51
2014 Supply Chain Seminar Supply Chain Opportunities and Challenges in the Oil & Gas Market February 27 th , 2014
2014 Supply Chain Seminar Supply Chain Opportunities and
Challenges in the Oil & Gas Market
February 27th, 2014
© 2013 IHS 2
AEROSPACE & DEFENSE
100+ years’ experience
delivering unrivaled news,
insight and intelligence on
defense and security
equipment, markets,
industries and risk
CHEMICAL
Over 200 leading industry
authorities creating integrated
views and analysis across
more than 300 chemical
markets and 2,000 processes
for 95 industries
FINANCE
Research on 200+
countries and territories
with harmonized indicators
from IHS analysts and
economists
TECHNOLOGY
World’s largest
electronics component
database with more than
350 million parts
AUTOMOTIVE
The world’s largest team
of automotive analysts with
hundreds of experts located
in 15 key markets around
the world covering the entire
automotive value chain
ENERGY
Extensive Oil & Gas well
information on 5.5+ million
wells worldwide dating
back as far as 1860
MARITIME
World’s largest maritime
database with an information
gathering heritage of 250+
years with comprehensive
information on all vessels 100
GT and over
IHS overview
© 2013 IHS
IHS cost and procurement for oil and gas
3
• Pricing and Purchasing
• Platform for analyzing costs & prices
• Forecast commodities, labor and products
• Cover general indicators and sector specific prices
• QUE$TOR
• Industry estimating tool
• Data base of regional itemized cost data
• Day rates $/t or man-hour
• Market Survey System
• Category Management MI
• Detailed category demand/supply analysis
• Supplier assessment/tracking
• Category cost models
• Capital and Operating Cost Forums
• Supplier/vendor actual costs
• Scenario forecasts
• Foundation of project escalation
• Project activity model based
CAF MSS
P&P QUE$TOR
© 2013 IHS
Supply chain client base
4
© 2013 IHS
Agenda
1. Macro picture
2. Demand trends
3. Supply trends
4. Market balance
5. Summary and conclusions
5
© 2013 IHS
World and regional economic growth in 2014
6
3.3%
5.2%
3.3%
3.4%
8.0%
4.8%
3.2%
2.2%
1.5%
2.7%
0% 2% 4% 6% 8% 10%
World
Africa
Latin America
Middle East
China
Non-OECD Asia Pacific (excluding China)
Eurasia
OECD Asia Pacific
Europe
North America
World and regional real GDP growth rates in 2014
Source: IHS Global Insight © 2014 IHS
Annual percent change
Note: Global GDP growth calculated using real local currency growth rates, aggregated using real exchange rate-based weights. North America
includes the United States and Canada. Latin America includes Mexico.
© 2013 IHS
World economic growth outlook to 2015 Global GDP growth to accelerate
7
1.7%
-1.9%
4.3%
3.1% 2.6% 2.5%
3.3% 3.8%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
2008 2009 2010 2011 2012 2013 2014 2015
World real economic growth rates, 2008-15
Source: IHS Global Insight © 2014 IHS
Pe
rce
nt
gro
wth
in
re
al G
DP
Note: Global GDP growth calculated using real local currency growth rates, aggregated using real exchange rate-based weights.
Outlook
© 2013 IHS
Global economy: Key messages
• Global economic growth will strengthen in 2014, led by better
performances in North America and Western Europe
• The US expansion will gain momentum with faster growth in
consumer and business spending, a sustained housing recovery,
and reduced fiscal drag
• Western Europe will gradually recover, with northern countries
leading and southern countries with heavy debt burdens lagging
• Asia (excluding Japan) and sub-Saharan Africa will achieve the
fastest growth
8
© 2013 IHS
US light sweet “tight oil” production surge
looking increasingly revolutionary
9
0.0
2.0
4.0
6.0
8.0
10.0
12.0
1990 1995 2000 2005 2010 2015 2020 2025
Alaska GOM Tight Oil Lower 48 Conventional
US crude oil production outlook
Source: IHS CERA
© 2014 IHS
Millio
n b
arr
els
pe
r d
ay
Outlook
IHS has increased its US crude supply outlook, especially in 2014-15 period
© 2013 IHS
Dated Brent crude oil price environment
10
© 2014 IHS
124
150
163 171 174 175 175 176
107 105 103 102 100 99 99 99
94
78 72
67 60
56 51
48
105
117 113
109
118
108 110 110 113
102 110 109
35
55
75
95
115
135
155
175
1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15
Metamorphosis scenario
Global Redesign (planning scenario)
Vortex scenario
Historical
Dated Brent crude oil price environment to 2015
Source: IHS CERA; Platts, ©2014 by the McGraw-Hill Companies, Inc. (historical)
Qu
art
erl
y a
ve
rag
e p
ric
e (
US
do
lla
rs p
er
ba
rre
l)
Three-month outlook
Mar 14 Apr 14 May 14
105.25 105.00 104.50
Updated 3 February 2014.
Disclaimer: Historical oil price data are extracted or derived by IHS CERA from Platts. All rights reserved. All liability for errors and omissions is hereby excluded
by Platts and its sources. No representations or warranties are made by Platts or its sources concerning the data or any conclusions to be drawn from it.
© 2013 IHS
Snapshot of global oil fundamentals and price
outlook
Source: IHS CERA.
Note: Liquids supply includes crude oil, condensate, and natural gas liquids (NGLs). Demand includes refined products, including liquefied petroleum gases (LPG).
OPEC spare capacity is for crude oil only. Figures are rounded.
11
IHS CERA global oil fundamentals and price outlook snapshot, February 2014
2012 2013 2014 2015
FUNDAMENTALS
World economic growth 2.6% 2.5% 3.3% 3.8%
(change from previous year)
World oil (total liquids) demand
growth
1.0 mbd 1.1 mbd 1.5 mbd 1.6 mbd
(volume change from previous year)
Non-OPEC liquids supply growth 0.4 mbd 1.1 mbd 1.7 mbd 1.5 mbd
(volume change from previous year)
OPEC crude spare capacity 2.9 mbd 2.9 mbd 3.0 mbd 3.2 mbd
(annual average)
PRICES
Brent $112 $109 $104 $99
(annual average)
WTI $94 $98 $96 $89
(annual average)
© 2013 IHS
Key implications: World Oil Watch February
2014
• The US petroleum system has been highly dynamic in absorbing surging growth in domestic light, sweet crude production, but limits are appearing
– Light, sweet offshore imports are rapidly declining as refiners satisfy their needs with domestic crude
• The political debate over US crude exports will be contentious and a quick resolution unlikely
– Meanwhile, relief measures that stop short of a full lifting of the export ban may be explored
• Our global balances still indicate further declines in the call on OPEC crude
– Ongoing instability in the Middle East and North Africa remains a concern and a threat to supply; we have downgraded our outlook for Libyan production for 2014–15
– Nevertheless, non-OPEC supply growth—led by North America—is expected to be historic, reducing the call on OPEC. OPEC spare capacity is expected to be steady to slightly higher on an annual average basis
12
© 2013 IHS
0
2
4
6
8
10
12
14
16
18
20
US
D /
MM
Btu
Global gas prices
NBP (UK spot)
Border Contract Tracker (Germany)
Henry Hub (USA)
Japan LNG average import price
© 2013 IHS Source: IHS 20 August 2013
Henry Hub: Any potential price hike to be
short-lived
• Gas prices in North America to remain at current levels for
foreseeable future, impacting spending trends on conventional
and unconventional gas developments
13
© 2013 IHS
Steel outlook narrative
• Global steel production is too high
– China is almost the sole culprit
• Unless/until the Chinese cut production global prices will remain
weak
– Any attempted hikes will eventually fail
• Other regions have cut production, providing some price support
– North American prices rose to end 2013
– But don’t buy into a story of runaway prices for 2014
• Mills need higher prices
– If they don’t make a profit they will eventually fail
• Thus, attractive prices for 2014 could set the scene for disastrous
prices in 2015 or beyond
14
© 2013 IHS
Steel overview – Sedate for 2014, increasing
risk afterwards
• For 2014 a BUYER’S MARKET bias as a global surplus continues
• Prices are essentially flat for most of 2014
• No shortages without a disaster
• Eventually (2015?) the low prices cause mill failures and higher
prices
• ALTERNATE:
• Chinese mills cut production, prices rally but not to a crushing
level
15
© 2013 IHS
The forecast has been revised to show 2014
flat, 2015 spike
(Hot rolled carbon sheet, US$/metric ton)
United States Europe
16
400
600
800
1000
1200
2007 2008 2009 2010 2011 2012 2013 2014 2015
Current forecast Previous outlook
400
600
800
1000
1200
2007 2008 2009 2010 2011 2012 2013 2014 2015
Current forecast Previous outlook
© 2013 IHS
Plate (Dollars per metric tonne)
• Demand rises significantly in 2014
• Premium over sheet is much
narrower than normal
– Some rebound in 2014 as
premium partially returns
• China is far lower, giving upside
room
– Chinese weakness suppresses
Japan and Korea
• Advice: try to lock current levels for
2014, especially Asian prices
• 2015 could be ugly
17
400
600
800
1000
1200
2009 2011 2013 2015
United Sates Europe China Turkey
© 2013 IHS
Agenda
1. Macro picture
2. Demand trends
1. Project sanctions and order books
2. North American activity trends
3. Spending trends
3. Supply trends
4. Market balance
5. Summary and conclusions
18
© 2013 IHS
Dec: Dagny
Statoil
FID: USD 4 bn
High, stable oil prices have resulted in
numerous major project sanctions worldwide
Jan: Ichthys
Inpex
FID: USD 34 bn
Jul: AP LNG Train 2
ConocoPhillips
FID: USD 6 bn
Project total: USD 25.5 bn
Kidan development
Saudi Aramco
USD 8 bn
Apr:Kanowit FLNG
PETRONAS
FID: USD 2 bn
Aug: Cygnus + Juliet
GDF Suez
FID: est USD 3 bn
Jan: Skuld
Statoil
FID: USD 2 bn Jun: Edvard Grieg
Lundin
FID: USD 4 bn
BM-S-9 /
BM-S-11
Petrobras
Mar: Åsgard Comp.
Statoil
FID: USD 3 bn
Jan: Hebron
ExxonMobil
FID: USD 14 bn
Dec: Mariner
Statoil
FID: USD 7 bn
Jan: Aasta Hansteen / Polarled
Statoil
FID: USD 6 bn / USD 3 bn
19
Feb: Vladivostok LNG
Gazprom
FID: USD 7.3 bn
Feb: Malikai
Shell
FID: USD 2-3 bn (est)
2012: South Stream
Gazprom
FID: USD 3 bn
Dec: Delta House
LLOG
FID: USD 2 bn
Oct:MonArb
Talisman
FID: USD 2.6 bn
2013
2012
May: Stones
Shell
FID
May: Julia
ExxonMobil
FID: USD 4 bn
Jul: Lianzi
Chevron
USD 2 bn
Mafumeira Sul
Chevron
Feb: Erha North
ExxonMobil
USD 6 bn
Mar: Egina
Total
USD 15 bn
Mar: Moho Nord
Total
USD 10 bn
Source: IHS Market Survey System (MSS)
May: Sabine Pass LNG
Trains 3-4
Cheniere
FID
Aug: Sabine Pass LNG
Cheniere
FID: USD 5.6 bn
May: Rosebank
Chevron
FID: USD 6 bn
Martin Linge
Total
FID: USD 4 bn
Aug: Kraken
EnQuest
FID: USD 2 bn
© 2013 IHS
0
5
10
15
20
25
30
35
40
2008Jan-Mar
2008Jul- Sep
2009Jan-Mar
2009Jul- Sep
2010Jan-Mar
2010Jul- Sep
2011Jan-Mar
2011Jul- Sep
2012Jan-Mar
2012Jul- Sep
2013Jan-Mar
2013Jul- Sep
US
D b
illio
n
Construction Yards
EPC Contractors
Offshore Construction Vessels
Subsea Equipment
© 2013 IHS
16 contractors quarterly new orders: March 2007 - September 2013
• 1H13 was particularly strong for the subsea equipment contractors and
construction yards, despite quarter-on-quarter declines in 2Q2013
Contractor new orders: Very strong first half
2013
20
© 2013 IHS
• Backlog levels have risen 11.5% since year-end 2012
Backlog has risen relentlessly...
21
Continued growth in activity levels going forward – in particular for
offshore segments
0
50
100
150
200
250
2008Mar
2008Sep
2009Mar
2009Sep
2010Mar
2010Sep
2011Mar
2011Sep
2012Mar
2012Sep
2013Mar
US
D b
illio
n
Construction Yards EPC Contractors
Offshore Construction Vessels Subsea Equipment
Discounted by UCCI
© 2013 IHS
23 contractors quarterly backlogs: March 2008 - June 2013
0
50
100
150
200
250
300
2007Mar
2007Sep
2008Mar
2008Sep
2009Mar
2009Sep
2010Mar
2010Sep
2011Mar
2011Sep
2012Mar
2012Sep
2013Mar
2013Sep
US
D b
illio
n
Construction Yards
EPC Contractors
Offshore Construction Vessels
Subsea Equipment
© 2013 IHS
23 contractors quarterly backlogs: March 2007 - September 2013
© 2013 IHS
…however visible FEED contracts indicate
possible future slowdown in project sanctions
22
0
10
20
30
40
50
60
70
80
90
Jan Feb March April May June July Aug Sept Oct Nov Dec
Nu
mb
er o
f co
ntr
acts
aw
ard
ed
Accumulated Visible FEED* Contract Awards
2011 2012 2013 YTD (Jan-Nov)
* Includes contracts defined as either conceptual study or FEED © 2013 IHS
© 2013 IHS
Further project postponements expected –
primarily linked to economic concerns
23
LC negotiations
LC uncertainty
LNG projects – Capacity
OGX – out
Petrobras – Realistic?
Escalating local costs
NOR: New tax regime
Onshore remains a problem
Reassessment of projects
Small operators
LC – Execution risk
LC
Instability
Johan Castberg
Browse LNG
Mad Dog Ph2 Hadrian
Hod
Maduro
Tubarao
Bressay? Rosebank
© 2013 IHS
Agenda
1. Macro picture
2. Demand trends
1. Project sanctions and order books
2. North American activity trends
3. Spending trends
3. Supply trends
4. Market balance
5. Summary and conclusions
24
© 2013 IHS
0
500
1,000
1,500
2,000
2,500
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
rig
co
un
ts
US rig counts by trajectory
US Vertical
US Directional
US Horizontal
© 2013 IHS Source: Baker Hughes / IHS
25
• Highly price sensitive region
– Short term contracts, large no. of smaller operators increase volatility in the North
American market
Weaker oil prices and low gas prices soften
activity levels in North America
© 2013 IHS
LNG liquefaction facilities segment to see
massive capacity expansions going forwards
26
© 2013 IHS
Propsed North American LNG liquefaction projectsProposed North American LNG Liquefaction projects
© 2013 IHS
Agenda
1. Macro picture
2. Demand trends
1. Project sanctions and order books
2. North American trends
3. Spending trends
3. Supply trends
4. Market balance
5. Summary and conclusions
27
© 2013 IHS
North America to remain largest region in
terms of onshore spending
• Large gains seen over last decade – some reversal expected in
next years linked to slowdown in drilling activities
28
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Sh
are
of g
lob
al to
tal
Onshore CAPEX (E&P, Pipelines and LNG) by region
Latin America
Russia & Caspian
Middle East
Europe
Asia-Pacific
Africa
North America
© IHS 2013
© 2013 IHS
Much of spending growth in recent years
coming from North American developments
29
-100% 0% 100% 200% 300% 400% 500%
Husky Energy Inc.
Marathon Oil Corp.
Suncor Energy, Inc.
Anadarko Petroleum Corp.
EOG Resources, Inc.
Canadian Natural Resources Ltd.
BHP Billiton Group
Occidental Petroleum Co.
Hess Corp.
Apache Corp.
ConocoPhillips
BP plc
Chevron Corp.
Royal Dutch Shell plc
Exxon Mobil Corp.
Change in spending 2012 vs 2009
North American vs ROW spending growth*Ranked by global spending
growth 09-12 NAM
growth 09-12 ROW
© 2013 IHS
…however:
2013 Spending surveys:
• NAM: -2.5%
• ROW: +8.1% *Original E&P Spending Survey
© 2013 IHS
Unconventional spending is impacting
spending in other regions and segments
Direct impact:
• Operators have divested riskier assets to focus on domestic
market…
• …but other operators have always been there to acquire divested
assets
Indirect impact:
• Lower global oil prices, expected to trend lower over next years
due to unconventional supply
• …unconventional supply could also be positive for industry in long
term, as it makes North America the new “swing producer”
– Highly reactive, very price sensitive region - Lower oil prices quickly met by
reduced drilling activity.
30
© 2013 IHS
Asia-Pacific to be a key driver of offshore
spending through forecast period
31
-
50
100
150
200
250
300
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
US
D b
illio
n
Total Offshore CAPEX (including pipeline construction and LNG)
Latin America
Russia & Caspian
North America
Middle East
Europe
Asia-Pacific
Africa
© IHS 2013
© 2013 IHS
Large share of future growth linked to ongoing
Australian LNG projects
• Despite new project sanctions put on hold, and delays of on-going
projects, spending is expected to see a dramatic rise as recently
sanctioned projects enter the construction phase
32
0
5
10
15
20
25
30
35
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
US
D b
illio
n
FLNG
Total pipeline construction
Total Well Services
Total Drilling
Other field development cost
Offshore installation (Heavy Lift)
Offshore installation (DSV/ROVSV)
Floaters (hulls only)
FSOs (hulls only)
FPSOs (hulls only)
Subsea Production Systems
Jackets
Topsides EPC
FEED© IHS 2013
Australian offshore spending by market segment
© 2013 IHS
The onshore and offshore segments react
differently to changes in market environment
33
Source: IHS Upstream Spend Report
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
70%
-200
-100
-
100
200
300
400
500
600
700
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Ye
ar-o
n-y
ea
r ch
an
ge
To
tal sp
en
din
g -
US
D b
illio
n
Onshore and offshore spending
Onshore y-o-y change Offshore y-o-y change
Total CAPEX ONSHORE (incl pipelines and LNG) Total CAPEX OFFSHORE (incl pipelines and LNG)
© IHS 2013
© 2013 IHS
Agenda
1. Macro picture
2. Demand trends
3. Supply trends
1. Capacity expansions, skill levels and
productivity
2. Contractor financials
4. Market balance
5. Summary and conclusions
34
© 2013 IHS
The world has become more “local”
35
Ghana New local content rules
50% in 5 years
Nigeria 45% achieved for Egina
Likely to be a precedent
Gabon Setting local content
Congo Setting local content
Angola Will it follow Nigeria?
Myanmar Discussing local
content
Malaysia PETRONAS opening
up its procurement? Brazil Recent blocks see no
fall in local content
Australia No relaxing of
immigration policy
Mozambique Discussing local
content
Norway More pressure for
local jobs?
Diminishing
Constant
May increase
Increasing
Situation from now:
• Offshore EPC and onshore E&C are the most affected for now.
Mexico Liberalising?
© 2013 IHS
Large increase in effective fabrication capacity,
but it will take time before capacity is proven
36
-20
-10
0
10
20
30
40
50
60
Me
tric
to
ns (
'00
0)
South America
Russia & Caspian
North America
Med. & Middle East
Europe
Central America
Asia-Pacific
Africa
Change in Effective Topsides and Modules Fabrication Capacity
Regional, 2003-2017
© 2013 IHS Source: IHS, 26 June 2013
© 2013 IHS
Construction vessel fleet still seeing strong
undersupply in the high end segment
37
• Large number of new vessels coming into market
– …but not sufficient DP enabled vessels to meet demand in Harsh & Deep waters
– …while new non-DP vessels lead to continued oversupply in Shallow & Benign
segment
0%
20%
40%
60%
80%
100%
120%
140%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F 2014F 2015F 2016F 2017F
Ve
sse
l Da
ys
Offshore Pipelay Fleet Demand, Supply & Utilisation (2003-2017)
Whole Fleet Harsh & Deep Shallow & Benign
© 2013 IHS Source: IHS
© 2013 IHS
Engineering contractors are expanding hubs to
overcome cost and availability issues
38
Selected EPC contractors’ headquarters
Low-cost engineering hubs
© 2013 IHS
Skills shortages becoming an increasing
concern
39
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2011 2012 2013
Sh
are
of re
sp
on
de
nts
Hays' Oil and Gas Survey: Main concerns in the oil and gas industry
Other
Immigration / overseas visa program
Security
Safety regulations
Environmental concerns
Economic Instability
Skills shortages
© 2013 IHS Source: Hays: "The Oil & Gas Global Salary Guide" 2011, 2012 & 2013
© 2013 IHS
Productivity appears to be in decline
• Lower efficiency due to rapid expansions of teams.
• Stricter quality assurance, more complex regions (Brazil/ W. Africa)
40
Don’t see any visible demand in this graph
(remove legend?)
0
2
4
6
8
10
12
14
16
18
0
50
100
150
200
250
300
350
400
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Pro
du
ctivity-0
00
's e
mp
loye
es p
er
tre
e
Insta
lle
d S
ub
se
a T
ree
s #
Subsea Trees - Installations vs Productivity
Visible demand Historical Installations Productivity
Source: IHS
Worldwide
© 2013 IHS Cameron and FMC Technologies only
Tre
es p
er 1
,000 e
mplo
yees
© 2013 IHS
• Weak global economy provides incentives for capacity expansions
– Large capacity increases in many low end market segments
– Limited rise in faster growing “high” end market segments
• Greater yard capacity available and many new plants, but capacity
remains untested / inexperienced
– Local content, trade restrictions and industry development has contributed to
massive expansions
• Engineering contractors have been hiring – but it will take time
before these gain the necessary experience
Capacity is coming online, but is it what the
market needs and how long will it take?
41
There are no shortcuts to gaining experience and building technological
expertise.
© 2013 IHS
Agenda
1. Macro picture
2. Demand trends
3. Supply trends
1. Capacity expansions, skill levels and productivity
2. Contractor financials
4. Market balance
5. Summary and conclusions
42
© 2013 IHS
-6.00
-4.00
-2.00
0.00
2.00
4.00
6.00
-30% -20% -10% 0% 10% 20% 30%
EB
ITD
A m
arg
in c
ha
ng
e (p
.p.)
Change in revenue (% )
9m 2013 vs 9m 2012: Change in revenue and EBITDA margins Fabrication Yards
EPC Contractors
Well Service
Offshore services
Subsea equipment
© 2013 IHS
Revenue has risen sharply for contractors, but
for many, profit margins are falling
43
Revenue up; Margins down.
© 2013 IHS
Contractors struggling with increasing costs,
productivity and risk related to project complexity
44
• Unfavorable contracts entered into in a weaker market
• Increasing engineering and skilled labour salaries
• Project complexity is increasing – greater risk (new designs, concepts)
• Competition (yards)
• Productivity under pressure – grown too quickly?
• Exchange rate effects (both positive and negative)
• Slowdown in onshore North America activities (well service contractors)
Reasons for margin pressure:
© 2013 IHS
Agenda
1. Macro picture
2. Demand trends
3. Supply trends
4. Market balance
5. Summary and conclusions
45
© 2013 IHS
Topsides Fabrication (< 10,000t)
Topsides Fabrication (> 10,000t)
FPSO / FLNG (newbuild)
FPSO (conversion)
Subsea Equipment
Offshore Construction Vessels (S&B)
Offshore Construction Vessels (H&D)
Line Pipe (large diameter)
OCTG / Line Pipe
Onshore Drilling Rigs
LNG Liquefaction Facilities
Legend:
High buyer negotiating power High contractor negotiating power
-shorter lead times -longer lead times
-lower demand growth -higher demand growth
-more spare capacity -tighter capacity
-falling contractor margins -higher contractor margins
20172011 2012 2013 2014 2015 2016
Tight conditions to persist in high end and
engineering intensive segments
46
Supply/Demand balance selected markets
© 2013 IHS
Large regional differences in Onshore
segments
47
LNG Liquefaction Facilities
Australia
North America
Onshore Drilling Rigs
Middle East
North America (high-spec)
North America (low-spec)
Legend:
High buyer negotiating power High contractor negotiating power
-shorter lead times -longer lead times
-lower demand growth -higher demand growth
-more spare capacity -tighter capacity
-falling contractor margins -higher contractor margins
2017
2011 2012 2013 2014 2015 2016 2017
2011 2012 2013 2014 2015 2016
© 2013 IHS
Agenda
1. Macro picture
2. Demand trends
3. Supply trends
4. Market balance
5. Summary and conclusions
48
© 2013 IHS
Summary
• Slowdown in North America. Still full steam ahead elsewhere
– Particularly strong growth for offshore spending, while onshore spending
growth will be slow due to North America
– Signs point to slower activity growth also outside North America
going forwards
• Capacity to remain tight in segments requiring high levels of engineering
expertise and experience
– Length of training required leading to challenges in increasing effective
capacity
• As contractor capacity tightens, costs rise, and oil prices trend lower,
further projects are expected to be pushed back
– Market balance to start improving in 2-3 years in current tight segments
49
© 2013 IHS
Who we are:
50
David Vaucher, Director Mr. Vaucher oversees the Upstream Operating Costs Forum and has
years of experience in the oil and gas industry. Prior to joining IHS
he was with TAM International, a maker of specialty completion tools, where
he was a Technical Advisor supporting the company’s global operations. He
began his oil and gas career as an engineer at Schlumberger based in
Texas, and has published several SPE papers.
He is the current editor-in chief of “The Way Ahead” magazine, the Society
of Petroleum Engineer’s official publication for young professionals, as well
as a weekly contributor to the Houston Chronicle, writing the column
“Building Hydrocarbon Bonds”.
Mr. Vaucher holds a Bachelor of Science degree in mechanical engineering
from Rice University, an MBA from the University of Texas at Austin, and a
Master’s in petroleum engineering from Texas A&M at College Station.
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David Vaucher
Linda Kinney
Sandra Vasconcellos
