What is Driving Todays Deepwater

Market?
1

World Energy Consumption Global Economics and Energy

Population
Billions

Energy Demand
MBDOE

GDP

Non-OECD
OECD

Trillion (2000S)

10
Average Growth/Yr.
2000 - 2030

80

350

70

300
2.8%

0.9%

1.6%

60
250
50

200
4.7%

40

2.4%
150

30

1.1%

100
20
2.2%

0.7%

50

10
0.4%
0

0
1950

1990

2030

1950

0
1990

2030

1950

1990

2030

Source: ExxonMobil

World Energy Consumption Macro Level

Continued world economic

growth with attendant growth in
oil demand
Increasing resource
nationalization and diminished
access
Non-OPEC struggling to
increase production
OPEC spare capacity largely in
Saudi Arabia
Depletion is real
Super majors will be compelled
to focus on organic growth

World Energy Consumption

Deepwater Market Fundamentals

Deepwater Market Fundamentals

Deepwater Market Fundamentals

Deepwater Market Fundamentals

Rising costs are a major concern

Capital costs for deepwater development projects increased by about 50% in the last 2 years

Further cost inflation could slow down projects even further

Lack of experienced staff is a major factor

Delays and longer delivery times forcing projects into longer construction times, further
stretching resources

It could be 2008 before any significant relief on cost increases

Deepwater Rig Deliveries

Sche dule d Rig De live rie s

2006 2007 2008 2009 2010
Ja ck-ups
10
17
31
16
3 77
Se m is
0
1
12
17
7 37
1
4
7
2 14
Drillships
0
10
19
47
40
12 128
% Incre a se to Curre nt Fle e t
Ja ck-ups
19%
Se m is
22%
Drillships
37%

Deepwater drilling rig deliveries will help

ease the shortage, but will it push rates
down?
10
9

Timing of Floater Deliveries

2

Number of Scheduled Deliveries

8
7
6

3
5
3
4
7

3
5

4
3

1
1

0
1Q07

2Q07

3Q07

4Q07

1Q08

2Q08

3Q08

4Q08

Contracted

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

4Q10

Not Contracted

Deepwater Market Fundamentals

There

appears to be sufficient demand to absorb new construction without

pushing rates lower

The majority of new builds scheduled to enter the market over have already

received contracts, at very attractive day rates

Through

2012, Anadarko has booked 339 rig months for drilling, giving them

significant leverage to buy into other opportunities. Other notable commitments

for deepwater rigs in the GOM include:

BP (196 rig months); Chevron (168); Shell (125); Devon (95); StatoilHydro (90);

BHP (89); Petrobras (87); Hess (50,5); Repsol (48); Nexen (24); Murphy (23.5)
Woodside (23); Noble (18); ExxonMobil (14); Dominion (13.5); Eni (12);
Mariner (12)

10

Deepwater Market Drivers

Leading indicator - pending lease expirations will drive new deepwater activity

Source: MMS

11

Deepwater Market Fundamentals

For the production floater, the fundamentals driving the sector have never
been stronger

Deepwater floater CAPEX is predicted to rise between 2006-2010 to

nearly US $90 Bn, compared to nearly $60 Bn in the period 2001-2005

Source: Douglas-Westwood
12

Competing Projects Will Squeeze Resources

13

Worldwide FPS Awards 2005 (a) 2011 (e)

40
35

Award Counts

30
25
20
15
10
5
0

2005

2006

2007

2008

2009

2010

2011

North Sea

South America

Africa/ Med

10

Asia/Pacific

11

13

10

10

North America

Excludes storage only units

Hull Award Year

Source: Quest

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Gulf of Mexico FPS Awards 2005 (a) 2011 (e)

Big Foot FPS*

Mrage MinDOC

GUMBO TLP*

Phoenix MOPU

Kaskida Spar*/Semi*

Blind Faith Semi

Shenzi TLP

St Malo Spar*/Semi

Independence Hub Semi

Thunderhawk Semi

Jack Spar*/Semi

Neptune TLP

Perdido Hub Spar

Tahiti Spar

Tubular Bells Spar

Chuck EPS FPSO

Knotty Head FPS*

Sturgis FPS

Pony TLP*

Stones Spar*

Award Counts

Chinook-Cascade EPS FPSO

Exmar Semi- Spec Unit

4
4
3
3

Williams Unnamed Spar EPSSpec Unit

2
2
1

1
0
2005

2006

*Candidates for dry tree units

2007

2008

2009

2010

2011

Hull Aw ard Year

Source: Quest Offshore

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Asia Pacific FPS Awards 2005 (a) 2011 (e)

KG-DWN-98/2 FPSO
Kikeh Spar
Basker/Manta/Gummy FPSO
Wenchang FPSO

Puffin FPSO
Vincent Phs 1 FPSO
Gumusut Semi

Tui FPSO

Montara FPSO

Stybarrow FPSO

Galoc FPSO

AC/RL3 Methanol FPSO

MA D6 FPSO

Liwan FPSO

Van Gogh FPSO

Ichthys Semi

Scarborough Semi

Bombay FPSO

Sunrise FLNG

Echuca Shoals Semi

Camago-Malampaya FPSO
Pyrenees FPSO

Bunga Orkid FPSO

Block H Sarbah FPSO

Kerala-Konkan FPSO

Blackbird/Dua FPSO

Pandora FPSO

Sakhalin 5 FPSO

14
Award Counts

12

Dhirbubhai FPSO

13

Rotan Spar
Petrel FPSO

10

11

11

Chaoshan FPSO

10

4
4

2
0
2005

2006

2007

2008

2009

2010

2011

Hull Award Year

All units wet tree unless otherwise noted, listed projects do not represent all opportunities

Source: Quest Offshore

16

Africa FPS Awards 2005 (a) 2011 (e)

Negage, Gabela, Lucapa, Malange FPSO
Block 31 Southeast-South FPSO
Agbami Phase 2 FPSO
Venus FPSO
Bosi/Bosi North FPSO

Kizomba D FPSO

Block 31 Southeast FPSO

Belinda Semi

Clov FPSO

12
10

Ibhubesi TLP Nord Marine FPSO

Agbami FPSO

Block 32 FPSO

Oudna FPSO

Usan, Usan West, Ukot FPSO

Block 15 FPSO

Antan FPSO

Azurite Marine FPSO

Giove, Medusa FPSO

Mobim Bilondo FPU

Bonga SW FPSO

Ofrima North FPSO

Kizomba C Phase 2 FPSO

Pazflor FPSO

Baraka South East FPSO

Award Counts

Block 31 Northeast FPSO

Awa FPSO

10

Mahogany FPSO
Mer Profonde Nord FPSO

Kizomba C Phase 1 FPSO

Block 32 FPSO

Jimbao/Gimboa FPSO
Bilabri, Orobiri, Owanare FPSO

Bosi/Bosi North EPS FPSO

2007

2008

4
4

2
0
2005

2006

2009

2010

2011

Hull Award Year

All units wet tree unless otherwise noted, listed projects do not represent all opportunities

Sourc: Quest Offshore

17

South America FPS Awards 2005 (a) 2011 (e)

Jabuti FPSO

Award Counts

Jubarte Phase 2 FPSO

Espadarte-22 FPSO

Marlim Sul Module 3 Semi

Golfinho Module 3 FPSO

Roncador Module 4 FPSO

Posa FPSO

Atlanta TLP

Polvo FPSO

Roncador Module 3 Semi

Frade FPSO

Atlanta FPSO

MPF 1000 EPS

Camarupim FPSO

Carapicu, Caratai FPSO

Manganga, Catua FPSO
Pirambu FPSO

Marlim Sul Module 4 Semi

BM-S-22 FPSO
ES-11 FPSO

Marlim Leste FPU

Espadarte FPSO

Golfinho Module 2 FPSO

3
2

Albacora FPSO

Shell Park FPSO

Cachalote, Baleria Franca & Ana FPSO

Papa Terra FPSO

Tambau-Urugua FPSO Papa Terra Dry Tree TLP

Peregrino FPSO

2010

2011

1
0
2005

2006

2007

2008

2009

Hull Award Year

All units wet tree unless otherwise noted, listed projects do not represent all opportunities

Source: Quest Offshore

18

North Sea FPS Awards 2005 (a) 2011 (e)

Shelley Roundship FPSO
Skarv FPSO
Millburn Roundship FPSO

Pilot Roundship FPSO

Acorn/Beechnut FPSO

Sevan 5 Roundship FPSO

Rosebank/Lochnagar FPSO

Sevan 6 Roundship FPSO

Goliat FPSO

Spanish Point Semi

Helvick FPSO

Crawford FPSO
Luva Semi

Award Counts

Dumbarton FPSO
Ettrick FPSO
Luva Semi

Gjoa Semi

Connemara FPSO

Alvheim FPSO

Chestnut Roundship FPSO

3
3

Skipper Semi

2
2

1
1

0
2005

2006

2007

2008

2009

2010

2011

Hull Award Year

All units wet tree unless otherwise noted

Source: Quest Offshore

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Project Slippage is a Major Concern

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Project Slippage
The Reasons

Portfolio gap

Resource constraints within oil

companies

Lack of experienced staff

Limited rig availability delaying appraisal

programs

Delayed or extended projects extending

resources

Limited supplier capacities causing

delivery bottlenecks

Rising costs impacting project

economics

21

Project Timelines are Getting Longer

For IOCs it can take up to 7 years to go from discovery to production

For Independents, it can still take up to 5 years

Appraisal programs adding to schedule
Emphasis at the front end to get it right
Lessons learned fosters conservatism

22

Key Deepwater Issues and Challenges

Cost and availability of Mobile Offshore Drilling Units (MODUs)

Access to human resources

Increased cost of goods and services

Longer lead times for raw materials and major equipment items

Access to fabrication and shipyard capacity

Access to deepwater technology

The technological know-how to develop deepwater reserves is critical and lie
primarily with IOCs
Technology is a major driver of success
Proprietary hull designs, limited players, mean business not as usual

23

Deepwater Drilling and Completion Costs Rule

24

Ultra-Deepwater: Drilling Technical Challenges

Storms and hurricanes

Sea
Level

8,000

Loop and eddy currents

Empire State
Building ~500
Meters

Gulf of
Mexico

Suprasalt
Sediment

16,000

Allochthonous Sigsbee
Salt Canopy

24,000

Upper Tertiary
Sediments

32,000

Lower
Tertiary
Cretaceous
Autochthonous Salt

40,000

Unpredictable high pressure gas

and faults near surface
10,000 thick salt canopy with
unpredictable layers of highly
variable trapped sediments

Unpredictable base of salt

rapid pressure differentials
Thief zones of significantly
lower pressure which cause lost
circulation fluid loss
Ultra-deep reservoir with high
temperatures, high pressures
and low natural flowability

Basement

25

Biggest Challenge: Finding the People

13% of the current oil industry workforce will have retired by 2008
and 33% by 2012

Structural weakness in the labor market - lack of adequately skilled

professionals between 30 and 40 years of age

Most of the emerging frontiers do not have appropriately skilled

domestic labor

Rigs on order need 5-10,000 people to man!

Plus 50 more offshore construction vessels

Source: SPE, Maxwell Drummond Intl., Douglas-Westwood

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GOM Trend Early Development Contracting

Pre-FEED & FEED moving towards same contractor to limit verification time of
existing work, improve schedule, reduce cost and meet technical challenges of deep
water (desirable to keep the same team together for better execution)

Master Service Agreements most contractors have existing MSAs in-place to

allow expedited start, lessen impact of changes, and maintain rate structure
throughout project

Relationships because the industrys capacity is close to 100%, most operators

are aligned with particular contractors to secure services and resources, including
fabrication slots.

Negotiated Terms Competitive bidding on early studies is gone, trend turning

towards aligned relationships due to capacity

27

GOM Trend Emerging Bias Towards Dry Tree Units

Wet Completions Face Depletion Challenges

Dry completion features and benefits:

9 Direct vertical access for well intervention
Enhances reservoir testing, monitoring, inspection and maintenance operations

9 Drilling and workover capabilities

9 Lower operating costs because of well intervention ease

Source: MMS
28

GOM Trends Floating Systems

Spars and Semis starting to dominate deepwater developments due to

superior motion characteristics, versatility, larger rig packages, and deck load
capability

Dry tree systems new semi designs will enable ultra-deep dry tree production,
opening up new opportunities in some frontier plays

TLP dominant floater concept up to about 4,500 ft. w.d., tendon technology
needs improvement before ultra-deep deployment can take place

FPSOs MMS approval still on a case-by-case basis, Petrobras Cascade will be

US GOMs first

Installation move to designs that allow quayside integration, reduce installation

risk

Vessel excursion deeper water depth means greater excursion and thus
higher bending loads and a reduction in fatigue life on SCRs and TTRs

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Thank You!

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