IOCs / NOCs EVOLVING PROFILE AND ONSHORE MARKETS OUTLOOK

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1 CONVEGNO SEZIONE COMPONENTISTICA D IMPIANTO ANIMP L EVOLUZIONE DEL MERCATO E LE SFIDE PER LA FILIERA DELL IMPIANTISTICA ITALIANA La filiera Coreana: un modello da seguire? IOCs / NOCs EVOLVING PROFILE AND ONSHORE MARKETS OUTLOOK Cosimo Cannalire Vice President Alliances Technip Milano - 1 dicembre 2011

2 The IOCs role Replacing reserves mainly through mergers, acquisitions and authentication of new ones Increasingly relying on: Development of technologically complex offshore projects Managerial experience of complex mega-projects and Development of unconventional plants IOCs tend to target investments with high returns and to divest from marginal ones (this explains why they move away from Onshore to maximise Offshore assets) 2

3 Less adept Technology & Capital The NOCs: who are they? More adept Seekers: Strategic Resources CNOOC Entrepreneurs StatoilHydro PETRONAS CNPC Petrobras PEMEX Sonatrach National Assets Holders S. Aramco Gazprom Rosneft Sinopec ONGC LNOC QP PTT EGPC Ecopetrol Challenged Pertamina Sonangol PDVSA NNPC NIOC KPC Seekers: Market, Technology, Finance, Security Poor Material Resources Rich 3

4 NOCs operations are not as widespread as the IOCs ones StatoilHydro Gazprom Rosneft BP Shell National Iraniana Oil Co Chevron ConocoPhiillips ExxonMobil Total ENI Iraq National Oil Co Qatar Petroleum Kuwait Petroleum Corporation Pemex PDVSA Sonatrach Saudi Aramco ADNOC CNPC Number of countries > 100 National Petroleum Co. Of Nigeria Pentamina Petronas Petrobras = NOCs = IOCs 4

5 Number of countries of operation But just few NOCs are now confined to their home markets StatoilHydro Petronas High Petrobras CNPC ONGC Sonatrach Saudi Aramco CNOOC KPC PDVA Gazprom Sonangol Rosneft Qatar Petroluem ADNOC NIOC Ecopetrol Pertamina Low PDO EGPC Pemex Libya NOC NNPC Iraq NOC Low Reserves High 5

6 The growing importance of NOCs NOCs hold 10 times more reserves than IOCs But especially NOCs are becoming more internationally competitive and oriented NOCs are increasingly investing onshore, mainly in partnerships / JVs 6

7 NOCs versus IOCs strategies Though it is emerging an increasing convergence between IOCs and NOCs, significant differences exist in asset ownership patterns across the value chain as well as in contracting strategies IOCs are maintaining some onshore assets and divesting from others with limited new investments NOCs are increasing onshore investments, so to guarantee security of supply IOCs are sophisticated, highly structured, ask for top tier services developed by professional contractors, are prone to long lasting relationships and to test unusual contractual deals NOCs generally prefer competition to other type of deals, often show up with a local heart in a global body and leverage more and more upon domestic resources all along the EPC value chain imposed to contractors 7

8 World business environment - Onshore North America Activity in Canadian oil sands Opportunities in US onshore Latin America/Brazil Several onshore projects moving forward gradually Expanding onshore opportunities in Brazil Europe Onshore very slow Increasing focus on renewable energies Africa Political uncertainty in North Africa pushing back investments Middle East Downstream strategic investments continue across the region Growing brown field activities Asia Pacific Strong momentum in gas-related projects Investments in refining, petrochemicals and fertilizers 8

9 Main investments and challenges in the O&G sector Confirmed worldwide capital spending trend registered in the last three years and stabilized in the range of 55 Billion USD per year: 25 Bill. USD in Refining, 15 Bill. USD in Petrochemicals/Chemicals, 10 Bill. USD in Gas Processing and 5 Bill. USD in Synfuels An increasing share of unconventional oil will be tapped with the upgrading of Extra Heavy Oil from Venezuela Orinoco Belt and of Oil Sands in Canada The uncertainties regarding the world economy will delay some projects but a limited impact is expected on growing South American, CIS and Asian markets, both in Refining and Petrochemicals The stop to Nuclear decided by many countries after Fukushima will foster investments related to fossil fuels and to renewables ; moreover natural gas (including unconventional gas) to become the pivot point of the next decades Investments on fuel specs will move towards South (Latin America and Africa) and East (CIS and Asia) feeding a significant brown field Refining market A growing number of new grass root refinery projects will be associated with downstream petrochemical productions (Brazil, Vietnam, KSA, Tatarstan, Nicaragua, Azerbaijan, Malaysia, etc.) Subject integration will propose new challenges given the need for the optimization of the various involved technologies The increasing standard of life in developing countries is calling for more food and thus for a growth in fertilizers consumption 9

10 Onshore market forecast LNG/GTL : Geographical shift after the Australian boom and the first FLNG Refining : High number of prospects, grass root refineries and expansions, well balanced geographically Ethylene : Market rebound after the low level of with more than half a dozen important prospects in all regions Petrochemicals/Fertilizers : Emerging market in Latin America, South East Asia and Africa with many large prospects 10

11 Suggestions Be patient and follow investments from inception Support Clients with holistic risk assessment services Be glo-cal, maximising world based assets with local content all along the EPC chain Facilitate financing, such as proactively following the Chinese wave Provide integrated expertise (i.e. on Refining/Petrochemicals) given the large complexes investment structure Anticipate the renewables (i.e. 2nd bioethanol generation) market trends Use an adaptive model to now again fashionable old economy businesses (i.e. fertilizers) 11

12 An immediate application - The new deal in procurement Mexico, Brazil, Russia, Eastern Europe, Turkey, KSA, India, Thailand, Korea, PRC, Vietnam, Indonesia,, i.e. we have to play now out of the comfort zone Need to leverage upon local procurement hubs PreQ/Q process to be more extended and always up to date Avoid any award and forget syndrome strengthening instead inspection/expediting/qa-qc processes Adoption of a predictive coaching in lieu of a post event inspection Need to teach and convince the Owners in order to get their positive support Play intelligently with standards and codes 12