GLOBAL RIG AND OFFSHORE CONSTRUCTION...

© 2014 IHS

Information | Analytics | Expertise

GLOBAL RIG AND OFFSHORE

CONSTRUCTION MARKETS Slowdown on all fronts?

OCTOBER 2014

Evgenia Kukina, Sr. Product Manager

+44 (0)2031 593 380

[email protected]

mailto:[email protected]

© 2014 IHS

Content and Presentation Sources

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BLACK SEA OFFSHORE CONFERENCE/OCT 2014

© 2014 IHS

Field Development Trends


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© 2014 IHS

2/3 of global offshore finds in past decade were made in

Southeast Asia, Europe and Africa


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Global offshore discoveries 2004-present

SE Asia Europe Africa Latin America Australia/NZ North America Middle East CIS

© 2014 IHS

Those will be the regions that will drive demand


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SE Asia 26%

NW Europe 22%

West Africa 12%

Latin America 11%

North America 9%

Middle East & Caspian 8%

Mediterranean 7%

Australia/NZ 5%

Offshore field development start-ups in 2014-2019

© 2014 IHS

Fewer project sanctions will lead to a reduction in new

projects in 2-3 years…

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2009 2010 2011 2012 2013 2014

Global Offshore FEED awards

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Global Offshore Field Development Projects

Completed Construction Planned Tendering


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© 2014 IHS

… due to cost escalation and uncertainty over oil price

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Prospects of lower oil prices

Weak demand growth

Rising costs

Tight contractor capacity

Less project sanctions

Postponements

Revisions

Decline in new orders


© 2014 IHS

Only five subsea awards this year – the longest order

drought in years!


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© 2014 IHS

Construction Fleet


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© 2014 IHS

Heavy lift fleet almost doubled in the past ten years


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2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Existing vessels Newbuilds

Global Heavy Lift Fleet Supply

The current fleet consists of 56 vessels, with 10 under construction

© 2014 IHS

Heavy lift market will remain heavily oversupplied…


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0%

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5,000

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2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Uti

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vessel

days

Demand (vessel days) Supply (vessel days) Utilisation

© 2014 IHS

…unless older vessels are removed


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25

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0-5 years 6-10 years 11-15 years 16-20 years 21-25 years 26+ years

© 2014 IHS

The pipelay market has seen a large number of newbuild

deliveries in the past ten years…


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© 2014 IHS

Increasing supply and slower demand for pipelay work

are affecting utilisation rates


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0%

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2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014F 2015F 2016F 2017F 2018F

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Demand Supply Utilisation

© 2014 IHS

Utilisation rates for deepwater vessels will stay at a

healthy level


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0%

20%

40%

60%

80%

100%

120%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014F 2015F 2016F 2017F 2018F

Harsh&Deep Shallow&Benign Whole Fleet

Offshore pipelay utilisation by vessel type (2004-2018)

Rig market


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© 2014 IHS

Floating rig market will weaken in the next two years due

to newbuild deliveries and poor demand


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NW Europe semis supply and demand 2014-16

Demand Total supply Marketed supply Marketed surplus

© 2014 IHS

Indicators of market change from IHS publications


- Chevron looks for cost cuts on Rosebank (European Rigs Newswire - 25 November, 2013)

- Alarm bells ring over UK exploration decrease (European Rigs Newswire - 26 February, 2014)

- Oil & Gas UK expresses concerns over bareboat chartering tax measure (European Rigs Newswire - 20 March, 2014)

- Statoil lets Transocean Leader option lapse (European Rigs Newswire - 1 April, 2014)

- Sublets adding further market pressure (North Sea Rig Report - 10 July, 2014)

- Rosneft awards contracts to NADL and Northern Offshore (European Rigs Newswire - 30 July, 2014)

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© 2014 IHS

Jackup rig market will also soften as little new work is

emerging for 2015-2016


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NW Europe jackups supply and demand 2014-16

Demand Total supply Marketed supply Marketed surplus

© 2014 IHS

Floater market softening

Standard

• Marketed utilisation 85%

• Total utilisation 60%

• 25% cold-stacked

• Fixture rates USD 180,000-300,000

• Older rigs up for sale – few buyers

Deepwater (DW)


• Total utilisation of 83%


• Declining rig values

• Scope for attrition of older deepwater units

Ultra-deepwater (UDW)

• 95% marketed/total utilisation

• 72 units available before late 2015

• Most UDW rigs working way below water depth capacity

• 16 newbuilds available before late 2015

• Soft market expected until 2016

• Day rates slipping from highs of USD 630,000 to USD 375,000

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WHATEVER HAPPENED TO THE NORTH SEA RIG MARKET? / SEPTEMBER 2014 BLACK SEA OFFSHORE CONFERENCE/OCT 2014

© 2014 IHS

New supply incoming but little attrition

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1995 1999 2003 2007 2011 2015 2019

Additions/ Removals

Supply

Semi supply 1995-2020

Add Del Fleet

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• 46% of newbuilds uncommitted • 45% of newbuilds uncommitted

• 61 of 75 have wd>7,500ft

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Drillship supply 1995-2020

Add Del Fleet


© 2014 IHS

Sharp decline in 3,001-5,000ft backlog

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Floating Rig Backlog by Rated Depth

>7,500ft

5,001 - 7,500ft

3,001 - 5,000ft

<3,000ft

© 2014 IHS

Rigs on order and under construction are counted. Out of service rigs are not counted.


© 2014 IHS

Jackup supply increasing but market remains for older

rigs

Premium (301ft+)




• Stronger utilisation of higher-spec vs. lower-spec rigs

• Day rate gap between older and newer rigs

• Oversupply looming

300ft IC


• Marketed utilisation of 87%


• Attrition rate for older rigs remains low

• Low-cost contractors being set up

250ft IC


• Marketed utilisation of 87%


• Attrition rate for older rigs remains low

• Low-cost contractors being set up

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© 2014 IHS

Huge increase in jackup fleet

• 144 jackups under

construction

• 88% uncontracted

• Little attrition underway

• Over half being built in

China

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Additions/ Attrition

Jackup supply 1995-2015

Jackup - Add Jackup - Del Jackup - Exist


© 2014 IHS


Conclusions • Cost escalation and uncertainty over the

oil price will lead to a reduction in new

field development projects in 2-3 years

• This will affect demand for pipelay,

platform and subsea installation work

• Increasing supply and slower demand

will bring down utilisation rates for heavy

lift and pipelay vessels

• Floating and jackup rig markets will

weaken in the next two years due to

newbuild deliveries and poor demand

• Longer term, the oil price will be

strengthening, as the global economy

recovers, boosting field development

activities

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