IHS Petrodata FPSOOutlook KSam Sept2011

FPSO outlook Preparing for tough times? Kelvin Sam, CFA DnB NOR Asian Investor Conference September 12, 2011

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ODS-Petrodata tracks 198 FPSOs and 130 potential awards in FPSbase

Copyright © 2011 IHS Inc. All Rights Reserved.

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Agenda 1. Overview 2. Lessons from past downturns 3. Capacity 4. Demand 5. Conclusion


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What is an FPSO? • FPSO (Floating, Production, Storage,

Offloading) • Ship-shaped structure which receive,

process and stores oil • Widely used in the Asia-Pacific, Brazil,

Africa and Europe • 60 per cent of the global fleet is leased

while 40 per cent is owned by oil companies


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Introduction

FPSO contract awards Newbuilds

Conversions

Redeployments

Normally owned

Normally leased

Normally leased

USD 0.8 – 2 billion capex

3-4 years construction


USD 250 – 800 million capex

5

2-3 years construction

At least USD 15 million capex

3-12 months upgrade

New leasers arriving with 16 leasers actively bidding globally Asia-Pacific Leasers • • • • • • • • • • • • • • • • •

Petrofac Ramunia Aker FP Berlian Laju Tanker Bluewater Bumi Armada BW Offshore EOC M3nergy Maersk FPSO MISC Mitra Rajasa MODEC Premuda Rubicon/Sea Prod. SBM Tanker Pacific

Brazil Leasers • • • • • • • • •

Africa Leasers • • • • • •

BW Offshore Maersk FPSO MODEC OSX Petroserv Saipem SBM Sevan Marine Teekay Petrojarl

Bumi Armada BW Offshore Fred Olsen MODEC Saipem SBM

Europe Leasers • • • • • •

Bluewater BW Offshore Maersk FPSO Saipem Sevan Marine Teekay Petrojarl

Expect more consolidation involving smaller players (< 6 units each)


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Market share for hull yards is less fragmented FPSO hull conversions 2003-2011

FPSO hull newbuilds 2003-2011

35 Delivered Under construction

30 20

Delivered Under construction

Protected by Copyright (c) 1986-2011 ODS-Petrodata Ltd

• Only a few yards are capable of hull construction globally

• COSCO Dalian emerging as a popular choice for owners with its lower cost

structure and improving capabilities


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Qingdao Behai

IHI

Shanghai Waigaoqiao

Dalian shipyard

Others

COOEC

ST Marine

Yantai Raffles

Sevan 300 hulls counted as conversions

Fene Shipyard


MMHE

COSCO Dalian

Drydocks World

Sembcorp Marine

Keppel O&M

0

DSME

5

Engevix

10

Samsung HI

15

Hyundai HI

Hulls

Hulls

25

10 9 8 7 6 5 4 3 2 1 0

FPSO awards staying high in 2011 FPSO contract awards 25 8 Petrobras newbuilds

Awards

20

Redeployments New orders

15 10 5 0 2003

2004

2005

2006

2007


2008

2009

2010

2011 YTD

Source:ODS-Petrodata

• Both redeployments and new orders contributing to high activity in 2010/2011.

• OGX emerging as a major buyer after ordering four FPSOs in 2011. • Expect at least 15 awards for 2011.


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FPSOs ordered for many regions since Jan 2010 Goliat Knarr

Athena Huntington Quad 204 Ardmore

P-66 Tiro/Sidon P-67 OSX-1 CLOV P68 OSX-2 Sangos P-69 OSX-3 P-70 OSX-4 P-71 OSX-5 P-72 Guara Norte P-73 Guara Pilot Lula Nordeste P-58 P-62

Cendor TSB Pagerungan Berentai D-1 Kitan Balnaves

• 2010 awards • 2011 awards

9 Copyright © 2011 IHS Inc. All Rights Reserved.

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Growing risks of a global economic slowdown – “Vortex”

Quarterly average (USD/barrel)

Brent oil price scenarios 180

Historical

160

Meta (morphosis)

140

Vortex

121

100 89

80

69

60

58

97

115

117 105

Vortex arrives earlier

75

40

141

Global Redesign

120

59

55

75 76 78 68 77

44

154 156 155 157 160 162 139 130 134 135 136 138 120 128 151 153

153

86

108 109 109 111 113116 115

95

107 95

Vortex arrives earlier

86

82

75

55

65 55 52 48

45

20 0

Source: IHS CERA and Platts (historical)

• IHS uses three oil price scenarios • “Global Redesign” is our base case scenario where oil prices stay high • Growing risks of a global recession • “Vortex arrives earlier” shows the impact of an earlier than expected recession


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#1 FPSO awards vulnerable in a recession FPSO contract awards 25

FPSOs

20 15 10 5 0 2000

2001

2002

2003

2004

2005

2006

2007


2009

2010


FPSO awards are cyclical


2008

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#2: Big projects still go ahead in a downturn FPSO contract awards by oil processing capacity 25

120 >100,000 b/d

Awards

<50,000 b/d 80

Avg Brent oil price

15

60

10 40

5

Average oil price (Brent)

100

50-100,000 b/d

20

20

0

0

2000

2001

2002

2003

2004

2005


2006

2007

2008

2009

2010

2011 YTD Source:ODS-Petrodata

• Medium to large projects (at least 50,000 b/d) still sanctioned in a recession: • Longer field life • Operators of bigger fields tend to have stronger balance sheets. • Major leasers with strong balance sheets should still grow in a recession.


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#2 …while smaller projects are cancelled Oil Processing (b/d)

Leaser

Year cancelled

Operator

Contract duration (years)

East Orovinyare

60,000

Fred Olsen Prod.

2006

BowLeven

5

Bilabri

40,000

BW Offshore

2007

Peak Petroleum

3

Basker-Manta-Gummy

28,000

BW Offshore

2008

Roc Oil

5

N/A

Nexus FP

2009

BGEC

7

Puffin Southwest

32,500

MODEC

2009

AED Oil

3

Puffin Northeast

40,000

Sea Production

2009

AED Oil

3

Cancelled FPSO contract

Camago Malampaya

Source: ODS-Petrodata

• Marginal developments at greatest risk in a recession • Shorter field life • Usually operated by smaller independents so higher funding risk


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#3 FPSOs are sold and not bought

FPSO

Year sold

Seller

Buyer

Sale Price (USD m)

Cost (USD m)

Crystal Sea

2007

Seadrill

BW Offshore

80

N/A

Nexus 1

2009

Nexus FP

OSX

400

700

Montara Venture

2011

Tanker Pacific

PTTEP

445

320

DeeP Producer 1

2011

Drydocks World

Ramunia

83

335

Jasmine Venture

2011

MODEC

Petrofac

70

Cossack Pioneer

2011

NWS JV

N/A N/A Source: ODS-Petrodata

• FPSO = a pair of spectacles?

• Difficult to raise cash from selling FPSOs • FPSOs normally sold below cost • Main exception was Montara Venture which was sold to the field operator


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Equipment lead times increasing again Estimated lead times: Selected FPSO equipment 25

Months

20 15

Gas Compressor Gas Turbine

10

Heat Exchanger Turret and swivel

5 0 2006 Jan

2007 Jan

2008 Jan

2009 Jan

2010 Jan

Proteced by Copyright (c) 1986-2011 ODS-Petrodata Ltd.

2011 Jan

2011 Sep Source: ODS-Petrodata

• Lead times increasing from 2010 lows • Some turret suppliers eg. SBM Offshore busy (five FPSOs and two complex

turrets)


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FPSO costs approaching last peak Cost Model - FPSO Y-O-Y Change [USD based] Cost Index (2003=100) [USD based]

300

20%

250

10%

200

0%

150

-10%

100

-20%

50

-30%

0 2003

2004

2005

2006

2007

2008

2009

2010

2011f

2012f

2014f

2015f

Source: ODS-Petrodata, Date: August 15, 2011

Protected by Copyright (c) 1986-2011 ODS-Petrodata Ltd.

• Cost model refers to a newbuild FPSO (180,000 b/d)

• Expect costs to increase by 13.6 per cent in 2011 • Salaries increasing by 7-8 per cent in 2011


2013f

Nominal Index (2003 = 100)

Year on Year Change

30%

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FPSO orders exceeding deliveries

Petrobras newbuilds Conversion

Sep 2011

Dec 2010

Dec 2009

Dec 2008

Dec 2007

Dec 2006

Dec 2005

Newbuild

Dec 2004

50 45 40 35 30 25 20 15 10 5 0

Dec 2003

FPSOs

FPSOs under construction

FPSO construction requires 2-4 years



• FPSO backlog is a good indicator of capacity bottlenecks

• Units under construction at the highest level in three years even after

excluding the Petrobras newbuilds


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Rig orders leading to higher backlogs and tighter capacity Shipyard total backlogs in local currencies 300

Index 1Q06 = 100

250

200 150 100 50 Samsung HI

DSME

Hyundai HI

Keppel O&M

Sembcorp Marine

1Q06

3Q06

1Q07

3Q07

1Q08

3Q08

1Q09

3Q09

1Q10

3Q10

Source: company reports


• Backlog includes non-FPS work such as rigbuilding and shipbuilding

• South Korean yards such as Hyundai HI have record backlogs • “Window of opportunity” to secure capacity is gone?


1Q11

20



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Recent leasing contracts are less risky FPSO lease awards* and average lease term 18 Lease awards

16

Average initial lease term

14 12 10

8 6 4 2 0 2003

2004

2005

2006

2007

2008

2009

2010

2011 YTD

*Includes redeployments Protected by Copyright (c) 1986 -2011 ODS-Petrodata Ltd

• Operators awarding FPSO leasers with longer durations

• Banks don’t believe in extension options anymore… • …so leasers prefer longer contracts.


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We expect 10-15 FPSO awards in 2012 Forecast 2012 FPSO awards by operator Field Region Operator Palas Africa BP Gehem Asia-Pacific Chevron Gendalo Asia-Pacific Chevron Chissonga Africa Maersk Oil OSX FPSO Brazil OGX OSX FPSO Brazil OGX Aruana Brazil Petrobras Transfer of Rights Brazil Petrobras Transfer of Rights Brazil Petrobras Transfer of Rights Brazil Petrobras Franco EWT Brazil Petrobras Maromba Brazil Petrobras Bukit Tua Asia-Pacific PETRONAS Egina Africa Total Tweneboa Africa Tullow Oil

18 16 14 12 10 8 6 4 2 0

Med. & Middle East

Protected by Copyright (c) 1986-20101ODS-Petrodata Ltd

Europe

Africa

Asia-Pacific

Redeployment Newbuild Conversion

Brazil

FPSO

Visible 2012 FPSO demand

Ownership Own Own Own Lease Lease Lease Lease Own Own Own Lease Lease Lease Own Lease Source: ODS-Petrodata

• Normally expect at least 15 awards • Less optimistic in 2012 • Recession risk, high costs and tight capacity


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Expect more redeployment awards in 2012 Idle/Available FPSOs by region 12 South America

10

Europe

FPSO

Af rica

8

Asia-Pacif ic

6 4 2 0 Idle

2011

2012

2013

2014


Source: ODS-Petrodata

• Several idle FPSOs

• 3-4 FPSOs with no extension options coming off charter annually • Many FPSOs potentially available in Asia-Pacific and Africa.


2015

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More FPSO deliveries if oil prices unchanged Visible/Forecast FPSO Deployments 40 South America

Deployments

35

North America

30

Med. & Middle East

25

Europe Central America

20

Asia-Pacific

15

Africa

10

Forecast

5 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source:ODS-Petrodata

Protected by Copyright (c) 1986-2011 ODS-Petrodata Ltd.

 We forecast deliveries to peak again by 2014/2015  Asia-Pacific to be the second largest source of demand  Yards in this region should benefit from growing FPSO demand.


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There is enough capacity for newbuilds… Yard capacity* and demand for FPSO newbuild hulls World demand (ex Brazil)

South Korean yard capacity**

World yard capacity (ex Brazil)

8 7 Hull deliveries

6 5 4 3

2 1 0 2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

*South Korean yard capacity falls in 2012-2013 since the yards are busy with rig orders **Includes only Hyundai HI, DSME and Samsung HI Source: ODS-Petrodata


 Newbuild demand to increase by 2015, absorbing spare capacity in Korea.  Buyers have few choices besides the three South Korea yards.


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… and conversions Yard capacity and demand for FPSO conversion hulls World demand

Singapore yard capacity*

World yard capacity

30

Hull deliveries

25 20 15 10 5 0 2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

*Includes only KeppeI O&M and Sembcorp Marine Source: ODS-Petrodata


 Singapore capacity highlighted due to market leadership in conversions.  Excess capacity for conversions.  Capacity to increase due to facilities expansion by incumbents and growing capabilities of Chinese yards.


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Conclusion – FPSO outlook for 2012

Robust demand( no Vortex).

Some risk of cost overruns as...


More redeployment awards

More leaser consolidation

...lead times and costs increasing…

...while yards are busier now.

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www.ods-petrodata.com


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Oil price scenarios Global Redesign - Shared interest among major powers to expand trade and encourage strong economic growth. Meta – accelerated move towards a lower carbon energy economy. High oil prices spark reactions that slow down the pace of GHG emissions Vortex – Volatile economic growth returns. Recession hits Asia, North America and Europe. Global cooperation suffers


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IHS Petrodata FPSOOutlook KSam Sept2011

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