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CORPORATE PROFILE & STRATEGY

COMPANY PROFILE

VISION & MISSION

ORGANIZATION CHART

PRODUCT & SERVICES

GLOBAL MARKET ANALYSIS

CORPORATE AGENDA
Our Vision & Mission

To be one of the leading company in providing a quality


OFFSHORE DRILLING and MARINE SERVICES to support
exploration and production of Oil and Gas by 2017

•Drilling Business
•Marine Business
•(Turnkey Project Service provider)

OFFSHORE PLATFORM
Organization Chart
Products & Services

The processes of Exploration & Production

DRILLING &
MARINE INDUSTRY
The processes of Exploration & Production

FABRICATION OF
OFFSHORE STRUCTURES
INDUSTRY

Related industries
DRILLING &
MARINE INDUSTRY
COMPANY PROFILE

GLOBAL MARKET ANALYSIS

PRODUCTION vs CRUDE OIL PRICES

MARKET SEGMENT

PRODUCT & SERVICES

CORPORATE AGENDA
Production vs
Crude Oil prices
Historically, global capital investment in E&P has grown tremendously..

Global E&P expenditures


US$ billion 69.00

• The factors driving an increase in E&P


66.04 activity to unprecedented levels are:

56.51 • Sustained high oil price


environment; and
41.44 299.4
• Limited additional production
270.8
capacity in excess of current demand
31.09
30.37
26.00 26.13 • Years of underinvestment by the
207.0 upstream oil industry in the late 1990s
20.29 20.56 and early 2000s led to stunted growth
19.30
16.86
in oil production while oil demand
14.36 142.6 148.9 continued to rise
126.9 132.3

94.8
75.8 84.5
59.3 63.9 66.8

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Expenditure Oil price (US$ per barrel)

Source: OPEC, ODS-Petrodata


However, crude oil prices have dropped by more than 50% since peaking in
July 2008, …but what is the long-term view on oil price?

Crude oil prices


US$ per barrel
3/7/2008 • Crude oil prices has been on an upward trend over the past
2 years due to:
US$ per barrel

• Geopolitical factors;
• Speculation; and
• Supply shortages amidst growing global demand
• However, oil prices have dropped by more than 50% since
peaking in July 2008 on expectations of declining demand
due to fears that the global economy will slip into recession
2/10/2006 16/10/2008

Prices as of 5 January 2009


US$

•Oil •Gas
48.94 per barrel 6.14 per MMBtu

Source: Bloomberg, Douglas-Westwood, Wood Mackenzie


The long-term oil price outlook is still forecast to remain strong, with prices forecast
to trade between USD $ 60 to US$80 per barrel, even with the spectre of a financial
crisis looming.
US Light Sweet Crude - Q2 2007 (USD/bbl)

$100
1 Source: ODS-Petrodata, NYMEX 2 Source: Infield

$80

$60

$40

$20

$0
1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014
Historical Prices Futures Prices

3 Source: WoodMac
Does the number of new platform installed directly related to oil price?

•The chart shows the spot price of WTI crude


against the number of fixed platform installations
since the 1980’s.

•There appears to be little correlation between


crude prices with the number of fixed platform
installations, which is believed to be due to
several factors:

– The first is that National Oil Companies


(NOC) execute a large amount of their
developments through fixed platforms
and will continue to do so irrespective
of oil price changes as their production
motives are focused towards indigenous
energy security i.e as contribution to their
nations’ development and requirement

– Furthermore, oil demand is expected to


remain strong for at least the next 20
years especially for the transport sector
where non-hydrocarbon alternatives, such
as hydrogen fuel cells are still years away
from being a commercially realistic
alternative.

Historically, there is no clear correlation between investment levels and oil price

•Source: Infield Systems Limited


However, the global financial turmoil occurring at present is expected to create a
more challenging environment for financing oil and gas projects

• The offshore oil and gas industry is capital intensive, and


US$ shortage and the US$ requires a substantial amount of project financing
• The majority of oil and gas projects are financed in US
dollars, such as the construction of:
• Offshore drilling rigs;
• Offshore production platforms; and
• Offshore support vessels
• The US dollar liquidity shortage caused by the current
global financial crisis will postpone or even cancel some
rig construction and field development projects
• However, postponements or cancellations will therefore
only tighten the demand-supply situation further and
preserve a strong market outlook for the offshore oil and
gas industry
• The shortage of supply of drilling assets and vessels will
help to sustain dayrates
• Due to the global dollar liquidity shortage reaching a
substantial scale, central banks such as the Federal
Reserve have added billions of US dollars in liquidity into
the banking system
• It would take a considerable amount of time and market
confidence for US dollar liquidity to reach previous levels
– until then, the environment for financing oil and gas
projects will remain challenging

•Source: Bloomberg
Global offshore capital expenditure by oil majors is forecast to increase
over the medium term

• An increase in E&P activity to


unprecedented levels is being
driven by:
• A sustained high oil price
environment, and
• Limited additional
production capacity in
excess of current demand
• Limited additional producing
capacity would be increased in
the future by raising capital
expenditure of oil majors in fixed
and floating production systems
• Approximately 15% of the E&P
spending increase is expected to
come from the Asia Pacific
region, comprised of the Far
East, Southeast Asia, Australia,
New Zealand and the Indian
Ocean
Market Segment

The processes of Exploration & Production

FABRICATION OF
OFFSHORE STRUCTURES
INDUSTRY
Related industries
reflecting the demand
for drilling industries

DRILLING &
MARINE INDUSTRY
Market Segment

The processes of Exploration & Production

FABRICATION OF
OFFSHORE STRUCTURES
INDUSTRY

Related industries

DRILLING &
MARINE INDUSTRY
Fabrication of offshore structure - Market segmentation

shallow water
deepwater
Global demand for fixed platforms is forecasted to grow in the medium term

Global demand for fixed platform units by region, 2008-2012


Units

28 26
23 23
16

2008 2009 2010 2011 2012

101 109
94 88 92 Europe
116
96 95
88
79 74
2008 2009 2010 2011 2012 50 47 Asia
39 36 36
North America 432
484
2008 2009 2010 2011 2012
2008 2009 2010 2011 2012

Africa
46 47 46 45
Middle East
228 44
208

2008 2009 2010 2011 2012


32 34 5 5 5 6
26 4
26
20
2008 2009 2010 2011 2012

2008 2009 2010 2011 2012


Australasia
South America 25
138

•Source: Infield Systems Limited


Global fixed platform demand is worth USD 46 billion, reflecting the demand for drilling
industries
Global Fixed Platform CAPEX (USD millions)
Table 1 Global Fixed Platform Units (Nos.) by Region 2009-2012 Table 2
by Region 2009-2012
Region 2009 2010 2011 2012 2009-2012 Region 2009 2010 2011 2012 2009-2012

Africa 47 46 44 45 182 Africa 1999 1887 1580 1685 7,151


Asia Pacific 96 88 95 74 353 Asia Pacific 5212 4481 3682 2719 16,094
Australasia 4 5 5 6 20 Australasia 497 427 559 706 2,189
Europe 28 26 16 23 93 Europe 1833 1439 944 704 4,920
Latin America 26 26 34 20 106 Latin America 1523 1319 1093 1076 5,011
Middle East 39 36 47 36 158 Middle East 1862 1888 2548 1730 8,028
North America 94 109 88 92 383 North America 880 942 701 620 3,143
Total 334 336 329 296 1295 Total 13806 12383 11107 9240 46,536

Source: Infield, Global Perspective Report, Fixed Platforms Market Update, pg 25 Source: Infield, Global Perspective Report, Fixed Platforms Market Update, pg 26

In Asia , the market is in Malaysia, Indonesia & Thailand

Table 3 Asia Pacific Fixed Platform Units (Nos) by Country 2009-2012 Table 4 Asia Pacific Fixed Platform CAPEX (USD million)
by Country 2009-2012
Region 2009 2010 2011 2012 2009-2012 Region 2009 2010 2011 2012 2009-2012

China 13 16 15 8 52 China 868 790 473 281 2412


India 14 12 14 8 48 India 1076 883 706 322 2987
Indonesia 24 16 19 15 74 Indonesia 617 507 679 456 2259
Malaysia 10 13 11 13 47 Malaysia 732 629 523 574 2458
Russia 0 0 1 1 2 Russia 289 399 327 264 1279
Thailand 19 18 19 16 72 Thailand 728 563 519 360 2170
Vietnam 8 6 8 9 31 Vietnam 506 302 225 279 1312
Others 10 7 9 1 27 Others 315 408 230 156 1109
Total 98 88 96 71 353 Total 5131 4481 3682 2692 15986

Source: Infield, Global Perspective Report, Fixed Platforms Market Update, pg 51 Source: Infield, Global Perspective Report, Fixed Platforms Market Update, pg 53
Malaysian Fabrication of offshore structure - Market segmentation

shallow water
deepwater
Deepwater solutions involves the fabrication of floating production systems

• There a 4 types of floating production


systems (“FPS”):
– Tension Leg Platform (“TLP”);
– Semi-submersible (“Semi-sub”);
– SPAR; and
– Floating Production, Storage and
Offloading (“FPSO”)
• TLPs are compliant structural
systems, vertically moored and using
buoyant components to maintain
tension in the mooring system and
can be deployed in water depths of
TLP Semi-submersible
up to around 1,500m
• Semi-subs are floating systems with
support structures for the topsides
consisting of pontoons and columns
and is either permanently moored to
the seabed or dynamically positioned;
can be deployed in water depths of
3,000m+
• SPARs have circular cross-section
structures that support the topsides
and can be deployed in water depths
of up to 2,500m
• FPSOs are tanker-type vessels that
additionally have processing, storage
and offloading capabilities via shuttle
tankers and can be deployed in water
SPAR FPSO depths of 3,000m+
Fabrication of offshore structure- Market outlook

shallow water
deepwater
The processes of Exploration & Production

FABRICATION OF
OFFSHORE STRUCTURES
INDUSTRY

DRILLING &
MARINE INDUSTRY
Market Outlook - Offshore Marine Vessel Industry
Global OMV Fleet Age Profile of Global OMV Fleet
68%
Number of vessels by type Percent
UB / DSV account
for 6% of OMV fleet 68%
1,971
Primarily AHTS and
1,489 PSV

855 25%

273 195 7%

AHTS PSV UB / DSV Crew Others Less than 10 years – More than
10 years 20 years 20 years

Source: Clarkson Research Source: Clarkson Research

Age Profile of UW / DSV Fleet ■ Almost 70% of the global OMV fleet is more than 20 years old,
85%
Percent hence, reaching maturity
■ 85% of the UB/ DSV fleet is more than 20 years old
■ The age dynamics of the vessel industry is indicating that there will
be little capacity addition relative to the growing demand in view of
the increase in oil & gas activities
■ The historical underinvestment has resulted not only in shortage of
vessels but yard and related equipment capacity
10%
5%
■ This led to increasing risk of vessel availability and higher charter
rates going forward
Less than 10 years – More than
10 years 20 years 20 years

Source: Clarkson Research


Market Outlook - Offshore Marine Vessel Industry

Daily Charter Rate for AHTS


90000
AHTS Rates (7-10,000 BHP) AHTS Rates (10,000+ BHP)
80000
70000 Source: Clarkson

Pound/day
60000 Research
50000
40000
30000
20000
10000
0
Low charter rates
results in 19 at e

19 -Q2

19 -Q4

19 -Q2

20 -Q1

20 -Q3

20 -Q1

3
19 -Q1

19 -Q3

19 -Q1

19 -Q3
19 -Q4

20 -Q2

20 -Q4

20 -Q2
-Q
D

underinvestment for
90

92

95

99

01

04

06
89

91

94

96
97

00

02

05
many years

 The OMV industry outlook is positive as there has been a tremendous pick-up in demand in the last 2-3 years due to:

– Increase in oil & gas related activities

– Tightness in the supply of vessels in the OMV market

 The charter rates for Anchor Handling Towing Supply (AHTS) vessels has significantly tripled over the last 3 years

 The UB / DSV segment have also seen rates doubling

 While there has been significant investment to build more OMVs to accommodate the increasing demand, growth in
supply has not been able to match the growth in demand due to:

– Average global OMV fleet is old and a number of vessels are due for decommissioning

– The underinvestment in the OMV sector over the last two decades have resulted in similar underinvestment in yard
capacity, thereby leading to limited yard capacity to accommodate demand
Market Outlook - Rigs
Factor Description
• There is a shortage of offshore rigs operating within the global
E&P industry which is driving the day rates upwards.

Acute shortage • Absence of Malaysian-owned rigs to service Petronas


contracts has caused local players such as UMW, Tanjung,
Sapura, Kencana and SAAG to expand their fleet aggressively
to benefit from the upsurge in demand for Malaysian-flagged
fleet

• The high utilization rate of Rigs world wide and the continuous
demand for additional new rigs make accessibility to new Rigs
difficult and commands a high price.

• The combination of high demand for and acute shortage of


Rigs has led to high EBIT margins being generated by the Rigs
players
Market Outlook - Rigs
Capex of Top 4 Oil Majors vs. Oil Price Worldwide Rig Count vs. Oil Price
Capex Oil price (WTI) RHS
Rig count Oil price (WTI) RHS
75.0
50000 2700
75.0
45000 60.0
60.0
40000 2200

US$bbl/day
US$bbl/day
45.0
45.0
US$m

35000
30.0
30.0
30000 1700

15.0
25000 15.0

20000 0.0 1200 0.0


1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
6

8
99

00

01

02

03

04

05

06

07
9

9
19

19

19

19

20

20

20

20

20

20

20

20

Source: Bloomberg, Exxon Mobil, R D Shell, Chevron, Total SA Source: Baker Hughes

 Capital expenditure for the top 4 oil majors have increased by almost 70% from US$38.3 billion in 2003 to US$64.3
billion in 2006. As oil prices remain high (given little oil spare capacity) the capital expenditure will continue to remain at
high levels for the oil majors to benefit from the higher oil price environment

 This has led to a peak in worldwide rig count which in turn will lead to high demand for all infrastructure requirement
in the oil & gas value chain which include offshore structures as well as OMV

 We view that oil price will remain high in the next 3-4 years in view of small spare capacity and the little progress to
increase this capacity ahead

 This will result in multi year high spending in capital expenditure from the oil majors to benefit from high oil price
environment. The result would be high demand for O&G infrastructure requirement and with inability for the supply to
catch-up, charter rates will not only remain high but will potentially increase in view of the acute shortage
Market Outlook - Rigs
Market Outlook - Rigs
New fields
• 30 new fields have been identified and being reviewed by PETRONAS and PSCs. These
include shallow, marginal and deepwater. To proceed further, drilling Rigs would be required
in substantial numbers and quickly.

Rig market
• Existing rigs and rigs under current production are insufficient to meet the demand not only in
Malaysia but world wide. This fact is pushing up the charter day rates rapidly. PETRONAS
obviously need to sign up long term contracts on an urgent basis to curtail E&P
expenditure. Further, there is the impending treat of the high percentage of rig retirements in
Malaysia. Rigs are mostly 25 years old.

• This situation is real and need the immediate attention of PETRONAS to “lock-in” rates to
contracts quickly.
Market Outlook - Rigs

Outlook
• The outlook is very clear; Demand for rigs surpasses Supply. Currently rig count in Malaysia is 20 and
these numbers are expected to fall to 10 by end of 2008.

• Another factor that influences rig market is that rigs are mobile and move to fields that offer higher day
rates and hence adversely affecting the availability of rigs in Malaysia. An example is that Atwood,
Mermaid, Pride and Diamond have moved 5 of their rigs to Australia, Thailand, West Africa and India.

• One can conclude that the rig market is vibrant. Rig owners and operators are placed in low-risk high-
profit structure with possible long term contracts and attractive day rates.
Market Outlook - Rigs

Rig Operators

• Currently heavy dependence is placed upon 3 major Rig players in the market. This
situation is an encouragement for other international companies to be “invited” into the
market. The 3 majors are: UMW, Tanjung Offshore(TOFF) and SapuraCrest.

• UMW is tied-up with Standard Drilling ASA. They are scheduled to deliver 2 new Jack-up
Rigs in 2008-2009. TOFF is an Agent for an International rig operator and is expected to
provide 3 rigs to any licensed operator in Malaysia. Sapura by far the largest, operates 5
jack-ups.

• Two new players are SAAG and Kencana. The latter is tied-up with Mermaid and building a
Tender due in November 2009. And SAAG has 2 Jack-ups under construction.
INTRODUCTION

GLOBAL MARKET ANALYSIS

CORPORATE AGENDA
The execution of the 4 core strategies is therefore key to the future growth of the Business Unit

•Aspiration
To be a regional player in providing a
quality offshore drilling & marine
2010/2017 Corporate Agenda
services to support exploration and
production of Oil and Gas by 2017

•Strategic Intend •Transform into integrated


•Transform player player
into REGIONAL •Transform into GLOBAL player

1 2 3 4
• Drilling project •Integrated drilling • expanding drilling •Position For technology
in SEA services business provider
•Business • Improve project • Co-owned marine fleet
• Strengthen drilling • R & D in drilling
Focus costing • Owned drilling
capabilities Technology
• Manpower capability equipment
• Target project in • Branding and market
building • Integrate drilling and
Middle East / Europe positioning
• Alliance with int’al Marine services
drilling equipment • Owned O & G block
owner thru JV
•Average PBIT
per annum (RM • up to • to • to • to
million)

•Pace •CY 2010/2011 • FY 2011/ 2014OW •FY 2014//2016 •FY 2016/2017

• Marine charter •Drilling consultant


• rental of Jack up rigs • Integrated drilling and
Marine services
• Drilling and integrated • Fully integrated drilling
•Product •Manpower supply & PMT
Marine Sevices services
Offerings • Maintenance of the
•Marine Services downholes.
• Sales of Crude Oil & gas •Deepwater drilling
equipment & technology
•PMT
provider
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