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What is Driving Todays Deepwater

Market?

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Source: ExxonMobil

1.1%

0.4%

1950 1950 1950

0 0 0

50

100

150

200

250

300

350

10

20

30

40

50

60

70

80

2

4

6

8

10

1990 1990 19902030 2030 2030

0.9%

Average Growth/Yr.

2000 - 2030

2.2%

2.8%

4.7%

0.7%

2.4%

1.6%

Energy DemandMBDOE

GDPPopulation

Trillion (2000S)Billions

Non-OECD

OECD

World Energy Consumption Global Economics and Energy

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World Energy Consumption

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Deepwater Market Fundamentals

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Rising costs are a major concern

Capital costs for deepwater development projects increased by about 50% in the last 2 years

Further cost inflation could slow down projects even further

Lack of experienced staff is a major factor

Delays and longer delivery times forcing projects into longer construction times, furtherstretching resources

It could be 2008 before any significant relief on cost increases


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Scheduled Rig Deliveries

2006 2007 2008 2009 2010

Jack-ups 10 17 31 16 3 77

Semis 0 1 12 17 7 37

Drillships 0 1 4 7 2 14

10 19 47 40 12 128

% Increase to Current FleetJack-ups 19%

Semis 22%

Drillships 37%

1

5 5

3

7

3

4

3 3

1

3

2

1

3

2 2

3

1

0

1

2

3

4

5

6

7

8

9

10

1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10

NumberofScheduledD

eliveries

Contracted Not Contracted

Timing of Floater Deliveries

Deepwater drilling rig deliveries will helpease the shortage, but will it push ratesdown?

Deepwater Rig Deliveries

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There appears to be sufficient demand to absorb new construction without

pushing rates lower

The majority of new builds scheduled to enter the market over have alreadyreceived contracts, at very attractive day rates

Through 2012, Anadarko has booked 339 rig months for drilling, giving them

significant leverage to buy into other opportunities. Other notable commitmentsfor deepwater rigs in the GOM include:

BP (196 rig months); Chevron (168); Shell (125); Devon (95); StatoilHydro (90);

BHP (89); Petrobras (87); Hess (50,5); Repsol (48); Nexen (24); Murphy (23.5)

Woodside (23); Noble (18); ExxonMobil (14); Dominion (13.5); Eni (12);

Mariner (12)


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Leading indicator - pending lease expirations will drive new deepwater activity

Source: MMS

Deepwater Market Drivers

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For the production floater, the fundamentals driving the sector have never

been stronger

Deepwater floater CAPEX is predicted to rise between 2006-2010 to

nearly US $90 Bn, compared to nearly $60 Bn in the period 2001-2005

Source: Douglas-Westwood


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Competing Projects Will Squeeze Resources

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Worldwide FPS Awards 2005 (a) 2011 (e)

Excludes storage only units

Source: Quest

0

5

10

15

20

25

30

35

40

Hull Award Year

AwardCounts

North Sea 2 3 6 4 2 1 3

South America 3 4 7 5 5 3 3

Africa/ Med 6 4 6 6 10 7 6

Asia/Pacific 9 11 13 10 10 4 8

North America 4 5 2 1 3 5 3

2005 2006 2007 2008 2009 2010 2011

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5

2

1

3

5

3

0

1

2

3

4

5

6

2005 2006 2007 2008 2009 2010 2011

Hull Award Year

AwardC

ounts

Gulf of Mexico FPS Awards 2005 (a) 2011 (e)

Blind Faith Semi

Independence Hub Semi

Neptune TLP

Tahiti Spar

Chinook-Cascade EPS FPSO

Exmar Semi- Spec Unit

Mrage MinDOC

Phoenix MOPU

Shenzi TLP

Thunderhawk Semi

Perdido Hub Spar

Williams Unnamed Spar EPS-Spec Unit

Tubular Bells Spar

Knotty Head FPS*

Pony TLP*

Big Foot FPS* GUMBO TLP*

Kaskida Spar*/Semi*

St Malo Spar*/Semi

Jack Spar*/Semi

Chuck EPS FPSO

Sturgis FPS

Stones Spar*

*Candidates for dry tree units

Source: Quest Offshore

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7

4

9

11

13

1011

0

2

4

6

8

10

12

14

2005 2006 2007 2008 2009 2010 2011

Hull Award Year

AwardC

ounts

Bunga Orkid FPSO

Blackbird/Dua FPSO

Sakhalin 5 FPSO

Kikeh Spar

Basker/Manta/Gummy FPSO

Wenchang FPSO

Tui FPSO

Stybarrow FPSO

Asia Pacific FPS Awards 2005 (a) 2011 (e)

Puffin FPSO

Vincent Phs 1 FPSO

Gumusut Semi

Montara FPSO

Galoc FPSO

Block H Sarbah FPSO

Scarborough Semi

Echuca Shoals Semi

Kerala-Konkan FPSO

Pandora FPSO

Dhirbubhai FPSO

Rotan Spar

Petrel FPSO

Chaoshan FPSO

KG-DWN-98/2 FPSO

AC/RL3 Methanol FPSO

Liwan FPSO

Ichthys Semi

Sunrise FLNG

MA D6 FPSO

Van Gogh FPSO

Bombay FPSO

Camago-Malampaya FPSO

Pyrenees FPSO

All units wet tree unless otherwise noted, listed projects do not represent all opportunities


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6

4

6 6

7

10

6

0

2

4

6

8

10

12

2005 2006 2007 2008 2009 2010 2011

Hull Award Year

Award

Counts

Africa FPS Awards 2005 (a) 2011 (e)

Agbami FPSO

Oudna FPSO

Antan FPSO

Mobim Bilondo FPUKizomba C Phase 2 FPSO

Kizomba C Phase 1 FPSO

Jimbao/Gimboa FPSO

Bilabri, Orobiri, Owanare FPSO

Bosi/Bosi North EPS FPSO

Usan, Usan West, Ukot FPSO

Azurite Marine FPSO

Bonga SW FPSOPazflor FPSO

Block 31 Northeast FPSO

Agbami Phase 2 FPSO

Bosi/Bosi North FPSO

Block 31 Southeast FPSO

Clov FPSO

Negage, Gabela, Lucapa, Malange FPSO

Block 31 Southeast-South FPSO

Venus FPSO

Kizomba D FPSO

Belinda Semi

Ibhubesi TLP Nord Marine FPSO

Block 32 FPSO

Block 15 FPSO

Giove, Medusa FPSO

Ofrima North FPSOBaraka South East FPSO

Awa FPSO

Mahogany FPSO

Mer Profonde Nord FPSO

Block 32 FPSO

All units wet tree unless otherwise noted, l isted projects do not represent all opportunities

Sourc: Quest Offshore

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33

55

7

4

3

0

1

2

3

4

5

6

7

8

2005 2006 2007 2008 2009 2010 2011

Hull Award Year

Award

Counts

South America FPS Awards 2005 (a) 2011 (e)

Marlim Leste FPU

Espadarte FPSO

Golfinho Module 2 FPSO

Polvo FPSO

Frade FPSO

MPF 1000 EPS

Camarupim FPSO

Jabuti FPSO

Peregrino FPSO

Albacora FPSO

Espadarte-22 FPSO

Golfinho Module 3 FPSO

Posa FPSO

Tambau-Urugua FPSO

Papa Terra FPSO

Papa Terra Dry Tree TLP

Shell Park FPSO

Roncador Module 3 Semi

Atlanta FPSO

Cachalote, Baleria Franca & Ana FPSOJubarte Phase 2 FPSO

Marlim Sul Module 3 Semi

Roncador Module 4 FPSO

Atlanta TLP

Marlim Sul Module 4 Semi

BM-S-22 FPSO

ES-11 FPSO

Carapicu, Caratai FPSO

Manganga, Catua FPSO

Pirambu FPSO

All units wet tree unless otherwise noted, l isted projects do not represent all opportunities


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2

3 3

1

2

4

6

0

1

2

3

4

5

6

7

2005 2006 2007 2008 2009 2010 2011

Hull Award Year

Aw

ardCounts

North Sea FPS Awards 2005 (a) 2011 (e)

Alvheim FPSO

Chestnut Roundship FPSO

Dumbarton FPSO

Ettrick FPSO

Gjoa Semi

Shelley Roundship FPSOSkarv FPSO

Millburn Roundship FPSO

Pilot Roundship FPSO

Sevan 5 Roundship FPSO

Sevan 6 Roundship FPSO

Acorn/Beechnut FPSO

Rosebank/Lochnagar FPSO

Goliat FPSO

Helvick FPSO

Luva Semi

Connemara FPSO

Skipper Semi

Spanish Point Semi

Crawford FPSO

Luva Semi

All units wet tree unless otherwise noted


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Project Slippage is a Major Concern

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Project Slippage

The Reasons

Portfolio gap

Resource constraints within oil

companies

Lack of experienced staff

Limited rig availability delaying appraisal

programs

Delayed or extended projects extending

resources

Limited supplier capacities causing

delivery bottlenecks

Rising costs impacting project

economics

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For IOCs it can take up to 7 years to go from discovery to production

For Independents, it can still take up to 5 years

Appraisal programs adding to schedule

Emphasis at the front end to get it right

Lessons learned fosters conservatism

Project Timelines are Getting Longer

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Cost and availability of Mobile Offshore Drilling Units (MODUs)

Access to human resources

Increased cost of goods and services

Longer lead times for raw materials and major equipment items

Access to fabrication and shipyard capacity

Access to deepwater technology

The technological know-how to develop deepwater reserves is critical and lie

primarily with IOCs

Technology is a major driver of success

Proprietary hull designs, limited players, mean business not as usual

Key Deepwater Issues and Challenges

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Deepwater Drilling and Completion Costs Rule

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Storms and hurricanes

Loop and eddy currents

Unpredictable high pressure gas

and faults near surface

10,000 thick salt canopy with

unpredictable layers of highly

variable trapped sediments

Unpredictable base of salt

rapid pressure differentials

Thief zones of significantly

lower pressure which cause lost

circulation fluid loss

Ultra-deep reservoir with high

temperatures, high pressures

and low natural flowability

SeaLevel

40,000

8,000

16,000

24,000

32,000

Allochthonous SigsbeeSalt Canopy

Cretaceous

Upper TertiarySediments

Autochthonous Salt

Basement

SuprasaltSediment

Gulf ofMexico

Empire StateBuilding ~500Meters

Lower

Tertiary

Ultra-Deepwater: Drilling Technical Challenges

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13% of the current oil industry workforce will have retired by 2008

and 33% by 2012

Structural weakness in the labor market - lack of adequately skilled

professionals between 30 and 40 years of age

Most of the emerging frontiers do not have appropriately skilleddomestic labor

Rigs on order need 5-10,000 people to man!

Plus 50 more offshore construction vessels

Source: SPE, Maxwell Drummond Intl., Douglas-Westwood

Biggest Challenge: Finding the People

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Pre-FEED & FEED moving towards same contractor to limit verification time of

existing work, improve schedule, reduce cost and meet technical challenges of deep

water (desirable to keep the same team together for better execution)

Master Service Agreements most contractors have existing MSAs in-place to

allow expedited start, lessen impact of changes, and maintain rate structure

throughout project

Relationships because the industrys capacity is close to 100%, most operators

are aligned with particular contractors to secure services and resources, including

fabrication slots.

Negotiated Terms Competitive bidding on early studies is gone, trend turning

towards aligned relationships due to capacity

GOM Trend Early Development Contracting

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Source: MMS

Wet Completions Face Depletion Challenges

Dry completion features and benefits:

Direct vertical access for well intervention

Enhances reservoir testing, monitoring, inspection and maintenance operations

Drilling and workover capabilities

Lower operating costs because of well intervention ease

GOM Trend Emerging Bias Towards Dry Tree Units

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Spars and Semis starting to dominate deepwater developments due to

superior motion characteristics, versatility, larger rig packages, and deck load

capability

Dry tree systems new semi designs will enable ultra-deep dry tree production,opening up new opportunities in some frontier plays

TLP dominant floater concept up to about 4,500 ft. w.d., tendon technology

needs improvement before ultra-deep deployment can take place

FPSOs MMS approval still on a case-by-case basis, Petrobras Cascade will be

US GOMs first

Installation move to designs that allow quayside integration, reduce installation

risk

Vessel excursion deeper water depth means greater excursion and thus

higher bending loads and a reduction in fatigue life on SCRs and TTRs

GOM Trends Floating Systems

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Thank You!

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