Post on 06-Feb-2018
Global Subsea Market Outlook
from an Asia Pacific Perspective
4th Asian Subsea Conference and Exhibition
Prepared by
Kian Zi Chew
Douglas-Westwood Singapore
www.dw-1.com
LNG
offshore
onshore
downstream
power
LNG
renewables
• Established 1990
• Aberdeen, Canterbury, London, Singapore
& Houston
Activity & Service Lines
• Business strategy & consulting
• Commercial due-diligence
• Market research & analysis
• Published market studies
Large, Diversified Client Base
• 1000 projects, 600 clients, 80 countries
• Leading global corporates
• Energy majors and their suppliers
• Investment banks & PE firms
• Government agencies
Douglas-Westwood Our Business
Transaction Support:
Mergers & Acquisitions
(M&A and LBOs)
Financing Facilities
(inc. MBOs)
Initial Public Offerings
(IPOs)
Douglas-Westwood Research
Macro-Economic Environment Offshore Market Outlook
Subsea Market Review
Conclusions
Global Energy Demand Outlook
1990 1995 2000 2005 2010 2015 2020 2025 2030 2035
• Primary energy demand is the prinicple indicator for all oil & gas related expenditure.
• Global demand is expected to grow by 41% between 2012 & 2035.
• Population growth projected at 24% for the same period.
• Energy intensity per capita is growing...
8.1btoe
12.5btoe
17.6btoe
Global Primary Energy Demand BP Energy Outlook 2035
Global Energy Demand Outlook Asian Import Dependence
Asian % Share of Global Demand
22%
47%
-100%
-90%
-80%
-70%
-60%
-50%
-40%
-30%
-20%
-10%
0%
Gas Balance Oil Balance
Asia China India Japan S. Korea
Asian Import Dependency
40% 22% 5% 4% 2%
% of global energy demand (2013)
• Asian population and economic the major driver behind projected global energy demand surge.
• Asia will account for 47% of global demand by 2035 compared to 22% in 1990.
• However, Asia is major importer of oil & gas, in particular oil which has a regional import/export
balance of -71%. China’s oil imbalance is currently estimated at -58%.
• Major global economies such as Japan and S.Korea are almost exclusively reliant on external oil
& gas.
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 2012-2035 Increase – 55%
Oil 2012-2035 Increase – 20%
• 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
Oil Supply Outlook Prices & Sanctioning
Papa Terra
Egina Lucapa
Block 18 West
Cepu Mars B
Prirazlom
Duvernay Shale
$0
$20
$40
$60
$80
$100
$120
$140
$160
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Bre
nt
$/b
bl
Europe Brent Spot Price FOB (Dollars per Barrel)
EIA High Case
EIA Low Case
Approval threshold Based on anticipated oil price levels
Papa Terra
Egina
Lucapa
Block 18 West
CepuMars B
$0
$20
$40
$60
$80
$100
$120
$140
$160
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Bre
nt $/b
bl
Europe Brent Spot Price FOB (Dollars per Barrel)
EIA High Case
EIA Low Case
Breakeven Price ($/bbl)
• DW expects oil prices to straddle the $90-$100/bbl mark for the next five
years.
• The majority of major projects will be viable at these levels.
• Only arctic and some shale
projects will be threatened.
Oil Price Outlook and Impact on Offshore Project Sanctioning
Gas Supply Outlook Prices & Sanctioning
0
2
4
6
8
10
12
14
16
18
2000 2002 2004 2006 2008 2010 2012
$/m
mb
tu US
Japan (LNG)
UK
Europe
Regional Gas Prices
• Unlike oil the gas market has a more regional pricing
structure due to historical geographical supply
limitations.
• Up to 2008 regional prices typically trended together
however the flooding of US shale gas between 2009-11
and rapid demand growth in North Asia post Fukoshima
have created massive price disparity globally.
• With the US poised to become a major exporter of
natural gas via LNG over the next ten years most
analysts expect a gradual convergence of regional
pricing.
• Significant short-mid term arbitrage opportunities for
North American gas producers.
• Influx of US exports is creating uncertainty in project
sanctioning for gas projects in exporting nations such
as Australia (see Browse).
Industry Challenges Cost Inflation
$0
$20
$40
$60
$80
$100
$120
0
50
100
150
200
250
2000 2002 2004 2006 2008 2010 2012
$/b
bl
Upstr
eam
Cost
Index
Upstream Capital Costs
Oil Price
Upstream Capital Cost Index vs Oil Price BP, CERA
• Upstream capital costs have increased by over 200% since 2000.
• Whilst costs rose rapidly in line with oil prices during 2005-08 they remained high during the oil
price crash of 2009-10.
• High industry costs are an increasing concern for oil & gas companies and the profitability of their
new projects.
Macro-Economic Environment
Offshore Market Outlook Subsea Market Review
Conclusions
Global Supply Outlook The Role of Offshore
Offshore Gas
Offshore Oil
20mn boepd
30mn
40mn
50mn
60mn
70mn boepd
100mn boepd
120mn
140mn
160mn
180mn
200mn boepd
Offshore
Onshore
Deep
Shallow
20mn boepd
30mn
40mn
50mn
60mn
70mn boepd
Global Oil & Gas Production Global Offshore Production Global Offshore Production
• Offshore and natural gas becoming increasing important to global hydrocarbon supply over
the next ten years.
Offshore E&P Spend
$0
$50
$100
$150
$200
$250
$300
$350
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Offshore E&P Expenditure Outlook ($billions)
$211.9
$306.8
• $211.9 billion spent in 2011 – unprecendented levels of expenditure. An additional $1.4
trillion to be spent over the next five years at a CAGR of 7.7%.
• 76% of anticipated expenditure to be associated with shallow water over 2014-18.
Offshore E&P Spend by Segment
$1.4 trillion
Offshore E&P Expenditure 2014-18 by Segment
Offshore E&P Spend Regional Breakout
Offshore E&P Expenditure 2014-18 by Region
Africa 14%
South - East Asia 17%
Rest of Asia 7%
Australasia 3%
Middle East 5%
Latin America 13%
North America 20%
Western Europe
19%
Others 2%
$1.4 trillion
Asia-Pacific
0
10
20
30
40
50
60 India25%
China19%
Malaysia13%
Indonesia12%
Viet nam10%
Thailand7%
Australia6%
Brunei Darussalam
2%
Russian Federation
2%
New Zealand1%
Sri Lanka1%
East Timor1%
Myanmar1%
APAC Drilling Rig Demand by Country
Oth
ers
APAC Drilling Rig Demand by Operator
• APAC is a large, mature and
predominantely shallow water area
controlled by NOCs.
• 58% of demand accounted for by three
largest countries (India, China & Malaysia).
• The region will account for 30% of fixed
platform expenditure – more than any
other.
APAC Offshore E&P Spend
$0
$20
$40
$60
$80
$100
$b
illio
ns
Shallow
Deep
Middle-East
Middle East Drilling Rig Demand by Country
• The Middle East is a mature, shallow water
market.
• Activity is concentrated in the Persian Gulf,
particulary throughout Saudi Arabia and
the UAE.
• Despite limited growth in E&P expenditure
strong drilling growth will drive demand for
OSVs.
Middle East Offshore E&P Spend
$0
$5
$10
$15
$20
$b
illio
ns
Shallow
Deep
Saudi Arabia45%
UAE20%
Iran14%
Qatar11%
Egypt7%
Saudi-Kuwait Neutral Zone
2% Oman1%
0
10
20
30
40
50
Oth
ers
Middle East Offshore Drilling by Contractor
$0
$10
$20
$30
$40
$50
$b
illio
ns
Shallow
Deep
Latin America
Latin American Offshore E&P Spend
Brazil58%
Mexico36%
Venezuela3%
Trin. & Tobago2%
Ecuador1%
Latin America Drilling Rig Demand by Country
• The Latin American E&P landscape is
dominated by NOCs such as Petrobras in
Brazil and Pemex in Mexico.
• Deepwater rig requirements are expected to
grow at a CAGR of 14.8% over the next five
years to support ultra-deep pre-salt
developments offshore Brazil.
01020304050607080
Latin America Drilling Rig Demand by Operator
0
5
10
15
20
25
30
North America
North America Offshore E&P Spend
• The US Gulf of Mexico is the world’s largest
shallow water basin by installed infrastructure.
• Over the next five years both shallow and
deepwater drilling are expected to pick up
with Jack-ups experiencing a CAGR of 3.2%.
• The deepwater industry is dominated by
major IOCs whereas the shallow water
market is highly fragmented.
North America Drilling Rig Demand by Country North America Drilling Rig Demand by Operator
US97%
Canada3%
AR
EN
A
Ta
na
Card
on
Oth
ers
$0
$10
$20
$30
$40
$50
$60
$70
$b
illio
ns
Shallow
Deep
North Sea
• Given the maturity of the basin, shallow water
drilling is expected to decline at a compound
rate of 4.6%.
• Increased exploration in deeper areas will
drive floating rig demand at a CAGR of 2.8%
• These deepwater campaigns will be
dominated by larger oil companies such as
Statoil, BP and Shell.
North Sea Drilling Rig Demand by Country
Oth
ers
0
5
10
15
20
25
30
Talis
man
Norway45%
UK38%
Netherlands11%
Denmark6%
$0
$10
$20
$30
$40
$50
$60
$b
illio
ns
Shallow
Deep
North Sea Offshore E&P Spend
North Sea Drilling Rig Demand by Operator
Macro-Economic Environment
Offshore Market Outlook
Subsea Market Review Conclusions
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
20
08
2009
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20182007 2009 2011 2013 2015 2017
Deepwater Drilling (Indexed to 2007)
Shallow Water Drilling (Indexed to 2007)
Global Subsea Expenditure Outlook
Offshore Drilling Trends Fixed Platform Installations Floating Platform Installations
• 2013 usher in a stepchange in subsea expenditure - $213 bn of investment over the next five years
compared to $122 bn over the previous period.
1
• This change is largely driven by the increasing reliance on deepwater developments.
• Subsea hardware is expected to account for 55% while vessel operations account for the remaining 45%
27.1bn
2008
20
09
2010
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
28.5bn
Strong growth in subsea hardware spend
• Worldwide expenditure to total $117bn over the 2014-2018 period.
(83% growth on the previous five years)
• 49% Subsea production hardware
• 36% SURF (subsea umbilicals, risers & flowlines)
• 15% Trunk pipelines
Picture: FMC
Africa
$21bn
S America
$19bn
N America
$17bn
UK &
Norway
$24bn Asia
$16bn
World Subsea Hardware 2014-2018
• 40% Subsea production hardware
• 32% SURF (subsea umbilicals,
risers & flowlines)
• 26% Trunk pipelines
Subsea vessel deliveries
0
5
10
15
20
25
30
35
40
45
50
197
5
197
6
197
7
197
8
197
9
198
0
198
1
198
2
198
3
198
4
198
5
198
6
198
7
198
8
198
9
199
0
199
1
199
2
199
3
199
4
199
5
199
6
199
7
199
8
199
9
200
0
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
201
7
201
8
Deliv
erie
s PipeLay
ReelLay
FlexLay
DSV
MSV
Subsea Vessel Deliveries
• The build cycle is undoubtedly cooling off now
• Strong demand demand for larger, technically advanced vessels
• Potential orderbook of $5-6 billion over the next few years
0
5
10
15
20
25
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
$bill
ions
Subsea vessel operations market outlook
• Global market to see a CAGR of 10% to
exceed $22 billion by 2018.
• Largest growth from vessels supporting
deepwater developments.
• L. America to grow from 27% & Africa to
38% of demand between now & 2018.
$13.8
$22.4
Africa15%
Asia16%
Australasia4%Latin
America19%
North America
21%
Western Europe
19%
others6%
Subsea Vessel Demand Outlook
Regional Subsea Profiles Asia
• Asian subsea expenditure to total $32bn over the next five
years – 15% of global demand.
• Investment is trending away from conventional shallow water
infrastructure and towards subsea and deep waters.
Subsea Expenditure Subsea Tree Installation Vessel Demand Analysis
• The future of the subsea industry is top-heavy with 65% of
forecast demand accounted for by the top five E&P co’s.
• Subsea Hardware accounts for 52%, vessel operations for
48%
• Major investment in manufacturing capacity already occuring
in the Asian region to ready for growing deepwater demand.
64%
4% 16%
16%
Field Development Trunklines
IRM Subsea Intervention
20132014
20152016
2017
>2000
1500-2000
800-1499
500-799
250-499
<250
20
08
2009
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
2018
5.0bn
Macro-Economic Environment
Offshore Market Outlook
Subsea Market Review
Conclusions
Conclusions
Macro-economic Environment:
1. Long term fundamentals of the oil & gas industry remain highly robust.
2. Key industry risks include rising costs and manpower.
Offshore Market
1. $1.4 trillion of anticipated spend on the offshore E&P industry over the next five years.
2. Continued trends towards deepwater developments, while shallow water continue to
account for the majority of expenditure.
Subsea Market:
1. Long-term growth potential, particularly in Africa, Asia-Pacific and Brazil.
2. At a price, and as a result our study shows the sector has become a very sizable
opportunity for the oilfield service and equipment community.
Questions?
Kianzi.chew@douglaswestwood.com