Technological Developments for Strategic Advantage - Ashok Belani

#OM2015 #OM2015

Technological Development for a Strategic Advantage

Ashok Belani

#OM2015

Supply reaction becoming evident US Crude Production (MMbpd)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

0.21

Kuwait

Saudi Arabia Qatar

UAE

Angola

Others

2012

Core OPEC Spare Production Capacity (MMbpd) 2011 – 2015

Libya

crisis

2013 2014 2015

9.8

9.3

9.7

9.6

9.5

9.4

9.2

0.0

Sep-15 Jul-15 May-15 Mar-15 Jan-15

New estimates Original EIA estimates Projections based on DPR

#OM2015

We have a Production Replacement Challenge

• Annual replacement challenge driven more by production decline than by demand growth

• E&P investment cuts impacting total production replacement capacity

MM

bpd

Time

Demand Growth

8-10 MM bpd

Annual Replacement

Challenge

#OM2015

Production & E&P Capex spend growth divergence

99

321

0

50

100

150

200

250

300

350

8

6

4

2

0

12

10

2013 2011 2010

+33%

2009 2008 2007 2006

Capex $B

2005

7.0 223%

2012

9.3

2019 2018 2017 2016 2015 2014

NAM Production NAM Capex

40.1

0

5

10

15

20

25

30

35

40

45

6

7

5

3

4

2

0

1

2011 2010 2009 2008 2007 2016 2015 2006 2005

6.9

14.4

2019

-37%

2018 2017 2013

178%

Capex $B

2012 2014

4.3

Europe Production Europe Capex

Production

MMBOEpd

Production

MMBOEpd

NAM Production vs. E&P Capex spend Europe Production vs. E&P Capex spend

Source: IHS

#OM2015

All Barrels are not created equal Oil Production and Capex

#OM2015

Deepwater development

-200

-100

0

100

200

300

400

500

600

700

800

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Tho

usan

d bo

e/d

2004–09: Average ~469,000

boe/d new production

2010–15: Average ~54,000

boe/d new production

2016–21: Average ~444,000

boe/d new production

Source: IHS

#OM2015

Eagle Ford 2009 4,432

5,411

22%

2014 22

12

83%

2014

2009

Lateral Length

1,120

148%

2014

2009 451

1,020

17%

2014

2009 870

Stages

Proppant (lbs/ft) Fluid (gals/ft)

100

4,000

0

3,500

3,000

2,500

2,000

1,500

500

0

1,000

700

600

500

400

300

200

560

2010

564

2009

565

2008

465

B3 BOE, BOE/d

2012

562

2015 (May)

645

2014

617

2013

562

Well Count

2011

B3 BOE (BOE/d) Well count

5.35.55.76.16.27.2

Target

-24%

1Q 2015 2015 plan 2014 2013 2012

Completed well cost ($million)

#OM2015

Cost deflation expectation

0 10 20 30

Subsea

Facilitites (Deepwater)

G&A

Facilities (Shelf)

Pipeline

Facilities (Onshore)

Deepwater Wells

Ultra-deepwater Wells

Shallow water Wells

Completion (Unconventional)

Onshore Wells (Unconventional)

Industry’s initial expectations of development costs deflation by category - Deflation in $ (2015 vs 2014)

Source: Wood Mackenzie, based on a survey of E&P companies in Jan 2015

#OM2015

Effort to contribute towards costs reductions

• Supply chain – over capacity/competition

– lower prices/margins

• Labour being cut

• Offshore rig rates have been decreased substantially

Areas to address for improvement

Improved efficiencies

Project optimization

Technology

New engineered solutions

Integration

Standardization

Automation

Improved Project planning

Looking for a structural solution

Integration, Collaboration, Partnerships

#OM2015

Expanding from Subsurface to Surface

#OM2015

Rig of the Future – The New Land Drilling System Design

• Proprietary features based on years of R&E

• Augmented by the recent T&T acquisition

Manufacturing

• JV with Bauer closing in Q4 2015

• First rig to be delivered in Q1 2016

Rig Equipment

• Surface components provided by Cameron

• Closely integrated with Drilling Group BHA

Software

• Developed on the Petrel platform

• Optimization of planning and wellsite execution

#OM2015

GeoSphere – Reservoir Mapping-While-Drilling

• Increase potential production and recovery rates

• Unlock access to new or marginal reserves

• Minimize water production

• Avoid drilling hazards

• Estimate reserves with greater accuracy

• Reduce number of pilot holes

• Eliminate geological sidetracks

#OM2015

Broadband Sequence – Fracturing Service

• Maximize wellbore coverage and reservoir contact through the engineered stimulation of zones with optimal completion efficiency

• Design smarter completions using an engineered composite pill and composite fluid with modelling and measurements data

• Integrated service results in additional stimulated clusters

#OM2015

Final Thoughts

• Supply reaction is imminent

• E&P activity will have to increase if demand remains on forecast

• Capital will be uncertain and expensive

• Supply chain cost reductions will help

• Deepwater and unconventional resource development requires both technical and business innovation