Market Outlook on the Deepwater Subsea Sector: Challenges ... richard.pdfII. Global Macroeconomic...

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Market Outlook on the Deepwater Subsea Sector Marine Richard, Associate Analyst 6th February 2014

Transcript of Market Outlook on the Deepwater Subsea Sector: Challenges ... richard.pdfII. Global Macroeconomic...

Page 1: Market Outlook on the Deepwater Subsea Sector: Challenges ... richard.pdfII. Global Macroeconomic Overview III. Offshore Capex Forecast a) Offshore Capex by Infrastructure b) Offshore

Market Outlook on the Deepwater Subsea Sector

Marine Richard, Associate Analyst

6th February 2014

Page 2: Market Outlook on the Deepwater Subsea Sector: Challenges ... richard.pdfII. Global Macroeconomic Overview III. Offshore Capex Forecast a) Offshore Capex by Infrastructure b) Offshore

I. Introduction to Infield Systems

II. Global Macroeconomic Overview

III. Offshore Capex Forecast

a) Offshore Capex by Infrastructure

b) Offshore Subsea Capex by Water Depth

IV. Subsea Market Overview

a) Subsea Market Shares in 2013

b) Deepwater Subsea Tree Awards by Manufacturer

V. Deepwater Subsea Market Forecast

a) Global Overview

b) Brazil

c) Gulf of Mexico

d) West Africa

e) Asia

f) Eastern Mediterranean & East Africa

VI. Disclaimer

Table of Contents

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Introduction to Infield Systems

SECTION I

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Geographic Locations A globally recognised oil & gas consultancy with a dedicated international team of cross-sector specialists

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Key Global Personnel

c.40 energy professionals – global footprint

Office Locations

London

Aberdeen

Houston

Head Office

Regional Office John Ferentinos (Senior Analyst)

London [email protected] +44 207 423 5036

James Hall (Director) London

[email protected] +44 207 423 5024

Steve Adams (International Sales Manager) Aberdeen

[email protected] +44 122 425 8150

Luke Davis (Senior Analyst) London

[email protected] +44 207 423 5023

Gregory Brown (Transaction Services Manager) London

[email protected] +44 207 423 5031

Marine Richard (Associate Analyst) London

[email protected] +44 207 423 0

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Image courtesy of FMC Technologies Inc.

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Products & Services A leading offshore oil and gas and associated services consultancy

Source: Infield Systems Limited, company websites 6

Data, Reports & GIS Mapping Business Strategy and Analysis Transaction Services

• Offshore specific data covering production infrastructure, rigs, specialist vessels, construction yards, contracts and OFS providers

• Sector specific reports • GIS mapping services covering

operational and forecasted production infrastructure

• Market matching and market tracking – “Match & Track”

• Complete market intelligence outsourcing • Bespoke sector services • Market entry strategy • Procurement strategy advisory – “Project

Flow” • Ad-hoc sector analysis • NPV Economic Field Modelling

• Advisory • Market overview IPO • Debt financing analysis • Distressed asset purchase analysis • Buy/sell side market due diligence • Opportunity identification

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Global Macroeconomic Overview

SECTION I

Page 8: Market Outlook on the Deepwater Subsea Sector: Challenges ... richard.pdfII. Global Macroeconomic Overview III. Offshore Capex Forecast a) Offshore Capex by Infrastructure b) Offshore

2014 Oil Price Outlook

Brent Oil Price Forecast (Annual Average)

Brent Trading Range

Brent prices will likely fall slightly from their 2013 average of $108/bbl to about $104/bbl in 2014

Sources: Infield Systems; EIA Petroleum and Other Liquids Database; Bernstein Research 8

• Brent prices will likely fall from their 2013 average of $108/bbl to about $104/bbl in 2014

‐ US oil production could rise to 9.6mbpd in 2014 (EIA)

‐ In early January 2014, Iran and six major powers signed an interim accord

‐ Bernstein estimates that the three swing factors – Iran, Iraq and Libya, could increase global oil supply by 450,000bpd in 2014

• A better, stable economic outlook within major economies will likely support prices above $100/bbl

• Without unexpected supply outages, Brent crude will continue to trade in the $20/bbl range throughout 2014 and 2015

‐ Brent oil prices have stayed within their usual trading range of between $100/bbl and $120/bbl since June 2012

‐ Prices outside the range would have the potential to be met with supply or demand responses

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Long-term Gas Price Dynamics

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Global Gas Price Forecast

Gas Price in Key Regions

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Gas prices will likely continue to rise in the US and fall gradually in the rest of the world by 2020

Sources: Infield Systems; Historical data workbook (BP Statistical Review of World Energy 2013); Bloomberg 9

• Major divergence in global gas prices, with three distinct regional segments:

‐ US gas prices have been suppressed by abundant shale supply

‐ Asian LNG prices have been stimulated by nuclear shut-downs in Japan

‐ European gas prices have stayed somewhere in the middle

• In the rest of the decade, we anticipate that gas prices will continue to rise in the US and fall gradually in the rest of the world

‐ Average $5.9/mmBtu in the US

‐ $9.3/mmBtu in the UK

‐ $13.9/mmBtu in Japan

• We anticipate that the divergence in regional gas prices will narrow gradually by the decade end

• However, a fully traded global gas market remains unlikely by the decade end

‐ The gas trade remains highly illiquid

‐ Price premiums in Asia will likely remain in the long-run

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Global Offshore Capex

SECTION II

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Pipeline Platform Subsea Completion Control Line Single Point Mooring

Capex (US$m) by Infrastructure Type

Subsea Capex (US$m) by Equipment Type

Capex split (%) by Infrastructure 2014-2018

Offshore Capex by Infrastructure Type Subsea completions are expected to account for 22% of the $650 billion in offshore Capex in 2014-2018

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• US$650 billion total industry Capex 2014-2018

‐ 8.2% CAGR

‐ 62% increase on 2009-2013

• US$140 billion subsea Capex

‐ 10.7% CAGR

‐ Fastest growing segment

‐ Doubling in Capex compared to the last five years

Pipeline 42%

Platform 30%

Subsea Completion

22%

Control Line 4%

Single Point Mooring 2%

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Subsea Tree Installations by Water Depth

Subsea Tree Units (%) by Water Depth 2014-2018

0-99 10%

100-499 32%

500-999 16%

1000-1499 17%

>1499 25%

Subsea Tree Capex (US$m) by Water Depth

Subsea Tree Installations and Capex by Water Depth Deepwater trees account for 58% of units but 84% of Capex of all subsea trees in 2014-2018

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Subsea Tree Capex (%) by Water Depth 2014-2018

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>1499 51%

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Subsea Market Overview

SECTION III

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Deepwater Subsea Market Shares in 2013 (end Q3) Deepwater trees accounted for 79% of the 520 subsea trees awarded in 2013, the majority in Latin America

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Deepwater Subsea Tree Awards by Manufacturer by end Q3 2013

FMC dominated the GoM and Africa, whilst Aker Solutions and Aker found success in Brazil

Latin America: 188

North America: 77

Africa: 112

Middle East & Caspian Sea: 3

Europe: 24 Global manufacturers’ market shares 2013: 411 subsea tree awards

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Asia: 15

Aker Solutions

29%

OneSubsea 25%

FMC 41%

GE O&G 7%

Aker Solutions 25%

OneSubsea 11%

FMC 55%

GE O&G 9%

OneSubsea 6%

FMC 25%

GE O&G 69%

Aker Solutions

33%

OneSubsea 67%

Aker Solutions 43%

OneSubsea 31%

FMC 26%

Aker Solutions 3%

OneSubsea 20%

FMC 77%

OneSubsea 100%

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Deepwater Subsea Market Forecast

SECTION IV

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Subsea Installations by Region

Subsea Installations (%) by Region 2014-2018

Africa 37%

Asia 11%

Australasia 2%

Europe 4%

Latin America 24%

Middle East & Caspian Sea

2%

North America

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Subsea Installations (%) by Operator 2014-2018

Global Deepwater Subsea Tree Installations Forecast Up to 2,000 deepwater subsea installations are expected globally in the 2014-2018 timeframe

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• 2,000 deepwater subsea equipment installations in 2014-2018

‐ Doubling in installations from 2009-2013

‐ 300-500 new installations per year

• Deepwater installation activity and Capex led by Africa, Latin America and North America

• US$115 billion Capex in 2014-2018

‐ Doubling in Capex from 2009-2013

‐ Roughly same regional split as installations

Petrobras 22%

Total 12%

BP 9% Shell

8%

Chevron 8%

ExxonMobil 6%

Eni 4%

Others 31%

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Brazil Subsea Installations by Operator

Brazil Subsea Installations (%) by Water Depth 2009-2018

Petrobras’ Market Capitalisation

Brazil Brazil is a strong market for subsea installations but Petrobras faces investment and local content challenges

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• 450 deepwater subsea installations in 2014-2018

‐ 23% increase on 2009-2013

• Driven by pre-salt discoveries in last decade

‐ 8.4 tree installations per development (average)

‐ 68% of tree installations concentrated in 8 fields

• Challenges

‐ Petrobras’ investment capability

‐ Manufacturing capacity

‐ Little regulatory change expected before 2015

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GoM Subsea Installations by Country

GoM Subsea Installations by Water Depth

GoM Subsea Installations (%) by Operator 2014-2018

Gulf of Mexico The Gulf of Mexico is a strong opportunity for the subsea market, with 400 installations in 2014-2018

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• 400 deepwater subsea installations in 2014-2018

‐ 63% increase on 2009-2013

• Key operators are IOCs and Independents

‐ 4 tree installations per development (average)

• Regulatory reforms in Mexico

‐ Positive signs

‐ Will depend on second stage legislation (2015)

‐ Likely to impact installations later on

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Shell 16%

BP 11%

Anadarko 11%

Hess 9%

Chevron 8%

LLOG 8%

ExxonMobil 8%

Others 29%

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West Africa Subsea Installations by Country

Subsea Installations (%) by Country 2014-2018

Subsea Installations (%) by Operator 2014-2018

West Africa Angola and Nigeria are major drivers of the African subsea market, with Ghana and Congo also promising

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• 670 subsea installations in 2014-2018

‐ 70% increase on 2009-2013

‐ 70% Angola and Nigeria

• Key operators are mostly IOCs and some Independents

‐ 6 tree installations per development (average)

• Nigeria activity expected to move ahead, but uncertain

• New basins in emerging countries very promising

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Angola Nigeria Ghana Congo (Brazzaville) Equatorial Guinea Ivory Coast

Angola 52%

Nigeria 18%

Ghana 12%

Congo (Brazzaville)

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Equatorial Guinea

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Ivory Coast 5%

Total 34%

BP 13%

ExxonMobil 12%

Eni 10%

Tullow 9%

Chevron 7%

Noble 3% Others

12%

Page 21: Market Outlook on the Deepwater Subsea Sector: Challenges ... richard.pdfII. Global Macroeconomic Overview III. Offshore Capex Forecast a) Offshore Capex by Infrastructure b) Offshore

Asia Subsea Installations by Country

Asia Subsea Installations (%) by Country 2014-2018

Asia Subsea Installations (%) by Operator 2014-2018

Asia Asia is a small but growing market for deepwater subsea trees, led primarily by activity in Malaysia and India

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• 200 subsea installations in 2014-2018

‐ 3 x increase on 2009-2013

‐ Malaysia, India and Indonesia dominate

• Main drivers are rising domestic demand & LNG exports

• Deepwater expected to represent 63% market share in 2014-2018, up from 39% in 2009-2013

• Key operators are Chevron, Shell, Murphy and Reliance

‐ 3.9 tree installations per development (average)

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Malaysia India Indonesia China (PRC) Brunei Philippines Sri Lanka

Malaysia 39%

India 30%

Indonesia 16%

China (PRC) 7%

Brunei 5%

Philippines 2% Sri Lanka 1%

Shell 22%

Murphy 20%

Reliance 17%

Chevron 14%

ONGC 13%

Husky 7%

Others 7%

Page 22: Market Outlook on the Deepwater Subsea Sector: Challenges ... richard.pdfII. Global Macroeconomic Overview III. Offshore Capex Forecast a) Offshore Capex by Infrastructure b) Offshore

Eastern Mediterranean & East Africa

Middle East Subsea Installations by Country

E. Africa Subsea Installations by Country

Subsea opportunities in the Levant basin and E. Africa are likely to materialise beyond the forecast period

• 35 subsea installations in the Middle East in 2014-2018

• Stable activity from Azerbaijan

‐ BP-led projects

‐ ACG incremental wells

‐ Shah Deniz II

• Growing interest in the Levant Basin

‐ Noble Energy key operator

‐ Licensing round in Lebanon

‐ Interest in Cyprus

• 45 subsea installations in East Africa in 2014-2018

• Dependent on LNG export terminals

‐ Potential for cost overruns

‐ Competition from other regions

‐ But dry gas 100km from shore

• Likely to see impacts of increased installations and Capex beyond the forecast period

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Disclaimer

SECTION V

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Disclaimer

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The information contained in this document is believed to be accurate, but no representation or warranty, express or implied, is made by Infield Systems Limited as to the completeness, accuracy or fairness of any information contained in it, and we do not accept any responsibility in relation to such information whether fact, opinion or conclusion that the reader may draw. The views expressed are those of the individual contributors and do not represent those of the publishers.

Some of the statements contained in this document are forward-looking statements. Forward looking statements include, but are not limited to, statements concerning estimates of recoverable hydrocarbons, expected hydrocarbon prices, expected costs, numbers of development units, statements relating to the continued advancement of the industry’s projects and other statements which are not historical facts. When used in this document, and in other published information of the Company, the words such as "could," "forecast”, “estimate," "expect," "intend," "may," "potential," "should," and similar expressions are forward-looking statements.

Although the Company believes that its expectations reflected in the forward-looking statements are reasonable, such statements involve risk and uncertainties and no assurance can be given that actual results will be consistent with these forward-looking statements. Various factors could cause actual results to differ from these forward-looking statements, including the potential for the industry’s projects to experience technical or mechanical problems or changes in financial decisions, geological conditions in the reservoir may not result in a commercial level of oil and gas production, changes in product prices and other risks not anticipated by the Company. Since forward-looking statements address future events and conditions, by their very nature, they involve inherent risks and uncertainties.

© Infield Systems Limited 2014