Nigeria Offshore Market Report 2016-2020

Revised edition by INTSOK

| June 2016 |

ABOUT:
This report is based on the 2015 Annual Offshore Market Report by Rystad Energy.
2016 Revision and compilation by INTSOK.
All data and figures by Rystad Energy.
 INTSOK Nigeria Offshore Market Report 2016
Nigeria market introduction
The large Bonga Southwest-Aparo project is facing indefinite delays as
commercial bids for contracts related to FPSO and subsea work were too high.
Uncertainties in the fiscal framework are also highlighted as a reason for a
possible project delay on this an other projects in the pipeline.
In June 2016 Rystad Energy forecast a total offshore oil and gas expenditure in
Nigreria of 49,4 billion USD for 2017-2020 and a *CAGR increase of 8 % in the
Nigerian offshore market in the same period. This is a significant decrease
from June 2015 when the total offshore oil and gas expenditure for 2016-2019
was estimated at 69.4 billion USD.
Offshore production & reserves
The Nigerian offshore production has had an underlying growth from 2000 to 2010,
but is expected to decline towards 2020 as the largest producing fields are entering a
phase of decline. Nigeria is Africas largest oil and gas producer with around 2.0
mboepd production offshore in 2014, making the country the 8th largest producer of
offshore oil and gas globally. The industry is a key sector for the countrys economy
with oil and gas exports accounting for around two thirds of government revenues and
over 95% of foreign export earnings. As of January 2015, the offshore oil and gas
resources in producing assets and fields under development accounted for 6.7 and
1.9 bnboe, respectively. Resources in discoveries (not sanctioned) are estimated at
8.8 bnboe. Of the total discovered resource base 43% lies in waters deeper that 1000
meters and 76% is estimated to be oil.
Market insight
In April 2015 Muhamadu Buhari was elected president in Nigeria. It is now uncertain
whether the passing of the long delayed Petroleum Bill will remain a priority for the
new government and how a new bill will be structured. An improved oil and gas
legislation could clear up fiscal uncertainties currently delaying investments in the
country. The majors and some local companies disliked some aspects of the initial
Petroleum Bill proposal aiming to dismantle established institutions and create new
accountable, competition-driven entities which would help erode entrenched methods
and modes of behavior.
The investment level in the Niger Delta by local oil companies remains high, despite
the fact that the security situation is a key issue for the countrys petroleum sector.
Local groups in the Delta demand that the federal government improve its sharing of
profits from E&P activities in favor of the producing regions. Piracy is an additional
problem in the Gulf of Guinea, posing a risk to deepwater offshore operations. The
instability in the region has made several operators reconsider their position in
Nigeria.
*CAGR: Compounded Annual Growth Rate
The political instability together with the local content requirements and the security
situation makes international companies reluctant to commit to large investments
before the industry framework is set and the political environment normalizes.
Upcoming projects & key operators
The largest producing fields in 2014 were Agbami-Ekoli, Bonga (main field), Akpo,
Usan, Erha and Ubit. These fields are expected to provide the majority of production
towards 2020. In 2020, fields currently under development are expected to constitute
25% of the offshore production in Nigeria. The largest contributors are the projects
Egina, Sonam, Forcados Yokri (redevelopment) and Erha Satellite development.
Samsung and Ladol (Nigerian company), contracted for the Egina FPSO, is planning
to invest in a yard dedicated to integration of floating production vessels in Nigeria.
The future of large new investment projects in Nigeria remains uncertain as a result
of the legislative stand-still in the country, the security situation and demanding local
content requirements. Relatively few new large projects are expected to reach FID
before 2020. The main projects are Bonga-Southwest-Aparo and Etan/Zabazaba.
The projected start-up date for many of the new projects has been pushed out in time
because of the uncertainties mentioned above.
Major international oil companies present offshore Nigeria are ExxonMobil Shell,
Chevron, Total, and Eni. ExxonMobil is currently developing future phases of the
producing Erha field. Shell has two projects, the Forcados Yokri redevelopment and
the large Bonga Southwest project. Total is currently developing the Egina field and
Enis Etan/Zabazaba field is expected to come on-stream before 2020. In addition,
Chevron and several smaller E&P companies have smaller new projects expected to
be initiated before 2020. A trend in recent years has been for foreign companies to
sell off interests in marginal shallow water fields, while keeping the deepwater fields.
Local content
The Nigerian parliament approved the Nigerian Content Act in 2010 in an effort to
develop the domestic oil and gas industry. Projects or contracts exceeding a value of
USD 100 million must contain a Labor Clause mandating the usage of a minimum
percentage of Nigerian labor (usually around 70%). Several contractors have built up
local engineering capabilities in Nigeria over the years. While engineering, assembly,
installation and maintenance can be done locally, Nigeria lacks local manufacturing
capability. None of the majors are currently able to meet the official local content
requirements in its contracting, mainly because the country lacks local manufacturing
capability.
Corruption Perception Index
The country was ranked number 136 on Transparency Internationals Corruption
Perceptions Index in 2015, same as in 2014.
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INTSOK Nigeria Offshore Market Report 2016

Nigeria offshore market

Figure: Offshore Market by Category Nigeria Figure:Top 5 Offshore Operators 2016-2019 by Category Nigeria

Table: Offshore Market by Category Nigeria Table: Top 5 Offshore Operators 2016-2019 by Category Nigeria
MUSD 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 MUSD R&S EPC & Topside Eq. Subsea Subsea Services Well Operations
R&S 420 399 253 369 514 525 290 272 439 600 544 ExxonMobil 645 4,451 2,391 33 2,892 7,325
EPC & Topside Eq. 3 943 2 894 3 318 2 739 3 427 3 770 3 770 3 000 3 623 4 923 5 544 Total 155 5,059 3,744 31 2,457 5,429
Subsea 1 374 1 758 1 519 1 028 1 318 1 819 2 106 2 377 2 578 3 027 3 343 Shell 325 3,170 1,542 27 2,027 3,372
Well 3 444 2 640 2 419 1 994 2 871 4 201 3 951 2 947 2 742 3 159 2 795 Chevron 203 1,241 910 19 1,453 5,388
Operations 4 608 4 418 4 634 6 110 6 093 6 868 6 768 6 458 6 409 7 015 7 361 Eni 44 284 1,295 5 421 591
Total 13 789 12 110 12 143 12 240 14 223 17 181 16 885 15 054 15 791 18 725 19 587 Total 1,372 14,204 9,881 116 9,250 22,106

The offshore market in Nigeria has been around USD 12 billion from 2010 to 2012
with Usan (ExxonMobil), Bonga (Shell), Akpo (Total) and Agbami-Ekoli (Chevron)
being major projects, among others. From 2012 to 2014 the market grew to USD 17
billion, but is expected to decline again towards 2016. Towards 2020 projects like
Egina, Bonga-Southwest- Aporo and Etan/Zabazaba are expected to drive
investments to a level of USD 20 billion in the 2020s.
Producing fields are estimated to account for half of the offshore market in Nigeria in
the period 2016-2019, with the largest being Agbami-Ekoli, Bonga, Usan, Akpo and
Erha (ExxonMobil).
The offshore market in Nigeria is dominated by majors, with ExxonMobil estimated to
be the largest spender towards 2019 with around USD 18 billion. The company is
expected to focus on fields currently in production such as Usan-Ukot and Erha. Total
with its upcoming Egina field is expected to be the second largest operator with
around USD 17 billion towards the end of the period. Furthermore, Shell and Chevron
are estimated to spend around USD 9-10 billion each, with important projects being
Forcados Yokri (redevelopment), Bonga and Bonga-Southwest-Aporo (Shell) and
Agbami-Ekoli (Chevron). Eni is expected to focus on its Etan/Zabazaba field, and is
estimated to spend around USD 3 billion offshore Nigeria towards 2019.

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INTSOK Nigeria Offshore Market Report 2016

Reservoir and Seismic EPC and Topside Equipment

Figure: Offshore Reservoir and Seismic Market Nigeria Figure: Offshore EPC and Topside Eq. Market by Definition Nigeria

Table: Offshore Reservoir and Seismic Market Nigeria Table: Offshore EPC and Topside Eq. Market by Definition Nigeria
MUSD 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 MUSD 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Reservoir and Seismic 420 399 253 369 514 525 290 272 439 600 544 Engineering 1 229 963 610 681 1 120 780 447 302 973 1 503 1 205
PC&I 1 680 1 046 1 525 980 1 259 1 669 1 679 1 292 1 316 1 897 2 453
Total 420 399 253 369 514 525 290 272 439 600 544
SEP&V 1 034 884 1 183 1 079 1 048 1 321 1 644 1 406 1 333 1 523 1 886
Total 3 943 2 894 3 318 2 739 3 427 3 770 3 770 3 000 3 623 4 923 5 544
The Reservoir and Seismic market in Nigeria has been in the range of USD 250-550
million since 2009. Moving forward, the market is expected to decline in the short term Historically the EPC and Topside Equipment market in Nigeria has varied between
but to increase to levels above USD 500 million towards the end of the period driven USD 3 and 4 billion. Going forward the market is expected to decline in the short term
by expected development of new projects, mainly due to Bonga-Southwest-Aporo and before new projects enter the engineering and construction phases. Towards 2019
seismic surveys at ExxonMobils Bosi field. the EPC and Topside Equipment spending is driven largely by Egina, but also Bonga-
Southwest- Aporo, if a FID is made and Ogo-1 and potentially the Bosi projects
Historically PGS has been active in Nigeria with seismic shooting as late as in 2011. among others.
Going forward there are no large multiclient surveys planned offshore Nigeria.
Samsung Heavy Industries in South Korea has been awarded the Egina FPSO
contract. Integration of the FPSO will take place in Nigeria in partnership with the
Nigerian contractor Ladol, and WorleyParsons is undertaking the design and
engineering of the topside. Samsung and Ladol are planning on building a fabrication
and integration yard in Nigeria. FMC was awarded the contract for the subsea
production system.

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INTSOK Nigeria Offshore Market Report 2016

Subsea Well

Figure: Subsea Market by Definition Nigeria Figure: Offshore Well Market by Definition Nigeria

Table: Subsea Market by Definition Nigeria Table: Offshore Well Market by Definition Nigeria
MUSD 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 MUSD 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
SURF 901 882 900 534 644 866 991 987 1 285 1 704 1 738 Rigs and Drilling 1 921 1 404 1 233 981 1 463 2 296 1 970 1 581 1 450 1 680 1 475
Subsea Equipment 362 722 459 205 394 517 669 907 757 759 1 074 Drilling Systems 765 593 613 522 715 955 1 058 761 704 788 700
Subsea Services 158 189 191 315 321 493 505 521 572 606 570 Downhole and Well 759 643 573 491 693 950 923 605 589 692 620
Total 1 420 1 793 1 550 1 055 1 359 1 877 2 165 2 415 2 614 3 069 3 381 Total 3 444 2 640 2 419 1 994 2 871 4 201 3 951 2 947 2 742 3 159 2 795

Since 2012 the market has grown and is expected to grow going forward reaching a
level of over USD 3 billion in 2019, again largely driven by Egina. The subsea market
in Nigeria is thereby one of few significant markets globally expected to grow in the
given period. SURF is estimated to stand for around half of the subsea market going
forward and is also expected to grow the most towards the end of the period.
The offshore well market in Nigeria peaked in 2014, with Rigs and Drilling Contractors
standing for over half of the market. The market is expected to decline somewhat in
2016 and be flat towards 2019 on a level of around 3 USD billion. The four largest
drilling contractors in 2014 and 2015 in Nigeria were Transocean, Shelf Drilling,
Pacific Drilling and Seadrill. In 2014 Seadrills West Jupiter was contracted for 5 years
to work on the Egina project in a contract worth over USD 1.1 billion.

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INTSOK Nigeria Offshore Market Report 2016

Operations Offshore Rig Demand

Figure: Offshore Operations Market by Definition Nigeria Figure: Offshore Rig Demand Years, by Rig Type Nigeria

Table: Offshore Operations Market by Definition Nigeria Table: Offshore Rig Demand Years, by Rig Type Nigeria
MUSD 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Rig Demand Years 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Operational serv. 1 477 1 460 1 516 2 089 2 150 2 304 2 202 2 218 2 233 2 361 2 564 Floater 8 7 7 7 8 9 8 7 7 6 9
Maintenance 1 694 1 801 1 839 2 525 2 513 2 797 2 642 2 577 2 498 2 598 2 676 Jackup 5 8 11 10 10 7 8 7 7 7 8
EI&T 585 496 664 625 616 758 947 801 759 868 1 070 Total 14 14 17 17 18 16 16 14 14 14 18
Logistics 815 662 613 868 814 1 003 976 862 893 1 169 1 051
Decommissioning 36 0 2 2 0 5 0 0 26 20 0 The rig demand in Nigeria is split relatively evenly between jack-ups and floaters. The
Total 4 608 4 418 4 634 6 110 6 093 6 868 6 768 6 458 6 409 7 015 7 361
rig demand is expected to be relatively flat towards 2018 while possible demand from
Bonga-Southwest-Aporo in 2019/2020 somewhat increases demand in the very end
The market for Operations has increased from a level of USD 4.6 billion in 2011 to of the period. The four largest drilling contractors in 2014 and 2015 in Nigeria were
USD 6.9 billion in 2014 as more projects have come on stream. Going forward the Transocean, Shelf Drilling, Pacific Drilling and Seadrill. In 2014 Seadrills West Jupiter
spending on producing fields is expected to be relatively flat as fewer projects will be was contracted for 5 years to work on the Egina project in a contract worth over USD
brought online in this period. 1.1 billion.

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 INTSOK Nigeria Offshore Market Report 2016

INTSOK priority projects

Exploration Zabazaba/Etan: The Eni-operated project is in the early tender phase. The first phase
of the development will use an FPSO on the Etan field and the second phase an
FPSO on the Zabazaba field. The converted Etan FPSO will have a capacity of
120.000 barrels per day. The project is anticipated to entail investments of around
USD 10 billion with potential startup of Etan in 2018. Due to the uncertainties
influencing the Nigerian market the startup could be pushed back.

Bonga-Southwest-Aporo: The USD 12 billion project by Shell initially planned to

Figure:Offshore Rig Demand Years, by Wellhead Type Nigeria
reach final investment decision in 2015/2016 with first oil expected in 2020/2021. The
project is now facing indefinite delays as commercial bids for contracts related to
FPSO and subsea work were too high, and will be retendered. Uncertainties in the
fiscal framework are also highlighted as a reason for a possible project delay. In the
operator's latest reporting it talks about a potential final investment decision earliest in
2017. The development concept comprises an FPSO unit with nameplate oil
processing capacity of 225.000 bblpd of oil and 270 million cubic feet per day of gas.
The field will also need a 44-well subsea production system.

Table: Offshore Rig Demand Years, by Wellhead Type Nigeria

Rig Demand Years 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Dry 4 7 7 5 5 7 6 5 4 5 6
Wet 7 6 6 6 8 8 8 8 6 5 9 INTSOK priority projects Nigeria
Exploration 3 2 4 7 5 1 2 2 3 4 2
Total 14 14 17 17 18 16 16 14 14 14 18 Estimated
Main dev. Sanctioning Estimated Reserves
While the share of wet wellhead types is expected to decline in the short term, the Project Operator Concept year Startup year Mmboe
Bonga-Southwest-Aporo project will increase the share of wet wellheads from 2020 Bonga Southwest/Aporo Shell FPSO 2017/2018 >2023 820
going forward.

* Comprehensive project, contract and contact information updated twice a year on INTSOKs web pages

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