FPSOs in 2011: Double dip or capacity crunch?

FPSOs in 2011

Double dip or capacity crunch?

Kelvin Sam

FPSO Congress 2010

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ODS-Petrodata is an independent

market intelligence company

Established over 30 years ago: 30+

years of historical data.

130 employees including market

reporters, specialists and analysts.

Offices in Houston, Aberdeen, Oslo,

Singapore and Dubai


Market Segments are updated every 4 months and

new segments are added on an ongoing basis

Offshore

Installation

DSV/ROVSV

Gas

Compressors

OCTG

Inspection

Maintenance

Repair

Subsea

EquipmentLine Pipe

LNG

Liquefaction

Facilities

Conceptual

Studies/FEED

Topsides

Fabrication

FPSO / FSO

Gas Turbines

LNG

Regasification

Terminals

Offshore

PipelayOnshore

Pipelay

Industry

Trends

Onshore

Production

Facilities

Helicopter

Services

EPCm

Drilling Fluids

Offshore

Heavy Lift

Heat

ExchangersOil Sands

Mining

Well Logging

© BP p.l.c.

Floaters – SPAR,

TLP, Semis...


Introduction

FPSO contract awards

Newbuilds

Normally owned

USD 0.8 – 2 billion capex

3-4 years construction

Conversions

Normally leased

USD 250 –800 million

capex

2-3 years construction

Redeployments

Normally leased

At least USD 50 million

capex

1-12 months upgrade


September 28, 2010

Contents

1. Overview

2. Capacity Trends

3. 2011 new orders

4. Conclusion


Further consolidation needed for leasers

Asia-Pacific Leasers

• Aker FP

• Berlian Laju Tanker

• Bluewater

• Bumi Armada

• BW Offshore

• EOC

• M3nergy

• Maersk FPSO

• MISC

• Mitra Rajasa

• MODEC

• Premuda

• Prosafe Production

• Rubicon

• SBM

• Sea Production

• Tanker Pacific

Brazil Leasers

• BW Offshore

• Maersk FPSO

• MODEC

• OSX

• Petroserv


• Saipem

• SBM

• Sevan Marine

• Teekay Petrojarl

Africa Leasers

• Bumi Armada

• BW Offshore

• Fred Olsen

• MODEC


• Saipem

• SBM

Europe Leasers

• Bluewater

• BW Offshore

• Maersk FPSO

• Saipem

• Sevan Marine

• Teekay Petrojarl


Many regions still fragmented even after BWO/PROD merger

FPSO leaser market share by region

Size of each region by number of leased FPSOs


Improving results could lead to further M&A in 2011

Almost all leasers reporting improved net margins in 2010.

Smaller leasers should benefit from consolidation.

Improving access to funding while qualifying them for more projects.

-90%

-80%

-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

2007 2008 2009 1H10

Median* FPSO leaser net margins

Protected by Copyright (c) 1986-2010 ODS-Petrodata Ltd

*Includes net margins of SBM, MODEC, BWO, Prosafe Production and Sevan Marine


2010 awards already surpassing 2009 levels

Robust recovery with both large and small projects awarded.

Further 2010 upside with operators tendering for eight more FPSOs.

0

5

10

15

20

25

2003 2004 2005 2006 2007 2008 2009 2010 YTD

Aw

ard

s

FPSO contract awards

Redeployments

Newbuilds

Conversions



Can the industry handle this recovery?

2006 2007 2008 – 1H09 2H09-2010 2011

Increased

competition and

low bids

submitted

Record order

book, rising

costs, delivery

delays, cost

overruns

Costs peak,

projects

deferred, volatile

oil price?

Recovery begins,

contracts

awarded again,

increased

competition


September 28, 2010

Contents

1. Overview

2. Capacity Trends

3. 2011 new orders

4. Conclusion


Steel prices are rising again

0

100

200

300

400

500

600

700

800

900

1000

2003 2004 2005 2006 2007 2008 2009 2010 YTD

US

D p

er

ton

ne

Steel Prices


Price of steel is a leading indicator of FPSO costs.

Steel prices increasing by 13 per cent year-on-year in 2010.


Why are steel prices so important?

20 per cent steel inflation in 2010= 4 per cent FPSO inflation.

Steel prices normally more volatile than other costs such as salaries.

0

50

100

150

200

250

300

2003 2004 2005 2006 2007 2008 2009 2010 YTD

Ind

ex 2

00

3 =

10

0

Steel Prices and FPSO costs

Steel prices FPSO newbuild costs



…but we don’t expect major cost inflation in 2011-2012

2010-2014 cost inflation to stay low compared to 2003-2009.

0

50

100

150

200

250

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

2003 2004 2005 2006 2007 2008 2009 2010f 2011f 2012f 2013f 2014f

No

min

al In

de

x (2

00

3 =

10

0)

Ye

ar o

n Y

ea

r C

ha

ng

e

Cost Model - FPSO

Y-O-Y Change [USD based]

Cost Index (2003=100) [USD based]

Source: ODS-Petrodata, Date: August 23, 2010Protected by Copyright (c) 1986-2010 ODS-Petrodata Ltd.


Deliveries keeping up with new orders

Contractors previously busy with record order book from 2006-2008.

Slowdown in 2009 resulted in spare capacity.

FPSOs under construction 1989-2010


Shipyards having spare capacity

Most shipyards have smaller backlogs now.

Hyundai HI is the exception with the company having a record order book.

0

50

100

150

200

250

300

1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10

Ind

ex 1

Q0

6 =

10

0

FPSO Shipyard Backlogs

Samsung HI DSME Hyundai HI Keppel O&M Sembcorp Marine



Idle FPSOs can be redeployed next year

Some idle units ideal for another project.

Falcon FPSO can be used for large developments.

Some FPSOs coming off charter in 2010 and 2011.

0

2

4

6

8

10

12

Idle 2010 2011 2012 2013 2014

FP

SO

Idle/ Available FPSOs with Lease Options

No extension options Extension Options



Capacity summary

Deliveries still keeping up with new orders.

FPSOs under construction still low

New FPSO yards diversifying the supply chain.

FPSO buyers can also redeploy existing units.

Supply conditions still good for FPSO buyers in 2011


September 28, 2010

Contents

1. Overview

2. Capacity Trends

3. 2011 new orders

4. Conclusion


4Q oil prices are a leading demand indicator?

2009 awards

Field Operator Country

Shelley Premier Oil UK

Aseng Noble Energy Equatorial Guinea

Dua Premier Oil Vietnam

Kakap ConocoPhillips Indonesia

Papa-Terra Petrobras Brazil

Te Giac Trang Hoang Long JOC Vietnam

Aquila Agip Italy

Baleia Azul Petrobras Brazil

Huizhou 26-1 CNOOC China

Source: ODS-Petrodata

Low + volatile 4Q08 oil price = low FPSO demand in 2009

0

20

40

60

80

100

120

Oct-08 Nov-08 Dec-08

US

D p

er

ba

rre

l sp

ot

WTI Oil Prices - Fourth Quarter 2008



0

10

20

30

40

50

60

70

80

90

Oct-09 Nov-09 Dec-09

US

D p

er

ba

rre

l sp

ot

WTI Oil Prices - Fourth Quarter 2009

Protected by Copyright (c) 1986-2010 ODS-Petrodata LtdProtected by Copyright (c) 1986-2010 ODS-Petrodata Ltd

4Q oil prices are a leading demand indicator?

2010 YTD awards

Field Operator Country

CLOV Total Angola

Terang Kangean Energy Indonesia

Parque Petrobras Brazil

Roncador Petrobras Brazil

Macondo BP USA, Gulf of Mexico

Tupi Nordeste Petrobras Brazil

Cendor Petrofac Malaysia

Pagerungan Utara Kangean Energy Indonesia

Huntington EON Ruhr Gas UK

Athena Ithaca Energy UK

Goliat Eni Norway

Waimea (OGX-3) OGX Brazil

Guara Petrobras Brazil

Kitan Eni Australia

Source: ODS-Petrodata

High+ stable oil price in 4Q09 = high FPSO demand in 2010


0

2

4

6

8

10

12

14

16

Asia

-Pa

cif

ic

Eu

rop

e

Afr

ica

Bra

zil

FP

SO

Visible 2011 FPSO demand by scope

NewbuildRedeploymentConversion


We expect at least 15 FPSO awards in 2011

Visible demand tracked 24/7 by a global team of market reporters.

Majority of FPSO projects likely to be conversions/redeployments in Asia

and Europe.

List of forecast 15 FPSO awards in 2011


Annual FPSO capex reaching USD 13 billion in 2014.

Capital spending to continue increasing.

Spending to remain higher even after excluding cost inflation.

FPSO capital spending


What will drive a strong FPSO recovery in 2011?

Favourable supply conditions

- Industry still has spare capacity with FPSO backlog staying low.

Lower costs

- FPSO costs falling 20 per cent in 2009.

- Single digit inflation in 2010 and 2011.

Oil prices

- Oil prices have to stay high and stable.


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FPSOs in 2011: Double dip or capacity crunch?

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