ASSOCIATION OF BRAZILIAN OFFSHORE SUPPORT COMPANIES Wednesday 5th, February, 2014

Agenda

ABEAM

Offshore Support Vessel sector

Brazilian O&G market

Challenges

Conclusion

2

ABEAM Entitys Structure

3

According to Brazilian Federal Constitution, to have legal representation to defend their collective or individual interests, either administrative or judicially, employers and employees categories are to be associated by means of an Union, regularly recognized and registered by the Brazilian Labor Ministry.

The SYNDARMA SINDICATO NACIONAL DAS EMPRESAS DE NAVEGAO legally represents Brazilian Maritime Companies (Seagoing and cabotage Vessel Companies, Offshore Vessels and Tugs Companies), and brings together the ABEAM Associao Brasileira das Empresas de Apoio Martimo and ABAC Associao Brasileira das Empresas de Cabotagem.

ABEAM Who we are

ABEAM is a national association that aims to promote the development of the Brazilian Offshore Support Companies sector, representing the associated companies interests, towards:

Government departments such as ANTAQ;

Brazilian Navy;

National Immigration Council;

Collective labour agreements;

Vessel Owners Syndicate (Syndarma);

ABEAM represents the associated companies in discussions with oil companies (mainly Petrobras) related to the sectors general issues, and participates on national and international organizations and commissions (e.g. IMCA, NSA and ISOA)*.

ABEAM also guides its associated Companies, seeking the alignment of regulatory, operational, safety, environmental and new technologies issues .

*IMCA - International Marine Contractors Association, NSA Norwegian Shipowners`Association and ISOA International Support Vessel Owners` Association

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Acamin

Asgaard

Asso Martima

Astromartima

Bourbon

BRAM

Bravante

BSCO

CBO

Deep Sea

Siem Consub

Solstad

Starnav

Subsea7

Technip

Tranship

Transmar

UP Offshore

Wilson Sons

Farol

Farstad

Finarge

Fugro Brasil

Geonavegao

Gulf Marine

Hornbeck

Internav

Locar

Maersk

Megasea

Norskan

Oceana

OceanPact

Olympic

OSM do Brasil

Safe Supply

Saveiros

Seacor Offshore

Sealion

ABEAM Associated Companies

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ABEAM Main Clients: Oil Companies

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Support Vessels in Brazil Overview

139 Brazilian companies legally registered by ANTAQ as EBN (Brazilian Navigation Companies), which is mandatory to operate in Brazil;

About 50 companies actively operating in vessel support activities;

39 companies (or 78%) are members of ABEAM;

Overall fleet of 469 vessels (224 Brazilian flag / 245 Foreign flag). Note: A Brazilian flag vessel, has priority over foreign flag vessels, on projects within Brazilian waters.

Charter estimated spent in 2013: US$ 4,5 billions. (ABEAM)

03/04/2014 7 Source: ABEAM & ANTAQ (September, 2013)

AHTS Anchor Handling and Tug Supply Anchor handling, towage and supply.

PSV Platform Supply Vessel

RSV ROV Support Vessel Vessels equipped with subsea remote control vehicles

MS Mini Supplier

LH Line Handling

UT Utility boat - Cargo fast suppliers

Crewboat Transportation of crewmembers to platforms

OSRV Oil Spill Response Vessel

WSV Well Stimulation Vessel

PLSV Pipe Laying Support Vessel

DSV Diving Support Vessel

ABEAM Types of Vessels

The support vessels are divided in the following main classes:

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ABEAM Where we Operate

9

ABEAM associated members offer logistic support throughout the Brazilian coast for subsea installations and platforms.

Offshore Support Vessel Sector - Highlights

The Offshore Support Vessel sector plays a significant role on the Oil & Gas industry;

We keep operating Drilling Rigs, Platforms and FPSOs along the more than 7,400km of coast line, away 300km from the shore.

The main activities performed by the sector are:

Supply services for offshore operations;

Anchor handling;

Pollution and fire fighting;

Pipeline deployment, inspection; and

Maintenance of subsea equipment and infrastructure.

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Offshore Fleet Growth

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13 44

95

43 48 60

74

120

173

211 224

300

0

47

110 125 110 88 91

130

254 239

245

386

13

91

205 168 158 148

165

250

427 450 469

686

0

100

200

300

400

500

600

700

1975 1980 1985 1990 1995 2002 2005 2009 2011 2012 2013 2020

NU

MB

ER O

F V

ESSE

LS

Brazilians Foreigners TOTAL

Law no 9.432 / 97

Source: ABEAM (September, 2013)

Vessel Breakdown

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Brazilians 48% Foreigners

52%

PSV

40%

AHTS

22%

LH / LS

18%

OSRV

8%

Crew /

FSV

4%

DSV / RSV

3%

PLSV

3%

MPSV

1%

WSV

1%

Source: ABEAM (September, 2013)

Vessel Breakdown

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Brazilian Flag Foreigner Flag

WSV/PLSV

/MPSV

3%

DSV/RSV/

OSRV

9%

Crew/FSV

/LH/SV

39% AHTS

8%

PSV

41%

WSV/PLSV

/MPSV

7%

DSV/RSV/

OSRV

11%

Crew/FSV/

LH/SV

4%

AHTS

40%

PSV

38%

Source: ABEAM (September, 2013)

Brazilian Flag Vessel Evolution

03/04/2014 Source: ABEAM (September, 2013)

25

43 45 55

98

124

149

166

179

202

224

-

50

100

150

200

250

WSV/PLSV/MPSV DSV/RSV/OSRV Crew/FSV/LH/SV

AHTS PSV

14

Source: ABEAM (September, 2013)

Foreign Flag Vessel Evolution

15

95

123

110

97 93 93 93

136 143

254

233 245

-

50

100

150

200

250

300 WSV/PLSV/MPSV DSV/RSV/OSRV Crew/FSV/LH/SV

AHTS PSV

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Oil & Gas Market Characteristics

Oil & Gas Brazilian Market continues to grow, but with a different profile, following the characteristics below:

Fields are more faraway from the coast (300km) and disperse along the Brazilian coast (> 9.000km);

Projects at deeper water depths (Pre-salt fields);

Solid background in quality and operational performance are required;

Higher CAPEX;

Strong onshore structure focused on HR and Financial/Administration (Tax, Legal, Regulatory);

Development of new technologies;

Few and remote logistic bases;

Dominant Client;

Market with a robust and promising forecast.

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Oil & Gas Market - Petrobras Business Plan

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Total investment between 2013 and 2017:

US$ 236.7 Billions

Exploration and Production Investments:

US$ 147.5 Billions

106,9; 73%

16,3; 11%

24,3; 16%

Production Development Exploration Infrastructure and Support

Oil and LNG Production Evolution

Source: Petrobras Business Plan (2013-2017)

18 1

4 4

Note: this forecast does not include Libra, and new concessions from ANPs 11th Round.

Main Challenges for the Sector

1. Brazilian crew :

The offshore support sector employs approximately 14.600 seafarers, of which around 4.900 are deck and machine Officers. There is a concern about the shortage of experienced workforce (Officers) to attend the market.

After a well coordinated effort involving Brazilian Navy, ABEAM, Petrobras and Syndicates, the official schools (CIAGA / CIABA) increased the availability at courses in order to fulfill the market needs for professionals (OMM).

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Seafarers on Board (Foreigners and Brazilians)

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Offshore Support ;

14.582 ; 61%

Coastwise

Syndarma;

1.986 ; 8%

Coastwise O&G;

1.739 ; 8%

Port Support;

1.588 ; 7%

Petrobras -

production O&G;

3.885 ; 16%

Source: ABEAM (2013)

Total: 23.780

Main Challenges of the Sector

2. Operational costs:

The growth of the sector, together with its development and technology demand, has increased the operational costs of the companies, mainly on the long term contracts.

3. Drydocking, maintenance and repairs:

Due to fleet increase, in quantity and size of vessels, the lack of available drydock capacity and maintenance has been a huge challenge;

The long duration and drydocks costs have been pushing up the maintenance expediture.

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Main Challenges of the Sector

4. Tax burden :

Tax law is complex and not very clear, so it is subject to different interpretations among clients, suppliers and regulatory entities. Therefore, legislation is a key contractual point for the sector.

High tax burden increases the sectors costs, and reduces competitiviness against international players.

5. Local content:

Aiming to foment the domestic supply chain for the industry and promote new technologies development, local content rules were created, with high and increasing requirements;

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Main Challenges of the Sector

5. Local content (cont.):

Difficulties faced by the offshore support companies to reach and evidence the local content percentage (for construction and operation) established by the Oil Companies in the contracts;

Brazilian local content rules are stated by the Petroleum National Agency ANP to be complied by the Oil Companies, who are obliged to request local content from their contracted service providers. Those rules are generic with several complicated requirements to be fulfilled. ANP is presently revising some of them to consider particularities of different sectors including the offshore segment;

The offshore support vessels local content obligations are subject to heavy penalties for non compliance.

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Conclusion

The offshore support vessel sector has been developing significantly all over the world. A substantial growth is expected, to attend future demands for Brazil Oil & Gas market.

It is estimated that more than 100 new vessels will be required in the next 5 years1.

The most critical issues faced by the sector are:

Lack of specialized workforce;

Increasingly technical complexity of operations;

Small number of drydocks to fulfill vessels M&R needs;

Uncertainties about the tax law and huge tax burden.

The challenges are huge, requiring coordination as well as proactivity among companies, government and clients in order to increase efficiency.

24 03/04/2014 1Source: ABEAM

Rua Visconde de Inhama, 134 sala 1005 Centro Rio de Janeiro/RJ CEP: 20.091-901 Tel: +55(0xx21) 3232-5600 - Fax: +55(0xx21) 3232-5619

abeam@abeam.org.br

www.abeam.org.br

Rachid Cury Felix Vice President