
Exploration & Production Spending – Actual and Forecast
Where is the industry heading?
Source: Evercore, Jan 2015
15
16
Offshore & Deepwater Supply Growth
Shallow:
• Shallow water production is set to grow 13% over the forecast period due to success in the gas drilling side of the market. This is despite a mature oil market that requires significant investment to stop production rapidly declining, particularly in the North Sea and US Gulf of Mexico
Deepwater:
• Four countries dominate the deepwater drilling sector – Angola, Brazil, Nigeria and the USA.
• Despite the downturn in oil price, projects already sanctioned will see deepwater output increase in all of these countries over the forecast period.
Shallow water production (Mboe/d)
Source: DW World Drilling & Production Forecast 2015-2021
Deepwater production (Mboe/d)
North Sea Decommissioning Market Outlook- Projects
