Future Plans for Offshore Drilling Offshore China 24 May 2012
Important information THIS PRESENTATION AND ITS ENCLOSURES AND APPENDICES (HEREINAFTER JOINTLY REFERRED TO AS THE “PRESENTATION”) HAVE BEEN PREPARED BY SEVAN DRILLING ASA (”SEVAN DRILLING” OR THE ”COMPANY”) EXCLUSIVELY FOR INFORMATION PURPOSES. THIS PRESENTATION HAS NOT BEEN REVIEWED OR REGISTERED WITH ANY PUBLIC AUTHORITY OR STOCK EXCHANGE. RECIPIENTS OF THIS PRESENTATION MAY NOT REPRODUCE, REDISTRIBUTE OR PASS ON, IN WHOLE OR IN PART, THE PRESENTATION TO ANY OTHER PERSON. THE CONTENTS OF THIS PRESENTATION ARE NOT TO BE CONSTRUED AS LEGAL, BUSINESS, INVESTMENT OR TAX ADVICE. EACH RECIPIENT SHOULD CONSULT WITH ITS OWN LEGAL, BUSINESS, INVESTMENT AND TAX ADVISER AS TO LEGAL, BUSINESS, INVESTMENT AND TAX ADVICE. THERE MAY HAVE BEEN CHANGES IN MATTERS WICH AFFECT THE COMPANY SUBSEQUENT TO THE DATE OF THIS PRESENTATION. NEITHER THE ISSUE NOR DELIVERY OF THIS PRESENTATION SHALL UNDER ANY CIRCUMSTANCE CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THE AFFAIRS OF THE COMPANY HAVE NOT SINCE CHANGED, AND THE COMPANY DOES NOT INTEND, AND DOES NOT ASSUME ANY OBLIGATION, TO UPDATE OR CORRECT ANY INFORMATION INCLUDED IN THIS PRESENTATION. THIS PRESENTATION INCLUDES AND IS BASED ON, AMONG OTHER THINGS, FORWARD-LOOKING INFORMATION AND STATEMENTS. SUCH FORWARD-LOOKING INFORMATION AND STATEMENTS ARE BASED ON THE CURRENT EXPECTATIONS, ESTIMATES AND PROJECTIONS OF SEVAN OR ASSUMPTIONS BASED ON INFORMATION AVAILABLE TO THE COMPANY. SUCH FORWARD-LOOKING INFORMATION AND STATEMENTS REFLECT CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND ARE SUBJECT TO RISKS, UNCERTAINTIES AND ASSUMPTIONS. SEVAN CANNOT GIVE ANY ASSURANCE AS TO THE CORRECTNESS OF SUCH INFORMATION AND STATEMENTS. AN INVESTMENT IN THE COMPANY INVOLVES RISK, AND SEVERAL FACTORS COULD CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS THAT MAY BE EXPRESSED OR IMPLIED BY STATEMENTS AND INFORMATION IN THIS PRESENTATION, INCLUDING, AMONG OTHERS, RISKS OR UNCERTAINTIES ASSOCIATED WITH THE COMPANY’S BUSINESS, SEGMENTS, DEVELOPMENT, GROWTH MANAGEMENT, FINANCING, MARKET ACCEPTANCE AND RELATIONS WITH CUSTOMERS, AND, MORE GENERALLY, GENERAL ECONOMIC AND BUSINESS CONDITIONS, CHANGES IN DOMESTIC AND FOREIGN LAWS AND REGULATIONS, TAXES, CHANGES IN COMPETITION AND PRICING ENVIRONMENTS, FLUCTUATIONS IN CURRENCY EXCHANGE RATES AND INTEREST RATES AND OTHER FACTORS. SHOULD ONE OR MORE OF THESE RISKS OR UNCERTAINTIES MATERIALISE, OR SHOULD UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE DESCRIBED IN THIS DOCUMENT. THE COMPANY DOES NOT INTEND, AND DOES NOT ASSUME ANY OBLIGATION, TO UPDATE OR CORRECT THE INFORMATION INCLUDED IN THIS PRESENTATION. THIS PRESENTATION IS SUBJECT TO NORWEGIAN LAW, AND ANY DISPUTE ARISING IN RESPECT OF THIS PRESENTATION IS SUBJECT TO THE EXCLUSIVE JURISDICTION OF NORWEGIAN COURTS. 2
01 Market fundamentals 3
Key Take away Messages • Future supply of oil and gas will be adequate to meet demand – just − Demand driven by non-OECD Growth − All potential sources of supply must be exploited • Deep and Ultra-Deep Water are key to supply • Half of demand for Deep Water drilling rigs will be for development drilling − Development drilling will require mobile units − More specialization in rig designs • Costs are very critical in this business − Low cost, efficient service is an advantage 4
Demand IEA 2011 New Liquids Supply/Demand Balance Policies Scenario IEA 2011 Current Policies Scenario Million boe/d Supply 0.8% (CAGR) • Demand growth projections vary EIA 2011 Population growth 0.9% 120 Demand outlook current policies 1.0% from 0.7% to 1.0% per annum BP 2011 adj* through 2035 100 • Supply growth requires new Deepwater non- deepwater projects as well as producing onshore unconventional resources 80 Offshore shelf non-producing • By 2035 over 33% of the projected Offshore oil supply is currently not on producing 60 production and substantial part is yet to be found Unconventional 40 • Production will struggle to keep up Iraq with demand and only in the “high supply” and “low demand” case will Onshore 20 there be an oversupply conventional (excl Iraq) • A strong base for oil price and 0 service demands 2005 2010 2015 2020 2025 2030 2035 2040 5
Demand IEA 2011 New Gas Supply/Demand Balance Policies Scenario IEA 2011 Current Policies Scenario Million boe/d Supply 1.6% (CAGR) EIA 2011 • Demand growth projections vary Population growth 0.9% 90 Demand outlook current policies 1.6-2.1% from 1.6% to 2.1% per annum BP 2011 adj* (includes NGLs) through 2035 80 • Supply growth depends on new 70 Deepwater deepwater projects as well as non-producing onshore unconventional resources 60 Offshore shelf non-producing • By 2035 over 33% of the projected oil supply is currently not on 50 Offshore production and substantial part is producing yet to be found 40 Shale/Unconv . • Gas markets are more regional 30 . where US has large domestic unconventional resources, Asia will 20 rely on imports Onshore conventional • As with liquids, this provides a 10 strong base for oil price and service demands 0 2005 2010 2015 2020 2025 2030 2035 2040 6
Global discoveries Global discoveries by water depth Discoveries of oil and gas deeper than 400 ft Million boe/decade Million boe/decade (much unconventional from 2000s) 7 Source: Rystad Energy UCube
Most deepwater discoveries still not developed Discoveries of oil and gas deeper than 400 ft by current status Start-up of oil and gas disc. deeper than 400 ft by current status Million boe/decade Million boe/decade 55% of discovered resources not yet put in production – a significant backlog of deepwater discoveries to be developed Resources found, but not yet developed 8 Source: Rystad Energy UCube
Summary of global deepwater drivers – stage set for growth Global oil and gas deepwater resource inventory • 142 Bboe of deepwater resources have been found and developed globally. billion boe • 50% has been produced 591 831 Ultra deepwater* • 174 Bboe have been found but have not yet been developed. Deepwater** GLOBAL INVENTORY • Deepwater development backlog amounts to 55% of volume discovered so far 484 • Another 590 Bboe of resources are expected to be discovered. • 90% higher than what has already been discovered 174 107 • Overall, based purely on resource 122 numbers, less than 15% of the global 67 52 deepwater drilling effort that is due to 59 happen in the past and future, has already 7 -3 taken place Produced Developed Discovered Yet to find Current -72 inventory -75 ACTIVITY appraisal • Exploration wells • Development wells • Infill wells • Intervention * Water depths 400-5000 feet **Water depths exceeding 5000 feet 9 Source: Rystad Energy UCube
02 Future implications 10
Deepwater exploration drilling requirements Global floating rig exploration* drilling demand by asset/license states • The number of exploration and appraisal wells is expected to rise by 50% By number of wells By number of rigs within 2020 • Discovered resource volumes are become increasingly drilling intensive • Petrobras’ subsalt drilling requires much more rig capacity per well, • Leading to a step increase in rig demand while number of wells are fairly 2007 2009 2011 2013 2015 2017 2019 2007 2009 2011 2013 2015 2017 2019 flat from 2008 to 2013. *Includes appraisal drilling 11 Source: Rystad Energy UCube
Future Implications • Half of future demand for mobile units will be for Development Drilling • Do we need the same rig designs for development drilling and exploration? • Yes, but …… − ease of mobility not a driver for development drilling − ease of holding station and movements is a driver − manage pressure operations more likely − costs are a significant driver in developments • Door is open now for more specialized rig designs and operations 12
03 The Sevan design 13
Unique and Cost Efficient Design Sevan Driller Sevan Brasil 2 x UDW new build rigs • Delivered from COSCO end 2009 • Delivered from COSCO February 2012 • Contract with COSCO for two new rigs of Sevan 650 design • In operation for Petrobras under a six • Will operate for Petrobras under a six year contract • Turnkey contract year contract – start-up in Q2 2012 • 98 % uptime in Q4 2011 • Delivery in Q4 2013 and Q2 2014 • COSCO has excellent safety record, over 5 Million Man-hours with no LTI • Over one year without LTI • Options on two additional rigs (5 & 6) 14
Why is it round? • Based on a circular design concept − First developed as an FPSO − 3 FPSO’s − 2 Drilling Rigs (Driller and Brasil) − 1 FPSO under construction (ENI for Goliath Field) • Significant storage capacity − On the main deck − Below main deck – either bulk or liquids • No appreciable pitch or roll − Heave compensation − Design changes • Transit speed 6 knots fully loaded • Easier to keep on station 15
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