Download PDF - Petrofac

UBS global oil & gas conference, Dubai
Changing relationships in the oil service sector
September 2007

Agenda
2. Petrofac: a brief introduction
3. Development of the oil service sector
4. New partnership models
5. Petrofac’s positioning
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1. Petrofac: a brief introduction
Petrofac is a leading international provider of facilities solutions to the oil & gas
production and processing industry
We provide project development, engineering, construction and facilities operation,
maintenance and training services; we also invest alongside our clients, delivering
our engineering and operations services service capability in complete alignment
Our clients include many of the world’s leading integrated, independent and
national oil and gas companies
Revenue Net profit Backlog
391
629
952
1,864
48% CAGR 37% CAGR 47% CAGR
1,485
2002 2003 2004 2005 2006
Note: all figures presented above are for the group’s continuing operations (US$ millions)
34.3
38.4
46.1
75.4
121.9
2002 2003 2004 2005 2006
885
1,097
1,740
3,244
4,173
2002 2003 2004 2005 2006
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1. Petrofac: a brief introduction
Our core geographic focus is on the Middle East, North Africa, the UK Continental
Shelf, the Commonwealth of Independent States and the Asia Pacific region
Petrofac operates out of four strategically located international centres, in
Aberdeen, Sharjah, Woking and Mumbai and a further 16 offices worldwide :
Houston
Woking
Algiers
Aberdeen
Lagos
London
Damascus
Baku
Ahmadi
Doha
Abu Dhabi
Khartoum
Moscow
Tehran
Sharjah
We are a people business, with over 9,500 employees
Tunis
Bishkek
Mumbai
Kuala Lumpar
Delivering world class competency with local resources and with strong focus on HSE
Chennai
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1. Petrofac: a brief introduction
Petrofac designs and builds oil & gas facilities; operates and manages facilities
and trains personnel; and, where it can leverage its service capability, develops
and co-invests
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2. Development of the oil service sector
The upstream oil & gas industry has four categories of major “actors” -
and their inter-relationships are changing:
Integrated Major Oil Companies (IOCs)
Increasingly focusing on long-term, multi-billion-$ opportunities where
national oil companies are daunted by scale &/or technical complexity
Finding access to conventional oil in conventional regions is more
challenging
National Oil Companies (NOCs)
Increasingly asserting their power, dis-intermediating IOCs - both where
NOCs have ready access to international finance and where they do not
Independent Oil Companies
Generally niche exploration, and less commonly, mature-asset focused
Service companies
Finding, therefore, that the customer-base is shifting
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2. Development of the oil service sector: 1960s
Integrated oil: the traditional model
Large oil companies, horizontally integrated, broad skill-set
Upstream Downstream
Geology and
Geophysics
Prospect
Generation
Exploration
Drilling
Engineering
Development
Service Sector
Operation and
Maintenance
Specialist
Maintenance
Well Services
Refining and
Product Sales
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2. Development of the oil service sector: by 1990
Geology and
Geophysics
Prospect
Generation
Outsourcing begins to transform the industry
Upstream Downstream
Exploration
Drilling
Engineering
Development
Service Sector
Operation and
Maintenance
Specialist
Maintenance
Well Services
Refining and
Product Sales
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2. Development of the oil service sector: 2000s
Integrated
Niche/
Equity
Geology and
Geophysics
Specialisation and the emergence of new business models:
Prospect
Generation
Exploration
Drilling
Engineering
Operation and
Maintenance
Refining and
Product Sales
More capable service companies, increased integration of services
Development
Service Sector
Specialist
Maintenance
Well Services
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3. New partnership models
Pre-OPEC 1, IOCs had access to equity oil throughout the world; power was based
on access to technology, capital and integrative capability; relatively limited
alignment of interests between IOC and NOC
Production Sharing Contract (PSC) model shifted balance of power in direction of
NOCs - and somewhat improved IOC/NOC alignment
Even in a PSC, alignment is in question, particularly as fields become mature and
returns more marginal:
− Tax-take is the point of friction
− Pressure has increased for sovereign governments/NOCs not to ‘sign away’
reserves
− The wealthier NOCs do not require IOC capital and are reluctant to pay high
returns for it
− IOCs want to book oil & gas reserves and are focused on reserve replacement
− NOCs are primarily interested in capability, now less dependent on IOCs than
pre-OPEC 1
Thus there has been a growing trend for the disintermediation of the IOC
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4. Petrofac’s positioning
Tunisia, ETAP
Algeria, Sonatrach
Kuwait, Kuwait Oil Company UAE, Dubai Petroleum
Oman, Ministry of Oil & Gas and PDO
Our relationships with NOCs encompass the provision of both our
engineering and operations service capabilities and as development
partner through Energy Developments
Malaysia, Petronas
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4. Petrofac’s positioning
Kuwait Oil Company, Kuwait
5 year full maintenance services contract, including
provision of management and technical support team
and systems
Preventative, corrective and predictive maintenance
execution using 650 maintenance personnel
General services including site accommodation and
catering services
Major overhauls on rotating equipment
Site workshops
Reimbursable materials
Measured extra works (Brownfield Engineering)
Training of company’s personnel (nationalisation)
Engineering services and spare parts for control and
shutdown systems
In addition, Petrofac is also undertaking a US$680m
lump-sum facilities upgrade project for KOC
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4. Petrofac’s positioning
Dubai Petroleum, UAE
Service operator contract for the provision of well and
facilities management services for all offshore oil &
gas assets
Assets comprise four offshore fields, 70 platforms, 400
wells, approximately 600 full-time employees and 500
contractors
Full operating responsibility transferred to Petrofac in
April 2007
Alignment through profit sharing of upside
Material increase in scale for Petrofac’s international
Operations Services business
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4. Petrofac’s positioning
Why Dubai Petroleum is important
First time a government entity has chosen to exploit its hydrocarbon resources
through direct contracting with an international service provider
Dubai gets the capability it requires without relinquishing reserves or control of
reserves
Though the fields are mature, because they were initially quite large,
considerable potential remains
In contrast to most UKCS mature-field examples therefore, there are major
developments planned alongside the rejuvenation of the mature operation itself
For Petrofac - a reputation-making opportunity
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4. Petrofac’s positioning
Early days yet, but…
As expected, the inherited organisation itself - its attitude to business - bore the
imprint of more than 35 years of “business as usual”
Many opportunities for short-term production increase have been identified, and
some already secured
The economics are different pre- and post-changeover: governments are looking
at “100% economics” and this makes a lot more investment opportunities
attractive
We have demonstrated that the risks of transfer of operatorship - the area of
most concern to any resource owner contemplating change - are manageable
This transition activity has been carried out by Petrofac many times in UK but
never before in an international context with an international workforce
The ability to do this - and particularly, the track record of having done it so
many times - is a key Petrofac differentiator
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4. Petrofac’s positioning
Where next?
Not all governments are as action-oriented as Dubai - so complete replication
will not be easy
This example however - and others where service companies are extending the
boundaries of previous service provision - are beginning to catch the attention of
some more forward-thinking NOCs
We know that many NOC-operated operations where IOCs have largely been
absent for decades are inefficient; considerable scope exists for efficiency
improvement leading to increased productivity
It is possible that other regional players will conduct experiments in ring-fenced
areas in the use of turn-key service provision
Against this theoretical opportunity has to be set the conservatism and the “old-
think” contractor relationship attitudes still prevalent in many NOCs
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Appendix 1: Petrofac’s positioning, examples
ETAP, Tunisia
Chergui gas field
Petrofac owns a 45% interest in the Chergui gas
concession from ETAP for a cash consideration of
approximately US$30m; ETAP hold 55% interest
Commencement of production from the field is expected
early 2008, with plateau rates expected to be maintained
for around four years with a further eight years of
operation beyond that
Hasdrubal gas plant
US$400m lump-sum turnkey contract for BG Group and
Entreprise Tunisienne d’Activites Petrolieres (ETAP)
Scope includes: project management, detailed design,
procurement, construction, pre-commissioning and startup
performance testing of the new gas plant processing
facility and the liquefied petroleum gas production
facility
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Appendix 1: Petrofac’s positioning, examples
Petronas, Malaysia
Cendor PM304 field undeveloped for years but with
proven reserves estimated at 24.6m barrels
Petrofac is operator with a 30% interest; partners are
Petronas Carigali, Kuwait Foreign Petroleum
Exploration Company and PetroVietnam Investment
Development Company
Petrofac’s full range of capabilities, Engineering &
Construction, Operations Services and asset
management, deployed to provide optimal solution
Asset management focus on developing innovative
solutions for smaller fields
From farm-in to full production in less than two years,
ahead of the prescribed timetable and below budget
First oil achieved in September 2006; daily production
approximately 14,000 barrels
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Appendix 1: Petrofac’s positioning, examples
Ministry of Oil & Gas and PDO, Oman
Harweel development cluster, PDO
Turnkey project value approximately US$1 billion
Scope includes: project management, detailed
engineering, procurement, construction and precommissioning
Training and support during commissioning of the
project
Kauther gas plant, Ministry of Oil & Gas
US$246m lump-sum engineering, procurement and
construction project with (initial) one-year operation
Will draw capability across the Petrofac Group from
Engineering & Construction to Operation Services
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Appendix 1: Petrofac’s positioning, examples
Sonatrach, Algeria
Ohanet is a large gas field development located in
Illizi province
Risk Services Contract (RSC) with Sonatrach; partners
are BHP Billiton (Operator), Japan Ohanet Oil & Gas
Co and Woodside Energy
Average daily production is approximately 14.6 million
m 3 /d gas, 24,240 bpd condensate, 2,770 tonnes per
day LPG
Petrofac investment US$100 million; US$1 billion total
project value
Pioneered the partnership business model
First time non-recourse financing used in Algeria
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UBS global oil & gas conference, Dubai
Changing relationships in the oil service sector
September 2007