Global Offshore Overview

June 2014

Marine Money China Offshore Finance Forum

By Piers Middleton
June 2014

www.clarksons.com
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AGENDA
Offshore Market Developments
The Macro Picture
Newbuilding Overview
Supply, MDU and Subsea Overview
Potential Growth Areas
Summary and Conclusions

June 2014

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Estimated E&P Spending

E&P Spending Growth

Barclays December forecast of 6%

now likely to be optimistic.

DNB recently projected 1% due to

cutbacks by International Oil
Companies.

National Oil Companies in

developing economies still pushing
ahead with spending plans

One fifth of global energy needs met

by Offshore

Data Source: Barclays E&P Survey/Various

June 2014

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Offshore Oil & Gas Production Forecast

Long-Term Oil Production

Long-Term Gas Production

Data Source: Clarkson Research Services

June 2014

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Global Discoveries & Start ups

June 2014

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Offshore Discoveries Getting Deeper

June 2014

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Deeper Water, Further From Shore

Data Source: Clarkson Research Services

June 2014

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World Offshore Oil Producing Regions (2013)

Europe

Offshore Production

2.9m bpd

Annual Growth

-11.6%

North America
Mediterranean/Caspian
Offshore Production

3.5m bpd

Annual Growth

-5.4%

Offshore Production

1.6m bpd

Annual Growth

7.2%

Middle East & India

South & Central America

Offshore Production

2.7m bpd

Annual Growth

3.2%

Asia Pacific

Offshore Production

7.5m bpd

Offshore Production

2.7m bpd

Annual Growth

5.1%

Annual Growth

1.0%

West Africa

June 2014

Offshore Production

4.4m bpd

Annual Growth

5.9%

WORLD

Offshore Production

25.4m bpd

Annual Growth

0.0%

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World Offshore Gas Producing Regions (2013)

Europe

Off Prod (cu.ft/day)

17.6 bn

Annual Growth

-2.7%

North America
Mediterranean/Caspian
Off Prod (cu.ft/day)

6.3 bn

Annual Growth

-1.3%

Off Prod (cu.ft/day)

10.2 bn

Annual Growth

10.9%

Middle East & India

South & Central America

Off Prod (cu.ft/day)

6.9 bn

Annual Growth

4.0%

Asia Pacific

Off Prod (cu.ft/day)

34.6 bn

Off Prod (cu.ft/day)

25.3 bn

Annual Growth

3.8%

Annual Growth

2.9%

West Africa

June 2014

Off Prod (cu.ft/day)

3.0 bn

Annual Growth

3.4%

WORLD

Off Prod (cu.ft/day)

103.8 bn

Annual Growth

2.7%

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Newbuilding Overview

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10

Offshore & Marine Orderbook Value by Type

Offshore (US$186 billion)

Shipping (US$185 billion)

Source: World Shipyard

Monitor, Offshore Yard
Monitor (May 2014)
June 2014
www.clarksons.com

Key Fleet Indicators

1.

Activity

Fleet Order
Nos. book OB %

Tankers

5,817

Bulkers

9,981 1,970

747

Fleet
Value

OB Value

NB Orders

S+P Sales
(2013)

13%

$179bn

$32bn

428

308

20%

$238bn

$59bn

1075

491

Containerships 5,095

477

9%

$101bn

$35bn

242

145

Gas

1,641

324

20%

$77bn

$32bn

151

65

Offshore

12,514 1,334

11%

$500bn+1

$186bn

568

258

Illiquidity of many offshore S+P markets makes assessment of total fleet value outside the OSV/MDU markets subjective.

June 2014

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12

Offshore Key Fleet Indicators

Activity
Survey
MDUs
Constrn/IRM
MOPUs
Logistics
AHTS
PSV

Order
book
25
255
200
50
37
185

OB % OB Value
3.6% $2.7bn
24.8% $101bn
8.3%
$20bn
15.2% $34bn
4.5% $2.5bn
6.4% $5.7bn

2,193 452 20.6% $15.8bn

NB Orders
10
116
86
17
17
82

S+P Sales
(2013)
6
63
64
5
2
36

184

62

1,752

Rescue

578

44

7.6%

$1bn

14

92

Utility Supp.

1,587

86

5.4%

$2.1bn

42

21

12,514 1,334 11%

$186bn

568

258

c6,000 1

Offshore

1.

Fleet
Nos.
689
1,030
2,419
330
815
2,873

Recorded
Fixtures
(2013)
121
376
589
55
74
2,344

Reported Fixtures only: not comprehensive.

June 2014

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13

Newbuild Activity: Contracting Totals

Data Source: Clarkson Research Services

June 2014

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14

Top Yards and Fabricators (by Orderbook Nos.)

Rank

Name

Country

Total

Value
($bn)

Development

Production
Hull

Topside

2.1

42

1.5

South Korea

40

27.8

Keppel FELS

Singapore

31

Daewoo

South Korea

ABG S.Y.

Supply

Fixed
Jacket

Topside

55

48

36

24

16

8.5

31

28

17.6

23

11

India

27

1.7

20

Hyundai H.I.

South Korea

25

14.6

13

12

Dalian
Shipbuilding

China P.R.

25

5.5

24

10

Dayang S.B.

China P.R.

25

0.3

25

Fujian
Southeast

China P.R.

58

1.9

Fujian Mawei

China P.R.

52

Zhejiang S.B.

China P.R.

Samsung H.I.

11-20

182

64

118

21-50

320

90

16

214

13

13

51+

505

197

42

89

266

240

229

TOTAL

1,360

486

92

92

782

260

260

Data Source: Clarkson Research Services

June 2014

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15

Vessel market share (output) by region

Data Source: Clarkson Research Services

June 2014

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16

Chinese global market share

Chinese Yards Get A Jack-Up
The number of Chinese yards taking Jack-Up
drilling unit contracts has risen from two in 2004 to
32 in 2013 -accounting for 50% of global contracts.
Chinese yards have made significant progress in
gaining market share in this sector.
10 Chinese yards took a Jack up contract in 2013.
Dalian took 12 contracts in 2013 most consistent
yard. Good track record of export orders.

June 2014

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17

Offshore Supply Vessels

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18

OSV: Fleet Size Growth

AHTS Fleet Growth now slower, after a rapid period.

Start Year

Data Source: Clarkson Research Services

June 2014

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19

Orderbook as a % of the fleet

Global Fleet

The orderbook for the largest PSVs

stands at 60% of the fleet. However, this is
partially the result of an upsizing trend:
vessels are being constructed to serve the
rigours of distant-from-shore, deepwater
supply duties which did not exist in
previous decades.
The AHTS orderbook as a % of the fleet
is much smaller following more limited
ordering over the past three years.
However, previous deliveries produced a
level of fleet over-supply which the market
is in the process of absorbing.

June 2014

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20

Age Profile
Current Fleet and Scheduled Orderbook Delivery

June 2014

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Asset Prices: Larger PSVs

Asset prices fell sharply from previous
heights in the aftermath of the global
financial crisis.
Prices recovered somewhat over the
course of 2010 and 2011 as E&P activity
picked up again.
Asset Prices have remained relatively
stable over the last couple of years. Signs of
softening recently.
Note that the graph to the right shows
benchmarks for European Designed vessels,
although trends may be similar for vessels
built in other regions.
Data Source: Clarkson Research Services
June 2014

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22

Asset Prices: Large AHTS

Asset prices fell sharply from previous
heights in the aftermath of the global
financial crisis.
Prices recovered somewhat over the
course of 2010 and 2011 as E&P activity
picked up again.
Asset Prices have remained relatively
stable over the last couple of years. Early
signs of softening recently.
Note that the graph to the right shows
benchmarks for European Designed vessels,
although trends may be similar for vessels
built in other regions.
Data Source: Clarkson Research Services
June 2014

www.clarksons.com

23

Asset Prices: Asian versus European Builders

A divergence in pricing between Asian
and European built OSVs (of European
designs) has become evident.

Ice class premium

Asian-built is cheaper, but may face

issues in terms of build speed and
potential chartering opportunities.
North Sea operators still prefer
Norwegian built vessels, but slowly
changing, but Norwegian designs
definitely remain Best in Class.
Recently, Norwegian yards have
concentrated on MSV orders, meaning
PSV ordering has been more heavily
weighted towards Asia.
Data Source: Clarkson Research Services
June 2014

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24

Demand Drivers
Number of Rig Moves by Type

*2014-Q2 only April and May

June 2014

Number of Rig Moves by Region

*2014-Q1 only April and

May
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25

OSV Dayrate Evolution

PSV Global 12-month T/C

AHTS Global 12-month T/C

Data Source: Clarkson Research Services

June 2014

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26

Mobile Drilling Units

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27

Rig Fleet Growth

Current strong drillship fleet growth is causing some rate softening.

Orderbook is now equivalent to 25% of total MDU fleet

Fleet growth is expected to accelerate for jack-ups from 2015.
Potential short term softening for the jack-up market, but could be
positive for OSVs.

June 2014

Source: Clarkson Research Services

www.clarksons.com

28

Rig Orderbook
Contract Status of the Rig Orderbook

June 2014
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Rig Asset Values & Sales

Floaters

Jack-Ups

NB Ultra-Deep Semi-Sub

NB High Spec Jack-Up

SH High Spec Jack-Up

NB Ultra-Deep Drillship

SH Standard Jack-Up

300

900

SH Ultra Deep Floater

800
250

200

$m

$m

700
600
500
150

400
100

300
200

50
100

Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14

0
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14

Data Source: Clarkson Research Services

June 2014

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30

Dayrate Evolution
Jack-Up Rates

Floater Rates

Averaged dayrate

Data Source: Clarkson Research Services

June 2014

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31

OSV and Drilling Unit Supply/Demand Index

Global MODU Demand

June 2014

OSV Supply/Demand

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32

Subsea Support Vessels

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33

Subsea Tree Installations

400
Historical Start-ups

Trees Under Construction

350

Number of Subsea Structures

Potential Future Requirements

300

250

Subsea installation demand is becoming an ever

more important driver for support vessels.

Graph shows units under construction and

announced future requirements: actual installations
are likely to be higher than shown for more distant
years.

200

150

100

50

2019

2014

2009

2004

1999

1994

1989

1984

1979

1974

1969

1964

1959

Data Source: Clarkson Research Services

June 2014

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34

Subsea Vessel Age Profile

Current Fleet and Scheduled Orderbook Delivery Schedule
This year is expected to see
particular growth in the 150250t fleet.

After a dearth of new

contracting in 2H 2013, there
are signs that owners are
thinking of further orders.
MSVs/Subsea construction is
a newbuild market still
dominated by Norwegian
yards, but could be an area in
which Asian yards can
attempt to build market
share.

June 2014

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35

MSV Contracting
Current Fleet and Scheduled Orderbook Delivery Schedule

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Subsea Rates & Prices

IRM (100t) NB Contract Prices
500

IRM (100t ) and ROV Support (<50t) T/C

,000$/day

90

M NOK

450

80

400

70

350

60

MSV

300

ROV

50

250

40
200
30
150
20

100

10

50

Apr-14

Nov-13

Jun-13

Jan-13

Aug-12

Mar-12

Oct-11

May-11

Dec-10

Jul-10

Feb-10

Sep-09

Apr-09

Nov-08

Jun-08

Jan-08

Aug-07

Mar-07

Oct-06

2014

2013

2012

2011

2010

2009

2009

2008

2007

2006

2005

May-06

Data Source: Clarkson Research Services

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37

Potential Growth Areas

June 2014

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38

Growth Areas: Barents Sea/Arctic

Boosting requirement for large BHP/ large DWT OSVs from NW Europe
Kara Sea : Exxon-Rosneft
campaign 2014/15.

Will absorb 10% of high-spec

North Sea AHTS fleet???

Novaya
Zemlya

Risks: Heavy Ice. Russian

Nuclear Waste. Polar bears!

Dikson

Hammerfest
Yamal
Peninsula

Murmansk

Data Source: Clarkson Research Services

June 2014

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39

Growth Areas: Brazil (1)

PROREFAM III: 146 vessels 2008-17, 75%
local content

Petrobrass PROREFAM III programme for

acquiring newbuild vessels on eight year
timecharters has reached Round 7, which was
launched in mid-March 2014.

Local content provisions apply: the focus is on

Brazilian-built, however seeing some Govt
softening on this stance for more technically
advanced Vessels.
Round 5 contracts were signed at the same
time. Round 6 contracts were signed in early
May, delayed by Round 5s over-run.
110 newbuild vessels were ordered in
connection with Rounds 1-6. Only 15 of a
planned 64 AHTS orders signed so far.
Contracting activity is ongoing for AHTS
vessels in all three categories, for PSVs of 4,500
and 5,000 DWT, and for oil spill response
vessels. Petrobras is confident it will sign deals
for the remaining 36 units this year, though
others are doubtful.
Data Source: Clarkson Research Services
June 2014

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40

Growth Areas: Brazil (2)

Estimated Vessel Supply : South America

In addition to newbuild vessels, other

OSVs have gradually been brought into the
region from other areas, notably the North
Sea. In general, these vessels are larger
units.

There is not much of a spot market in

Brazil: perhaps no more than 5-7% of vessels
in the region. Spot fixtures do occur (e.g.
when a rig move is needed and the intended
OSV suffers problems). However, most
vessels coming off timecharters either fix
another term charter, or mobilise out of the
region.
The declaration of non-commerciality for
several of OGXs fields leaves the future of
OSV chartering in Brazil even more in the
hands of Petrobras.
Data Source: Clarkson Research Services
June 2014

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41

Growth Areas: West Africa

PSVs 3-4,000 dwt, Current Deployment

Data Source: Clarkson Research Services

June 2014

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42

Estimated E&P Spending- Asia/Pacific

Asia Pacific Investment

According to the annual Barclays E&P

Survey, spending on E&P in Asia Pacific is
expected to be up by 3% in 2014.
This is down from figures in the teens in
recent years, as spending on Gorgon in
Australia tapers off. Likely to increase into
the medium term as other Australian gas
projects move forward.
Around half of spending in Asia-Pacific is
by Chinese state-owned companies.
Currently, state-owned service companies
take the lions share of this, but this market
is expected to open up more over the next
decade.

* Barclays projection as of start-2014. Could prove optimistic given

recent negative sentiment over E&P growth.

Data Source: Barclays E&P Survey

June 2014

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43

Growth Areas: South East Asia (1)

Cabotage Spurring Fleet Growth
Indonesia is phasing in a cabotage law of 51%

domestically owned, plus Indonesian flagged &

crewed.
Hence, foreign companies now need minoritystake JVs to work in Indonesia.

Supply/Demand imbalance means some dayrates

have been 20% up on other SE Asian countries.

Indonesia Cabotage Phase-in

Type

Deadline

AHTS >5k BHP DP

Start 2013

PSV

Start 2013

DSV

Start 2013

MSV/Pipe/Cable

Start 2014

Seismic/Geo

Start 2014

MDUs

Start 2016

Data Source: Clarkson Research Services/ SKK Migas

June 2014

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44

Growth Areas: South East Asia (2)

Malaysian Investment
Malaysian NOC Petronas has increased

investment levels substantially to arrest

decline in oil and gas output.
Deepwater projects, Enhanced Oil
Recovery, marginal field tie-in projects are all
ongoing. Use of Risk Service Contracts
This has soaked up a large amount of the
domestic-owned fleet.
Additional requirements have helped to
create further demand for non-Malaysian flag
vessels.
Most recently, Petronas boss has been
warning about domestic OSV oversupply &
short-term rates downside.
Data Source: Clarkson Research Services
June 2014

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45

Growth Areas: Mexico

PEMEX Capital Expenditure

The end of 75 years of PEMEXs monopoly in Mexico

over Christmas poses the possibility that private
investment will begin to gain a foothold in Mexican waters.
PEMEX was already planning to grow CAPEX strongly
(see left).
This is generating existing rig requirements, which will
need support.
PEMEXs tendering activity for OSVs has already been
increasing.

Data Source: Clarkson Research Services

June 2014

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46

Summary

4 June 2014

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47

Offshore Sector Summary

Recent newbuild ordering has focused on Jack-ups and PSVs. New speculative
investors evident in Jack-ups in particular.

Rigs : Jack-up rig rates steady for the moment but caution remains over size of
orderbook; softness evident in floater rates and concerns building.

OSVs : AHTS and PSV timecharter rates improved year-on-year in 2013. Outlook
seems more stable and sentiment is cautiously positive, particularly as jack-up fleet
expansion next year increases demand.

Other more niche sectors such as accommodation and some areas of subsea
construction may offer potential with the right partners.

View on E&P spending growth has turned more negative in early 2014 though this
is restricted to IOCs. National Oil Companies are still spending.

Positive long-term view on offshore oil and gas production; gas production growth is
forecast to be stronger than oil. Move to deeper, more distant fields increasing
requirement for complex units.

June 2014

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48

Disclaimer
The information supplied herewith is believed to be correct but the accuracy thereof is not guaranteed and the
Company and its employees cannot accept liability for loss suffered in consequence of reliance on the
information provided. Provision of this data does not obviate the need to make further appropriate enquiries
and inspections. The information is for the use of the recipient only and is not to be used in any document for
the purposes of raising finance without the written permission of Clarkson Research Services Limited.
The statistical and graphical information contained herein is drawn from the Clarkson Research Services
Limited ("CRSL") database and other sources. CRSL has advised that: (i) some information in CRSL's
database is derived from estimates or subjective judgments; and (ii) the information in the databases of other
maritime data collection agencies may differ from the information in CRSL's database; and (iii) whilst CRSL
has taken reasonable care in the compilation of the statistical and graphical information and believes it to be
accurate and correct, data compilation is subject to limited audit and validation procedures and may
accordingly contain errors; and (iv) CRSL, its agents, officers and employees do not accept liability for any loss
suffered in consequence of reliance on such information or in any other manner; and (v) the provision of such
information does not obviate any need to make appropriate further enquiries; (vi) the provision of such
information is not an endorsement of any commercial policies and/or any conclusions by CRSL; and (vii)
shipping is a variable and cyclical business and any forecasting concerning it cannot be very accurate.

June 2014

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49