OIL MARKET OUTLOOK AND WHAT NEXT FOR THE SOUTH EAST ASIAN OFFSHORE MARKET VIJAY KRISHNAN

Transcription

1 OIL MARKET OUTLOOK AND WHAT NEXT FOR THE SOUTH EAST ASIAN OFFSHORE MARKET VIJAY KRISHNAN

2 rystad energy introduction Office locations Rystad Energy is an independent databases and consulting services firm, started in 2004, headquartered in Oslo, Norway. Provides a range of upstream E&P and oilfield service business intelligence data solutions built from a bottom up perspective across every single asset A leading advisor within strategy, market analysis and business development Publishing standard and customized research reports on high impact industry topics Insight and deliveries based on proprietary, fundamental research from primary sources

3 ucube - the core of what we do Core content: 65,000 assets globally 100% of Global Supply Asset Level Economic Model Monthly Global Update 3,200 companies Time span Production & Reserves Costs & Tax models Breakeven prices Asset factsheets M&A data Core benefits: Complete Consistent Micro to Macro Best in class GUI Core usage: Market/company/asset analysis Benchmarking BD & target screening Valuation

4 INSIGHT THROUGH BUSINESS DATA SOLUTIONS BUILT ON SAME, CONSISTENT DATA STRUCTURE AND PLATFORM Complete and consistent E&P business intelligence data from macro to micro level with global coverage global e&p solutions global oil service solutions Global oil services market analysis data by industry segments, geography and supplier companies North America shale analysis package with volumes, economics, well data and maps for all key plays and players north america shale solutions regional e&p solutions Regional strategy & business development tool kit incl. regional E&P database, license activity atlas, asset reports and economical modelling spreadsheets

5 JW19 SERVING ALL OIL & GAS CLIENT SEGMENTS Governments/ Organizations Oilfield service NOCs Majors E&Ps Rystad Energy Oil & gas knowledge house Consulting firms Investment banks Investors

6 Slide 5 JW19 Work more on colour coding here and use company specific colours Julia Weiss, 30/11/2016

7 How we got here: the generic commodity cycle Higher reinvestment increases production Production outpaces demand Increased investment, capacity issues Prices drop, hurting cash flow and returns Higher prices improve cash flows Demand outpaces production Low reinvestment hurts production Cash flow declines, spending cuts, lay offs A commodity market with no price maker endlessly repeats this cycle

8 The cycle begins: in 2014, a large imbalance between supply and demand was looming Global liquids supply and demand Production outpaces demand Demand Demand outlook (Jun 2014) Supply Supply outlook (Jun 2014) Prices drop, hurting cash flow and returns 75 Historical Forecast Source: Rystad Energy research and analysis, UCube, IEA

9 We have now witnessed the biggest drop in Global E&P investments ever Global E&P investments USD billions Other Onshore Shale/Tight oil Oil sands Offshore shelf Offshore midwater Offshore deepwater - 25% - 22% Cash flow declines, spending cuts, lay offs Source: Rystad Energy DCube

10 Supply Impact affecting the medium term? Sanctioning of new fields has collapsed to Historic Lows 80 Global Resource by Approval Year Billion boe History Forecast Other Onshore Shale/Tight oil Oil sands Offshore shelf Offshore midwater Low reinvestment hurts production Approval year for project Source: Rystad Energy UCube

11 Supply: Some Impact now, but there are ~3 mmbbls/day missing due to recent underinvestment 4.0 Oil production (excl. shale) by approval year Mmbbl/d Source: Rystad Energy UCube

12 Stocks draw in 2017 on cuts, in medium term still tight market due to lack of sanctioning Global liquids supply and demand Million bbl/d Total Demand Total Supply Historical Forecast Source: Rystad Energy research and analysis 11

13 KSA prepared to force compliance and we expect production to be cut below target in 1H KSA base case crude production, monthly Million bbl/d KSA RE base case KSA Target cut Historical Forecast 9.0 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 * This is the scenario called «Full 2017 Cuts + Natural Decline» in the OPEC scenarios on slide 4. Source: Rystad Energy research and analysis 12

14 Full compliance through maintenance, while Iran increases production through Aug Selected OPEC countries crude production base case vs. OPEC agreement 30-Nov target production Million bbl/d Iraq RE base case Iraq Target Iran RE base case Iran Target UAE RE base case UAE Target Kuwait RE base case Kuwait Target Historical Forecast 2.0 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Source: Rystad Energy research and analysis 13

15 Six OPEC members struggle to maintain production regardless of the OPEC agreement Selected OPEC countries crude production base case vs. OPEC agreement 30-Nov target production 2.4 Million bbl/d Venezuela Venezuela Target Angola Angola Target Rest OPEC* Rest OPEC* Target Algeria Algeria Target 1.0 Historical Forecast 0.8 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 *Rest OPEC = Qatar, Ecuador and Gabon. Source: Rystad Energy research and analysis 14

16 Production to drop by 260 kbbl/d in 1H 17 against the reference level, mostly through declines. Liquids production profile for non-opec countries 2.2 Historical Forecast Million bbl/d Mexico Kazakhstan Oman Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Azerbaijan Malaysia Other non-opec 1 Source: Rystad Energy research and analysis

17 Recent rally in rig counts positions start-up activity for a steep recovery in US shale start-up activity scenarios Number of new wells per month Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 History Base Case Low Case (50 USD/bbl) Max Case (25 USD/bbl ahead of base) 1 Source: Rystad Energy research and analysis, Rystad Energy NASWellCube Premium

18 Significant growth is inevitable, base production is too mature given current activity levels 9000 US shale oil production scenarios Thousand bbl/d Incremental New Production (Max Case) Incremental New Production (Base Case) New Production (Low Case) 6000 Base Production Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 1 Source: Rystad Energy research and analysis, Rystad Energy NASWellCube Premium

19 Weaker 1Q and stronger remainder of the year demand result in overall higher 2017 growth World liquids demand growth y/y Million bbl/d History Forecast RoW Saudi Arabia Russia India Brazil China US Japan South Korea Iran World World (previous) Q-15 2Q-15 3Q-15 4Q-15 1Q-16 2Q-16 3Q-16 4Q-16 1Q-17 2Q-17 3Q-17 4Q-17 1 Source: Rystad Energy research and analysis

20 ICE Brent crude historical front month price, latest five year futures curve and UCube base case Nov-10 Nov-11 Nov-12 UCube base case Nov-13 Nov-14 Nov-15 Futures curve Brent front month Nov-16 Nov-17 Source: Bloomberg, Rystad Energy research and analysis

21 E&P companies to keep investment flat in 2017 with some positive upside risk E&P Investments USD Billion 1, % % 10% Source: Rystad Energy DCube

22 Average 62 USD/bbl oil price in 2017 suggests broadly flat growth for the OFS market In the November 2016 release of DCube we see some downward revision of the short and long term service market. This is the effect of more clarity around oil supply and E&P companies being cautious before the OPEC meeting. The short term service segment purchases from is now at -9.5%, down from -8.8%. Long term we still see an average growth of 10%. Purchases of oilfield services USD Billion Short term Long term CAGR -9.5% CAGR 10.0% Brent Oil Price with Rystad Forward Curve USD/bbl Source: Rystad Energy DCube

23 Floater fixture volumes and rig rates have been trending downwards Rig rates (kusd/day) # fixed rig years Rig Supply Years (rhs) Rig Rate USD (lhs) Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1Q

24 The same situation for jackups but lower activity Jackups Jackup construction and retirement Number of units Construction Retired units retired in 2016* 19 units retired in *As of Source: RigCube September 2016

25 2015 & 2016 with largest number of retired rigs in more than 40 years Floaters Floater construction and retirement Number of units Semisubmersible Drillships Retired Semisubmersible Retired Drillship units retired in 2016* units retired in *As of Source: RigCube September 2016

26 Utilization will start to recover during 2018 assuming no further retirements Floaters Global supply* and demand for floating drilling rigs Number of rigs Demand Total supply Utilization Total fleet Historical average 83% Implied 77% 81% 84% 86% 84% 81% 79% 82% 85% 82% 73% 57% 51% 53% 60% 65% * Total supply is gross supply for the fleet and includes all rigs, including ready stacked and cold stacked. Source: RigCube September

27 Recovery from 2018 for all segments 20% Purchases of oilfield services 15% Annual change 10% 9% 9% 10% 5% 6% 5% 0% -5% % CAGR -10% -15% -20% -20% -18% Maintenance and Operations EPCI Subsea Drilling Contractors -25% Well Services and Commodities Seismic -30% All OFS Purhases Source: DCube November 2016

28 But the rebound varies across regions and segments in 2017 Oilfield service growth North America Europe 30% 30% 20% 20% 10% 10% 0% -10% % -10% % -20% -30% -30% -40% -40% 30% 20% 10% 0% -10% -20% -30% -40% South America Africa and Middle East Asia and CIS 30% 30% 20% 20% 10% 10% % 0% % -10% -20% -20% -30% -30% -40% -40% Source: DCube

29 Project cost cutting has helped field development in the region New field developments Breakeven improvement of a best-in-class non-sanctioned offshore development USD/bbl Seismic Well Services and Commodities Drilling Contractors Subsea EPCI Maintenance and Operations Downsizing and simplification Improved design and reduced contigencies High grading and efficiency gains Unit prices Currency gains 2016 Source: Rystad Energy Research and Analysis

30 Shallow water investments drive the decline in Southeast Asia, but also the rebound Offshore purchases from investments by supply segment USD billions 35 Offshore deepwater Offshore midwater Offshore shelf - 26% % CAGR: 16% Source: Rystad Energy DCube 29

31 Southeast Asian growth will come from new developments and Brownfield investment SE Asia purchases of offshore oilfield services USD Billion Exploration Greenfield Brownfield Source: Rystad Energy DCube

32 Southeast Asian growth by service segment SE Asia purchases of offshore oilfield services USD Billion Seismic Well Services and Commodities Drilling Contractors Subsea EPCI Maintenance and Operations Source: Rystad Energy DCube

33 Although lower volumes, there are still exciting opportunities around the world! Offshore capex USD billion North Sea: Johan Castberg Wisting Alta/Gotha Culzean Mediterranean: Leviathan Zohr GoM: Appomattox Mad Dog Phase 2 Shenandoah Indonesia: Abadi FLNG/onshore Gendalo-Gehem Mozambique: Coral FLNG Area 1 LNG Area 4 LNG West Africa: Bonga SW Zabazaba/Etan Brazil: Libra Pilot Sepia Buzios Marlim revitalization Source: Rystad Energy research and analysis, DCube Legend Size of circle = 1 BUSD India: KG-DWN-98/2 Australia: Browse FLNG

34 Spending in Offshore Southeast Asia Greenfield Exploration Brownfield Greenfield Exploration Brownfield 3 33

35 Petronas, Shell, Chevron and Total are the biggest spenders during the recovery SE Asia purchases of offshore oilfield services USD Billion Other Perenco VietSovPetro Pertamina BP PetroVietnam Total Shell ConocoPhillips Eni Repsol ExxonMobil Murphy Oil PTTEP (Thailand) Chevron Petronas Source: Rystad Energy DCube

36 Investment in greenfield projects favors large fields SE Asia greenfield purchases by field size USD Billion Reserves 0-1 MMboe Reserves 1-3 MMboe Reserves 3-10 MMboe Reserves MMboe Reserves MMboe Reserves MMboe Source: Rystad Energy DCube 3

37 Large growth in fixed facilities SE Asia greenfield purchases by facility USD Billion Subsea tie back Floater Fixed Source: Rystad Energy DCube

38 Rystad Energy CONTACT INFORMATION Vijay Krishnan Managing Director Asia Pacific This document is the property of Rystad Energy. The document must not be reproduced or distributed in any forms, in parts or full without permission from Rystad Energy. The information contained in this document is based on Rystad Energy s global oil & gas database UCUBE, public information from company presentations, industry reports, and other, general research by Rystad Energy. The document is not intended to be used on a stand-alone basis but in combination with other material or in discussions. The document is subject to revisions. Rystad Energy is not responsible for actions taken based on information in this document.