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Risk - A Drilling Contractor’s Perspectives Anton Dibowitz, Vice President Marketing
Paris, September 20th 2011
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The next barrels of oil are more challenging:
More complex wells (deeper, HPHT, highly deviated, managed pressure)
In more challenging locations (harsh environment, remote / frontier area)
Under increased regulatory oversight (politically challenging areas, local content issues)
After Macondo, everything has changed…or has it?
Changed perceptions/ attitudes towards risk
Challenges to knock-for-knock indemnities
Reactions and responses
Managing risk
QHSE focus
Client base, geographic diversification, contract timing
Asset integrity, personnel competence, management systems
The “Cliff Notes”
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The bigger finds are in deeper water
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324m
3km
Deepwater brings technical challenges
Challenges
More remote locations
Extreme pressures and temperatures
Bigger wells, heavier loads
Extended reach, highly deviated, longer horizontals
More challenging reservoirs, more complexity
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Major deepwater regions all have challenges
Trend towards more complex and challenging resource plays
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Ghana
Mauritania
Sierra Leone
Democratic Republic of Congo
Sao Tome & Principe
Tanzania
Mozambique
French Guiana
Selected deepwater finds 2011
Significant finds in frontier plays
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Arctic Drilling: Great Promise / Great Challenge
Arctic developments to date have been in the least severe ice regimes
Industry is moving to basins where water is deeper and ice environments are more severe
Limited open water season creates challenges.
Example Canadian Beaufort Sea Shelf (20-50m WD): 85 day season Shelf Edge (50-70m WD): 70 day season Slope (70-1200m WD): 50 day season
Same season relief well (SSRW) capability (required in Canada, USA, Norway and Greenland) Alternatives to traditional relief wells will have to
be found
Ice flow severity by location
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Access challenges
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Infrastructure challenges
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Political Instability Challenges
Security concerns
Protection of crews and assets
Stunted development of local support, infrastructure, competence
Tend to be areas of:
High corruption: bureaucracy often implemented to compensate
High cost: unattractive economics
Contract issues
War Risk, Force Majuere
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Regulatory Challenges
Access to emerging markets
75% of world known conventional resources are closed to international oil companies (Andy Gould, SLB)
Restricted access from citizens groups and lobbyists
Oil companies move further offshore, more remote, harsher environments
Local Content
Often high on the political agenda, regardless of practicality.
Brazil: Crew, assets, pace
Angola: Crew, local partners
Nigeria: Asset ownership, currency
Indonesia: Assets ownership
China / Vietnam: NOC rig ownership
Other Regulatory Issues
Nigeria : Petroleum Industry Bill
UK: Tax increases
US GoM: Permitting process
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Operators perception on risk
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Post Macondo: Big picture
Public perception of risks has changed
Regulatory environment has changed If risk management has failed yet again, are there grounds for
challenging the fundamental approach to risk and risk management?
If management has failed yet again, are there grounds for challenging the fundamental approach being taken to management and control ?
Magne Ognedal, Director General PSA
Operators expectations have changed Increased focus on higher specification assets
Increased technical acceptance / inspection
Focus on training and personnel competency
Re-examination of contractual risk allocation
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What are the operators saying?
Question: How will oil services companies be exposed to risk from contracts (going forward)?
Nothing has changed?
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What are the operators doing?
There has been a long standing agreement on allocation of risks between contractors and operators
Risk goes with reward…contractor is responsible its rig & crew, operator responsible for its well.
BP / Transocean challenges this split
Significant implications if indemnity provisions are negated by court
Attitudes of some operators appear to already have changed
Changed perception of risk?
Opportunism?
Regular business cycle “give and take” ?
Prudent / established contractors will just walk away
Some contractor may take on liabilities they can’t cover
In the long run operators will end up bearing the risk
anyway.
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Post Macondo : Creating positives from tragedy
The blow-out was ultimately stopped
Any complacency that may have existed is gone
Proactive responses from operators and contractors Increased focus / cooperation on blow-out response
and capping systems US GoM: Marine Well Containment Company North Sea / Worldwide: Subsea Well Response Project
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How are drilling contractors reacting?
Post Macondo orders favor established contractors
Numerous joint industry task forces (API, OGP)
Revised IADC Guidelines (HSE Case for MODU’s, DW Well Control)
Redundancy (7 ram stacks, Dual BOP’s)
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Evolving where we focus our QHSE efforts
Source: Peter Sharpe EVP Shell, Shell Global Solutions International
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24 units
- 2 Semis
- 4 Semi-tenders - 9 Tender rigs - 8 Jack-ups
- 1 HE jack-ups
- 4 BE jack-ups
Worldwide operations diversifies risk
Worldwide operations
- 2 Semis
- 3 Drillships
6 units - 2 Drillships
- 2 Semi-tenders
- 2 Jack-ups
6 units
-3 Semis
-2 Jack-up -1 Drillship
-3 Tender rigs
-1 semi-tender
Newbuilds – 14 units
10 units
North America -2 Semis -1 Jack-up -1 Semi-tender Central & South America - 3 Semis - 1 Drillship - 2 Jack-ups
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Unit Customer
West Leo - Newbuild
West Capricorn - Newbuild
West Polaris Exxon US$560,000 US$618,000
West Navigator 1, 4
Shell US$610,000
West Aquarius Exxon US$525,000
West Auriga - Newbuild
West Hercules 3 Husky US$515,000 US$495,000 US$490,000
West Vela - Newbuild
West Tellus - Newbuild
West Gemini Total US$445,000 US$445,000
West Alpha 1, 4 BG Consortium US$503,000 US$477,500 US$477,500
West Capella Total US$542,000
West Sirius BP US$474,000
West Phoenix 1, 4 Total US$547,000 US$445,000
West Taurus 2, 3
Petrobras US$650,000
West Eminence 2, 3
Petrobras US$618,500
West Venture 1, 4
Statoil US$440,000 07.2017
West Orion 2, 3 Petrobras US$618,500 07.2016
West Pegasus PEMEX Newbuild Transit US$465,000 08.2016
Contract Option Yard plus transit period
2015
1Q 2Q 3Q 4Q2Q 3Q 4Q1Q 2Q 3Q 4Q 1Q
20142011 2012 2013
1Q 2Q 3Q 4Q3Q 4Q1Q 2Q
Floating Rig Availability
Staggered contract rollover dates spreads risk
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Customer base
Worldwide operations diversifies risk Prime client base reduces risk
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Asset Integrity
Focus on modern high specification assets
Asset management to maintain competitive cost structure with sustainable integrity
Consistent worldwide management systems / performance
Minimum operational standards
Verification of operational change / deviations from agreed standards
Technical specification and maintenance philosophies
Experience and best practice transfer
Reducing risk by Setting the Standard
Personnel training and competence
Attract top class talent
Position specific training and competence assurance
Demonstration of training, competence, and reporting
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Delivering wells safely, efficiently and cost-effectively
Setting the Standard in Drilling
Being our customers' most important partner in making oil and gas available through combination of:
Competence
High integrity assets
Consistent and effective performance