What kind of Companies do different areas need?

What kind of Companies do different areas need? Egil Meisingset Assistant Director General Ministry of Petroleum and Energy Olje- og energidepartemen...
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What kind of Companies do different areas need? Egil Meisingset Assistant Director General Ministry of Petroleum and Energy

Olje- og energidepartementet

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Diversity in challenges = diversity in composition of companies • It is important to have a population of companies that matches the challenges • Different kind of companies have focus on different phases/ aspect of the petroleum activity • In general many companies mean increased competition, which is beneficiary to the State

Olje- og energidepartementet

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Changes over the years • Previously there were a large difference in competence and resources between the largest companies and smaller companies • To day the differences in many aspects are smaller – Medium sized companies have access to state of the art technology – Many have a strong financial backing • More competent companies to choose from • Access to markets is no longer a major problem

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• What kind of companies are out there?

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Companies

NOC

Super Majors

Majors

Mid cap

Small Cap

Micro cap

Saudi Aramco INOC KPC PDV

Lukoil Yukos

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National Oil Companies

• Important companies with huge reserves and production

• Mainly focusing on home country

• Need to be exposed to international competition

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Super Majors • Sit on relatively large reserves and production • Are in most parts of the world and they screen investment opportunities against many different projects • Access to latest technology / Technology drivers • Expertise to do everything, but focus on high reward opportunities • Needs to substitute large production - materiality • Frequent acquisitions/ mergers • Suitable for frontier exploration! Olje- og energidepartementet

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Emerging Majors • Developing as a result of global liberalisation and privatisation • Huge companies in terms of reserves and production • Not been exposed to international competition for many years • Hungry for internationalisation? • Suitable for frontier exploration??

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Majors

• Much the same as for super majors but with smaller reserves and production • Suitable for frontier exploration!

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Mid Cap (Independents) • Diversified group of companies • Still financial strong companies • Use and to some extent contribute to development of new technology • Are not as spread out around the world as the super majors • Niche companies • Some has Deep Water/ HTHP experience • Suitable for frontier exploration? Olje- og energidepartementet

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Small cap • Limit their presence to a few core areas • High degree of niche companies • Very diversified group • Use supply industry in a different way (share risk) • To some extent supply companies that have turned into oil companies • Not normally frontier exploration as core focus Olje- og energidepartementet

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Materiality

120

12

8

'Super-Major' Major Paladin 50 mmbbl field

bbls millions

10

100

Paladin 50 mmbbl field

80 60 40

6

20

4

0

2 0

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Micro cap • Financial strength? • Often national based companies with activity in their own “backyard” • Participants not operators? • Focus on very limited geographical areas • Not likely suitable for frontier exploration Olje- og energidepartementet

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Company division by expertise Exploration companies Frontier

Production

Mature

Tail end producers

Onshore/offshore

Service companies turned oil companies

Energy Companies

“Financial investor” companies Olje- og energidepartementet

Others…

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Need for capital vs. need for expertise • Our experience form the NCS is that if there is a good project out there it is capital to realise it • Access to capital is not a constraint, but access to expertise is (and perhaps always will be) a constraint • Do not need pure financial investors as licensees

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The important questions

• What are our challenges? • What companies can contribute to solving these challenges? • How do we get them?

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Transfer of Operated Assets Leads to Increased Investment 250

Expected Future Capex at time of deal (£mm) Current Expectations on post-deal capex (£mm)

£ millions

200

150

100

50

Anglia 02

Ninian 02

THP 00

Johnston 01

Trees 00

Orwell 00

Scapa 99

Columba 00

Piper 99

Audrey 99

Hutton 99

Lyell 99

Saltire/Iona 99

Anglia 99

Murchison 99

Ninian 99

Claymore 99

Heather 97

Sedgwick 97

Buchan 96

Blenheim 97

Beatrice 96

Clyde/Leven 96

Ninian 96

Murchison 94

Lyell 94

Hutton 94

0

Additional Additional Capex Capex approx approx £1.6 £1.6 bn bn Olje- og energidepartementet

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The NCS

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Exploration activity on the NCS 60

50 Wildcat

Appraisal

40

30

20

10

Olje- og energidepartementet

04

02

00

98

96

94

92

90

88

86

84

82

80

78

76

74

72

70

68

66

0

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Production and replacement of reserves from exploration 1996 - 2005

million Sm3 oil equivalents

600

500

400

300

200

100

0 1996

1997

1998

1999

2000

2001

2002

Resource increasement from exploration

2003

2004

2005

Production

1996 – 2004 basert på data per 31.12.2004 2005: Foreløpige tall

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Norwegian continental shelf: Distribution of undiscovered resources

Š

Total undiscovered resources: Š

21.4 BBOE Š

Liquids: 9.4 BBOE (44 %)

Š

Gas:

67.0 TCF

North Sea

(56 %)

Barents Sea

Norwegian Sea

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The North Sea:

Many opportunities in mature areas

Norway Norway

Is the Norwegian part of the North Sea under-explored?

UK

Source-map: Konkraft

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A need for change • Licensing rounds • Licensing terms

• Population of companies • Area fee • Tax

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Why do we need new companies on the Shelf? • Large resource potential • Large parts of the NCS (both mature and frontier parts) are relatively under-explored • There is a varying degree of maturity on the NCS, constituting a large variation in the challenges and opportunities for the companies on the NCS • It is important to have a composition of players on the NCS that reflects the challenges on the Shelf • New oil and gas companies are necessary to expand the capacity and to increase the competition on the NCS • New companies are supplements and not substitutes to the existing players Olje- og energidepartementet

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What kind of companies do we want?

• The Ministry wants new companies to the Shelf that has the geological and technical expertise, backed up by financial muscles, to challenge the established players and contribute to value creation • We are especially interested in the independents, that through activity in other parts of the world, have a proven track record for value creation

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Prequalification •

Change the requirements for oil companies on the NCS – Allow for smaller, specialized companies



Prequalification of new entrants

Pre-qualified/ new entrants since 2000: Sumitomo Premier Petoro Paladin Talisman Mærsk Aker Energy* Ruhrgas Anadarko Dong Kerr McGee CNR Pelican* Pertra Lasmo* GdF Oranje Nassau Revus Lundin Endeavour Centrica DNO BG Norge Wintershall OER* Altinex Noble Energy Marubeni Idemitsu NORECO Petro-Canada Discover Mitsubishi Hunt Oil OMV

Under assessment: PA resources Nexen (op) Serica Ener Faroe-Petroelum Oilexco Edisen Rocksource

* Companies that no longer exists as individual companies

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Company:

Area

Evaluated as: Score

Competence

Exploration

Development

Production

Evaluation form

R&D Seismic interpretation Geophysical modelling

G&G

Structural plays Stratigraphic plays Geological modelling Uncertainty and risk analysis R&D Reservoir simulation Experience, oil production

Reservoir technology

Experience, gas production Production management IOR technology Uncertainty and risk analysis R&D Drilling and well technology

Technology

Development and production technology Project and cost management

Prequalification ensures that we get competent oil companies that can contribute to value creation

Pipelines and transportation systems jjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjjj Organisation of activities

Health, environment and safety

Management systems Over all philosophy regarding health, environment and safety Handling of major accidents Supervision of the activities

Other

Assessment of environmental consequences Other relevant experience to the Norwegian continental shelf: Experience, tail production Development of marginal/small fields Sub sea developments HPHT – developments Deep water technology Comments:

General company rating Scale for assessment: Competence rating 0-6 General company rating

6: highest; 0: lowest A: very good; B: good; C: satisfactory; D: not qualified

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Awarded Acreage – type of companies

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What are we doing to attract these companies? • ”Inform new actors about the opportunities on the Shelf, through actively approaching companies that through earlier achievements have proven ability and capacity to contribute to value creation” –

St. meld. nr. 38 (2003 – 2004)

• Companies invited to the MPE`s ”Why Norway?” arrangement at ONS 26th of August 2004: – Apache - Samson International – Newfield Exploration - Bow Vally Petroleum – Tullow Oil - Oranje Nassau – Centrica - Endeavour – Kerr-McGee - EnCana – Altinex - PetroCanada – Wintershall - Nexen – Noble Energy Olje- og energidepartementet

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Group exercise

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Group exercise • Each group should contain only one person from each country • Each country within the group should go through the most active important companies in their frontier areas – Identify the companies acording to type (focus area) – Identify the companies acording to size – Share experiences about the companies

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Group exercise Companies (name)

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Focus area

Size

Comments

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