UK North Sea Oil Gas Market UK Engineering

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UK North Sea Oil & Gas Market UK Engineering Hubs, Priority Projects, Brownfield &

UK North Sea Oil & Gas Market UK Engineering Hubs, Priority Projects, Brownfield & Decommissioning Opportunities Roger Swaine – UK Senior Advisor & Oddmar Johannesen – Regional Director

UK North Sea – Current Situation • Before the oil price crash UK North

UK North Sea – Current Situation • Before the oil price crash UK North Sea Production Operations was in decline. • The recent low $/bbl oil price made UK a high cost region – significant cost reduction required to maintain production and sustain future investment. Ø Offshore shifts now a 3 + 3 rota – was 2 + 2. Ø Cost /bbl reduced from $35 to $18 • Government tax take is now neutral / negative but production now increasing for the third year running. • Majors continue to sell older assets to Independents for «tail-end» production and focus their new developments West of Shetland (eg. BP Clair) • Operators, Contractors and Suppliers have significantly «downsized» . • A few large scale Greenfield projects are planned – subject to economics at low oil prices and financing. • Brownfield Projects appear to be robust with opportunities emerging for OPEX reduction, tie-backs, redevelopment of older fields, and life extension. • Abandonment / Decommissioning present significant opportunities associated with P&A and removal of redundant production facilities.

UK Sector: Current Challenges The UK North Sea has challenges to attract new business

UK Sector: Current Challenges The UK North Sea has challenges to attract new business / future investment compared to potentially better opportunities in other oil and gas regions globally. In summary, the main challenges are: - • • • Investment in 2016 only £ 100 million (£ 3. 5 billion in 2015). Continued need for cost reduction (CAPEX & OPEX) Access to value enhancing technology New Greenfield Projects are predominately heavy oil SNS gas fields largely depleted (although Independents are active in this area) Field life extension / deferring abandonment Reduction in UK fabrication capacity Cost of abandonment & decommissioning (on which there is no ROI) Expertise leaving the industry which will be hard to replace «The Great Crew Change»

Opportunities: Overall UK Opportunities can be categorised as follows: • Provision of «enabling technologies»

Opportunities: Overall UK Opportunities can be categorised as follows: • Provision of «enabling technologies» to reduce CAPEX and OPEX Ø Application of digital technology and information management Ø New techniques for drilling / completions • Field life extension Ø As above to increase production, reduce OPEX and defer decommissioning • Enhancement of offshore safety and environmental management Ø Provide solutions to safety / environmental issues which can also reduce operations / production costs • Provision of low cost products & services to Brownfield operations Ø Ø O & M / Integrity management Brownfield projects Tie-backs Well services • Provision of low cost products & services to Greenfield Projects Ø Major & Independent Operators Ø Major contractors Ø Front-End Contractors & field development consultants. • P&A and Decommissioning Projects Ø De-construction Ø Logistics support

New Greenfield Projects Centre of Excellence in UK is London Current business opportunities are:

New Greenfield Projects Centre of Excellence in UK is London Current business opportunities are: • The NORWEP list of Priority Projects. • Major Operators - before projects enter FEED (by which time technologies and contractors have been selected) - aim to be a «preferred supplier» • Independents: Rely more on supply chain for technology and services. Engage early to influence choice of technology and provide low cost / value adding solutions. Required Approach: Engage with: • EPC Contractors to be preferred suppliers and / or provide access to Norwegian enabling technologies which enhance their own competitiveness. • Conceptual / Front-End Contractors & Development Consultants to inform of enabling technologies, etc. • Operator & Contractor Drilling specialists to inform of new developments in technology / products

NORWEP Priority Projects – UK (1/2) Country Project Operator Stage FEED award Main EPC

NORWEP Priority Projects – UK (1/2) Country Project Operator Stage FEED award Main EPC award Dev. solution Project stages: Total investment (USD bn) Project location Definition Final Investment Decision Under dev 2014/ 2015 Culzean 2015 3 fixed platforms Bentley 2014 tba 2015 2018 2014 n/a 2017 2019 Fixed platform + FSO FPSO Tender Under dev. On hold Comments 4. 5 2015 Gas-condensate HPHT field. Approved by UK authorities. FEED topsides: KBR. FEED subsea: INTECSEA. 3 jackets detail design: Ramboll. 3 Jacket EPC: Heerema. SMOE with topside EPC contract. MODEC with FSO EPC contract. Subsea 7 with subsea installation contract. Export pipeline: Tata Steel 4. 4 Walsay Energy Holdings Aberdeen 2020 Previously Xcite Energy failed to obtain finance. Walsay now reshaping the project for sanction 2020 earliest. 2 Shell Aberdeen & London 2016/2017 2. 7 Chevron Aberdeen & London 2017 Phase 1 is now extended reach drlling of 5 polymer injection wells. Phase 2 (additional platform option) dependent on results from Phase 1. 5 -2 Siccar Point Energy Aberdeen 2019 Bidding expected late 2018 Under dev United Kingdom Penguins FEED Total (Maersk) Aberdeen Shelved Walsay Energy Holdings Conceptua l Flour selected as EPCM contractor with Sevan cylindrical FPSO for construction in China Under dev Captain EOR Fixed platform & polymer injection FEED Cambo 6 Siccar Point Energy FPSO or tieback

NORWEP Priority Projects – UK (2/2) Country Project Tolmount Operator Premier Oil Stage FEED

NORWEP Priority Projects – UK (2/2) Country Project Tolmount Operator Premier Oil Stage FEED award Under dev 2017 United Kingdom Greater Lancaster Area (GLA) Rosebank 7 FEED 2016 Main EPC award 2018 Dev. solution Fixed platform Project stages: Total investment (USD bn) Project location Definition Final Investment Decision 1. 5 Premier Oil Aberdeen Hurricane Aberdeen & London 2017/2018 Chevron Houston 2020/21 2018 FPSO 2 2019 FPSO 2 2018 Conceptual FEED Tender Under dev. On hold Comments Additional resources nearby could potentially result in a second phase. Hurricane now moving ahead with a phase 1 EPS using the Aoka Mizu FPSO with minimal subsea (2 well) infrastructure. Funding remains an issue. Technip. FMC are appointed contractor for the field development. Recoverable reserves tend to indicate this could be a very significant development. Now Tendering

UK Engineering Hubs • The major global Engineering Contractors have a UK based Greenfield

UK Engineering Hubs • The major global Engineering Contractors have a UK based Greenfield & Brownfield capability Ø Ø Ø Ø Ø • KBR (Leatherhead) Wood. (Staines) Aker Solutions (Chiswick) Worley. Parsons (Brentford) Petrofac (Woking) Saipem (Kingston-upon-Thames) Mc. Dermott (Epsom) Flour (Camberley) Bechtel (Hammersmith) Greenfield and Brownfield Projects are managed from different locations Ø Ø Greenfield – London Brownfield / O&M Services – Aberdeen • UK is also a base for Subsea Engineering / Installation Contractors (Subsea 7 & Mc. Dermott) • Drilling / Well Services contractors have UK bases (Aberdeen – Transocean, Baker Hughes, Halliburton, Schlumberger, etc. ) • Those with US offices operate regionally so UK is a significant hub for UK and international projects. • European based contractors (Saipem, Micoperi, and Technip. FMC) have London offics but major Projects are undertaken from Milan & Paris respectively. • Bechtel & Fluor bid opportunistically for offshore projects from the UK but their major markets are onshore upstream, midstream and downstream. • Current International projects executed in the UK Contractor hub include: Ø Sea Lion (Premier Oil – Falkland Islands) Ø ACE Shah Deniz (BP – Azerbaijan) Ø SNE (Cairn / BP – Senegal)

Conceptual & Front End Engineering The Global Engineering Contractors have full project life cycle

Conceptual & Front End Engineering The Global Engineering Contractors have full project life cycle capability including Conceptual and FEED and have Front-End consultantcy companies which operate separately. Front-End Consultants need to be informed of value enhancing technologies / services. • To sell to their clients (the Operators) • Enhance their own competitiveness • Inform their clients of new technologies «bottom up» As such, they should be targets to enable them to be informed of new, potentially game changing / cost saving, Norwegian products and services. Many Front-End Consultants work with Independents and therefore have a high influence on technology / concept selection very early in the project lifecycle.

Front End Consultants Main consultancies: • • • Granherne (KBR owned) Genesis (Technip owned)

Front End Consultants Main consultancies: • • • Granherne (KBR owned) Genesis (Technip owned) Xodus (60% owned by Subsea 7) ODE (Bouygues owned) Intec. Sea (Worley. Parsons owned) – subsea specialists WG Kenny (Wood. owned) – subsea specialists Specialist Front-End groups exist within: • Wood. (previously Mustang) • Petrofac • Worley. Parsons ( «Select» and Advisian) Specialist Field Development Consultants include: • io Oil & Gas Consultants (a GE / Mc. Dermott jv) • Upstream Advisors

Brownfield Projects + Life Extension UK Centre of Excellence is Aberdeen Current activity includes:

Brownfield Projects + Life Extension UK Centre of Excellence is Aberdeen Current activity includes: • Major Operators: Forthcoming re-developments (Penguins, Captain, etc. ) • Major & Independent Operators: Outsourcing of O&M services, require low CAPEX / OPEX technologies to make Brownfield Projects economic (Enquest, Chrysaor, Premier, etc…. ) • «Tail-end» Independent Operators: Production from «second hand» assets and require life extension expertise (Repsol, Apache, Perenco, etc…. ) • EPC Contractors: Provision of O&M / life of field services (Wood. , Petrofac, Aker Solutions) • Engineering & Subsea: Provision of sub-sea tie backs (Intec. Sea, WG Kenny, Subsea 7) • Engineering & Installation: Decommissioning and removal of redundant infrastructure • Drilling and Oil Field service Contractors: Major focus on P&A

Independent Operators The UK sector is now dominated by Independent Operators Currently most Greenfield

Independent Operators The UK sector is now dominated by Independent Operators Currently most Greenfield & Brownfield opportunities are with Independents Greenfield: • Hurricane Energy: Greater Lancaster Development. Phase 1 EPS now in progress for start-up 2019. Technip. FMC appointed as field development partner. • Alpha Petroleum: Cheviot heavy oil development. An FPSO project in early stages • Premier Oil: Tolmount - SNS NUI development with a new pipeline to onshore gas terminal. Now in execution with Rosetti. Potential Brownfield opportunities for Solan and Catcher fields. • Ophir: Fortuna (FLNG Equatorial Guinea) & Tanzania. Projects in early stages – currently managed from London. • Maersk (now Total): Culzean – currently in construction - Brownfield / O&M support opportunities. Brownfield Tie back Projects: • • • Chrysaor: Everest & Lomand extensions Premier Oil: Catcher tie-backs Dana: Western Isles tie-backs Nexen: Buzzard Phase II Ithaca: Various field extensions Apache: Various tie-backs

Abandonment & Decommissioning 349 fields will be decommissioned by 2025 • 214 UKCS •

Abandonment & Decommissioning 349 fields will be decommissioned by 2025 • 214 UKCS • 106 Dutch • 23 Norwegian 200 platforms of various sizes for removal (c. 30, 000 tonnes – 100 tonnes) 7, 800 Km of Pipelines to be inerted / abandoned 3, 650 Production wells to be plugged / abandoned

Decommissioning: Cost / Opportunity UK Government estimate: £ 39 billion Oil & Gas Industry

Decommissioning: Cost / Opportunity UK Government estimate: £ 39 billion Oil & Gas Industry estimate: £ 80 billion £ 17 billion to be spent between 2017 and 2025 • Annual average spend estimated as £ 1. 7 / £ 2. 0 billion pa Well Plug / Abandonment (P&A) is 45% of total decommissioning cost (£ 17. 5 to £ 36 billion) Decommissioning will take 25 / 30 years • Annual average spend estimated as £ 1. 6 / £ 3. 2 billion pa Main areas of activity currently CNS and SNS Major Contractors investing large amounts in specialist equipment / vessels • Allseas • Heerema • Able (Onshore recycling facilities) Engineering contractors developing capability / expertise Allseas “Pioneering Spirit”

Current P&A / Decommissioning Projects • Brent & Cormorant (Shell) • Miller (BP) •

Current P&A / Decommissioning Projects • Brent & Cormorant (Shell) • Miller (BP) • Curlew (Shell) • Brae (Marathon Oil) • Beatrice (Repsol) • Tyne & Trent (Perenco UK) • Thames Area (Perenco UK) • V Fields (Conoco Phillips) • LOGGS (Conoco Phillips) • CMS (Conoco Phillips) • Ninian (CNR) • Harding (Taqa) • Dunlin (Fairfield) • Rough (Spirit)

Summary • The UK Market is challenged - but remains robust and production is

Summary • The UK Market is challenged - but remains robust and production is increasing from a low in 2014. • CAPEX and OPEX have decreased - but there is still room for further cost reduction. • A small number of large Greenfield Projects will go ahead in the next five years with both Major and Independent Operators. • Existing production is being extended by tie-back Projects. • Most UK fields are operated by Independent Operators. • Maintaining existing assets, extending field life, P&A and Decommissioning are emerging as significant markets. • Operators aim to defer cessation of production and decommissioning for as long as possible. • Technology is an enabler of low cost Projects and field life extension. • All Operators continue to reduce their cost of Operations. • The UK is a hub for engineering capability which serves the North Sea and international / global Projects. • The UK supply chain is stretched. UK based contractors reduced capacity due to low oil price but are now expanding.

Way Forward for Norwegian Companies «Conventional» sales opportunities still exist - but a smaller

Way Forward for Norwegian Companies «Conventional» sales opportunities still exist - but a smaller number. The emerging market is for technology, products and services for Brownfield Operations / life extension projects – typically subsea tie-backs Brownfield Projects / services should be the major focus area including: • Well Services • P&A • Decommisioning Value enhancing or cost reduction technologies and services are required for Brownfield / Life Extension opportunities. • Innovative technologies / solutions to operational issues • Application of «digital solutions» for asset management and OPEX reduction – smart technology, etc… Applicable to drilling, well engineering, subsea and topsides facilities design as well as O&M / modifications and integrity management.

Way Forward (cont’d) Primary objectives: • Engage with the Independent Operators – these companies

Way Forward (cont’d) Primary objectives: • Engage with the Independent Operators – these companies have most of the opportuniteis (Greenfield & Brownfield). • Develop relationships with the Majors. • Engage with UK Engineering & Front-End Contractors. Once they have • Provide knowledge of Norwegian technologies and services Develop a strategy for the UK market. • Decide what it is you want to be in the UK • List UK target companies • Develop a business plan • Do you require a full time presence in the UK? Engage customers by developing a compelling «Value Proposition»

PROMOTING NORWEGIAN ENERGY CAPABILITIES IN INTERNATIONAL MARKETS norwep. com

PROMOTING NORWEGIAN ENERGY CAPABILITIES IN INTERNATIONAL MARKETS norwep. com