OFFSHORE NEW BUILD

MARKET WORLDWIDE
AND IN MIDDLE EAST
New challenges or recovery tendency in the future

Ksenia Zudinova
Business Development Manager, Emirates Zone
CONTENTS

INTRODUCTION
OVERVIEW
OFFSHORE MARINE TRENDS - WORLDWIDE
OFFSHORE MARINE TRENDS MIDDLE EAST
CHALLENGES FACING OIL & GAS INDUSTRY
FORECASTS
CONCLUSION

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INTRODUCTION

Demand for offshore rig rental globally is starting to recover from its worst
ever downturn, led by oil firms growing demand for harsh-environment
exploration and triggering multi-billion dollar tie-ups among drillers
hoping to profit.
While the 2014-2016 oil price crash caused firms to cut exploration budgets,
ending a boom in rig demand and bankrupting many owners, energy
companies are now seeking to replenish their hydrocarbon reserves.
The rapid demand for harsh-environment rigs, particularly for North Sea
drilling, could lead to increased rates for these units as soon as 2018, and
other categories may follow in 2019 or 2020, companies and analysts say.
This presentation will give you an insight into the trends, challenges and
future of offshore oil rigs the Middle East and Worldwide.

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OVERVIEW

Offshore drilling rigs have evolved manifold from wharf-based rigs that
were used in late 1800s. Today, offshore drilling rigs can tap into petroleum
reserves in waters that are more than 7,500 feet deep, and are as much as
200 miles away from the nearest shore.
These rigs are equipped with advanced technology and are supported on
poles that can be as long as 10,000 feet. With unparalleled development in
oil exploration technologies, rigs incorporated with useful elements from
different models have been developed for specific needs.

The high demand for crude oil, along with the maturing of onshore oil and
gas wells is driving the market for offshore drilling rigs. Moreover,
continuous development of offshore reserves and rising deep water
production are likely to positively influence the growth of the global
offshore drilling market.

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OVERVIEW

Recent World reports refer to:

remaining severe oversupply of OSVs
The delivery rate of vessels into the OSV fleet continued to
decline.
OSV demand remained weak till the end of 2016 with limited
market activity across the majority of key offshore regions except
the GCC region. Accordingly OSV utilisation levels continued to
decline m-o-m
Forecast will remain depressed in 2017 and beginning of 2018.

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OVERVIEW

In preparation for an eventual upturn, most of the maritime leaders

have a real desire for collaboration in key areas and focusing on
innovation, talent development, to meet future challenges.
Including technology and smart shipping, following extensive down-
sizing across the industry. Tighter control of costs, greater industry
collaboration, and research and innovation were also identified as
the top priorities for leaders in the next 12 to 18 months.

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OFFSHORE MARINE TRENDS - WORLDWIDE

The global offshore drilling rigs market is likely to expand at a CAGR of 3.5%
between 2017 and 2022, for the market to become worth US$41,922.8 mn by the
end of 2022 from US$35,336.2 mn in 2017.
Some of the factors responsible for this growth include increasing expenditure on
exploration and production and the rising demand for energy from emerging
economies like Africa, Brazil, and the U.S. Gulf of Mexico. The key concerns for the
offshore drilling rigs industry include various environmental concerns and other
related government regulations
The incessantly increasing demand for energy that have led to efforts to tap into
non-conventional resources is positively impacting the global offshore drilling
rigs market.
Offshore oil production which was complicated at one time has now become
routine. Currently, there are around 900 large-scale oil and gas platforms that are
being used to tap deep-water reserves. With drilling and extraction technology
becoming increasingly sophisticated, oil and gas at even greater depths can be
tapped.

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OFFSHORE MARINE TRENDS - WORLDWIDE

The North America & Latin America are projected to be the significant
markets in the offshore drilling rigs market and they are anticipated to
grow rapidly over the forecast period. Advancement in technology and
development in offshore facilities is expected to further eliminate the
regions dependency on foreign petroleum products. Additionally, it is
estimated that, plenty of reserves in the oceans are present near North
America. Increasing exploration and production activities in the Gulf of
Mexico have globally driven the offshore drilling rigs market.
Europe has witnessed a significant growth in offshore drilling rigs market
followed by Africa.
The rapid growth in North Sea, rising offshore exploration and
production activities in Nigeria have further enhanced the offshore
drilling rigs market.

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OFFSHORE MARINE TRENDS MIDDLE EAST

UAE, ADNOC started making significant investments downstream in

new projects to further increase its refining capability and expand its
petrochemicals business over the next five years. At the same time
(Adma-Opco) and (Zadco) will be combined into a new entity.

Qatar, Qatar Petroleum (QP) started a plan to integrate Qatar Gas and
RasGas Co. Ltd., forming a combined company which will retain the
name QatarGas and operate all of Qatars LNG ventures.

Kuwait the country targets crude oil and condensate production of 4

million barrels per day by 2020. Most of the increase in oil production
capacity is expected to come from the Kuwait Oil Company (KOC)
projects. The remaining is expected to come from the Kuwait Gulf Oil
Company (KGOC).
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OFFSHORE DRILLING RIGS TRENDS MIDDLE
EAST

The ME is the only region to buck the downward trend in offshore supply
vessels (OSV) over the last two years.
Demand in the region has remained steadfast since the oil price decline began in
2014 and outpaced Southeast Asia, the Gulf of Mexico and the North Sea.
New short- to medium-term opportunities are expected to open in
the ME offshore oil and gas market in the next 24 months.
OSV demand in the region will remain firm and stable given the pipeline of
drilling and field development projects, with an anticipated growth for OSV
term demand from 118 vessels in 1Q 2016 to 145 vessels in 4Q 2018.

The region still has the highest jack-up rig utilisation levels compared to other
regions and still the biggest jackup market in the world
Though oil output in Middle Eastern countries is rising, the regions oil well
consumption is not expected to see significant growth.

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CHALLENGES FACING OIL & GAS INDUSTRY

The oil price collapse, which began in June 2014, triggered a wave of cost
reduction among upstream businesses. Global oil and gas companies
slashed capital expenditures by about 40 percent between 2014 and 2016.
As part of this cost-cutting campaign, some 400,000 workers were let go,
and major projects that did not meet profitability criteria were either
cancelled or deferred.
Structural and cultural issues internally; many companies do not have the
talent, organizational framework, systems, processes, or attitudes to be
sufficiently flexible and innovative in an evolving and uncertain
marketplace
The main challenge going forward will be not only to meet the increasing
demand, which according to most estimates will reach about 110 million
b/d (barrels/day) by 2030, but, most importantly, to offset the natural
decline of the current reservoir productivity. Even if a moderate decline
rate of 3.5 percent per year is assumed, by 2030 the production of the
reservoirs currently on stream will decrease to about half of todays rate.
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PRICE RISK

The price of oil and gas is the primary factor in deciding whether a
reserve is economically feasible. Unfamiliar drilling will most likely
cost more than conventional drilling down into a reserve. The more
barriers, the more of a price risk the project will have. .

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GEOLOGICAL RISKS

Geological risk refers to both the difficulty of extraction and the

possibility that the accessible reserves in any deposit will be smaller
than estimated. Oil and gas geologists work hard to minimize
geological risk by testing frequently, so it is rare that estimates are
way off.
Some locations are environmentally depleted and the last resort is
to move to unconventional and unfamiliar areas where hard
drilling is required and extraction of resources is known to be
difficult like drilling platforms in the middle of the ocean.

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SOLUTIONS FOR THE CHALLANGES

Set-up , maintain and operate in the most cost effective way

possible
Increase BOEs (Barrels of Oil equivalencies)
Structure Operations to ensure safety
Personal Safety by enforcing MOC (Management of Change) process
Environmental Safety through compliance with regulatory requirements

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FORECASTS - I

OPECs attempts to constrain the oversupplied crude market, with the end goal of raising
prices, have so far had a limited impact. Several markets, such as Libya, Ecuador, Qatar and
Iraq, have been exceeding their quotas on crude production under the OPEC deal. Meanwhile,
non-OPEC markets, such as Russia, Kazakhstan, Canada and Brazil, are additionally expected
to bring large drilling projects online in the coming years, which are forecast to add more than
1 million bpd to the global production capacity.
Global Offshore Support Vessel Market share will surpass US$60 billion by 2024, as reported
in the latest study by Global Market Insights, Inc.
Saudi Arabia offshore support vessel market is set to witness gain over 4% by 2024. The
country has several fields including Safaniya oil field that produces 1.1 1.5 million barrels per
day and holds 13% of the world total offshore oil production.
US offshore support vessel market is predicted to witness strong growth on account of mature
industry and low-risk investment region. Availability of resources across untapped fields along
with large ongoing projects will supplement the product demand
Norway offshore support vessel market is predicted to surpass 400 OSV fleet by 2024.

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FORECASTS - II

Saudi Aramco requires as many as 200 more offshore support

vessels (OSVs) in the coming years to meet its requirements for
developing more of its largest offshore fields. The worlds top oil
producer has already handed out US$5Bn worth of project
contracts to construction groups and floated tenders for 33 vessels.
In the UAE, there are ongoing offshore projects that are keeping
vessels employed, although rates have plunged to just over
breakeven levels and many vessels are laid up.

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OIL RIGS GROWTH

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Source: Short RigLogix
CONCLUSION

OPTIMISM HIGH DESPITE HARD TIMES

Oil and gas investing isnt going to depreciate. Despite the risks, there is still a very real
demand for energy, and oil and gas fills part of that demand. Investors can still find rewards
in oil and gas, but it helps to know the potential risks that go along with those potential
rewards.

Most of the maritime leaders have a real desire for:

Extensive down-sizing across the industry
Tighter control of costs
Ccollaboration in key areas focusing on innovation and talent development, technology
and smart- shipping to meet future challenges
The OSV sector will be energy efficient when the upturn comes in the next 12 to 18 months.
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