deepwater the future of the oil and gas industry
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Deepwater The Future of the Oil and Gas Industry. Claiborne P. Deming President & CEO September 23, 2002. Today’s Agenda…. The Demand Story The Supply Challenge The Deepwater’s Role Murphy Oil and the Deepwater. The Stage is Set…. Year 2000. 400. United States . - PowerPoint PPT PresentationTRANSCRIPT
Deepwater The Future of the Oil and
Gas Industry
Deepwater The Future of the Oil and
Gas IndustryClaiborne P. Deming
President & CEOSeptember 23, 2002
Claiborne P. DemingPresident & CEO
September 23, 2002
Today’s Agenda…
The Demand Story
The Supply Challenge
The Deepwater’s Role
Murphy Oil and the Deepwater
The Stage is Set….
400400
200200
00
$100$100 $1,000$1,000 $10,000$10,000 $100,000$100,000
United States
Latin America
Western Europe/Japan
GDP per Capita
Energy Consumption
per Capita(Million Btu’s)
Australia
New Zealand
Korea
Venezuela
Thailand
India
China
Source: IEA/CIA
Year 2000
Crude Oil Demand
20002000 20052005 2010201060 MBD60 MBD
100 MBD100 MBD
70 MBD70 MBD
80 MBD80 MBD
90 MBD90 MBD
19901990 19951995
Crude Oil Demand will Grow Substantially
+5.4
Asia
+2.3
NorthAmerica
+0.9Europe
+0.6Africa
+1.3M.East
Regional Demand Increases(Million BPD 2000 to 2010)
Demand is likely unstoppable over the next 20 years
+1.4Russia
+1.5South
America
Source: PEL/Internal Murphy Analysis
Existing Production
after Natural Decline
World Crude Capacity78.8 MBD
CurrentCapacity
Requiring Tremendous New Production
2010 World Crude Capacity95.4 MBD
Middle East 16.3
Russia/Caspian 6.6
S. America/Other 5.3
Africa 2.3
N. America 5.5
Europe 2.6
Other OPEC 7.5
Required NewCapacity
New Capacity Sources
Source: PEL/Internal Murphy Analysis
49.3
However, Access to Major Reserves is Limited
2000 Total – 1,016 Billion Barrels (Non-OPEC – 214 Billion Barrels)
N. America
S. AmericaAfrica
Russia/FSU
Asia
Europe54
90
75
21
Worldwide Reserves in Billion Barrels
676
Middle East
57
44
Source: Wood MacKenzie
Middle East – Difficult for Outsiders
Projected Capacity Growth of Middle East Controlled by NOC’s
Marked by War’s, Embargoes, Government Instability
10% Return Contracts ( when offered)
0
10
20
30
40
2000 2005E 2010E
Annual Production(MBPD)
The Middle East will remain world’s largest oil producer and exporter, however it is closed to majority of our industry
Source: PEL
Russia/Caspian Region is Growing, but…
Russia/Caspian Production Forecast
Investment returns to date are negative
Legal/Contractual System is tenuous
Transport costs can exceed $5.00/Bbl
Requires immense capital and regional clout – Only the SuperMajors can operate successfully
0
2
4
6
8
10
12
1990 1995 2000 2005E 2010E
Annual Production(MBPD)
Source: PEL
North America is MatureNorth American Production Forecast
(Does not include Deepwater)
0
3
6
9
12
15
1990 1995 2000 2005E 2010E
US Production Canadian Production Mexico
Annual Production(MBPD)
Most heavily drilled region in the world
Massive capital required just to maintain current production
Remaining high potential areas are off-limits
North America will not supply the world’s growing demand
Data Source: PEL
Unconventional Sources are not the Answer
$0
$2
$4
$6
$8
$10
$12
$14
Full Cycle Cost $/BOE
Reserves are immense (Est. at 3 trillion Barrels)
Full-Cycle costs are high
Processing is energy intensive/produces large quantities of CO2
Full-Cycle Cost Comparison
Source: CERA
The Deepwater Offers a Credible Alternative
Reserves and prospectivity are immense
Full cycle returns are now averaging 20%
Technology is driving development costs
downward
Safety/Environmental record is
exemplary
Deepwater Reserves are Immense2000 Discovered Reserves in Billion Barrels
US GOM
15.0
Brazil
14.0
Nigeria
5.016.0
OthersAngola
10.0
60BillionBarrels
TotalSource: Wood Mackenzie
Deepwater Production is Growing
0
1
2
3
4
5
6
7
8
1998 2000 2002 2004 2006 2008 2010
Annual Production
(MBPD)
GOM Brazil Angola Nigeria Others
Production is set to grow by 4 Million barrels per day by 2008
Source: Wood Mackenzie
Deepwater Technology Continues to Improve
FPSO’s allow production in depths up to 9,000 feet
Sub-sea tiebacks allow profitable development of smaller reservoirs
Deep and extended reach drilling exploit entire reservoir
And is Decreasing Costs
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00$/BOE
1990 1995 2000 2005E 2010E0
200
400
600
800
1,000
1,200
Water Depth (ft)
1990 1995 2000 2005E 2010E
Capex/boe Average Field Water Depth
Development costs have decreased by almost 50% since 1990 - even as we go deeper and deeper
Full-Cycle returns now average 20%
Source: Wood Mackenzie
Safety Record is Improving
3.393.02
3.38
2.271.97
0.0
1.0
2.0
3.0
4.0
5.0
6.0
1996 1997 1998 1999 2000
Recordable Injury/IllnessIncident Rate
Even though we are producing and drilling more, the actual number of accidents is declining and the incident rate is decreasing rapidly
Source: MMS
Oil Spills Have Declined Dramatically
1.46 1.54
1.00
0.440.27
0.0
1.0
2.0
3.0
1996 1997 1998 1999 2000
Oil Spill Incident RateIncident Rate
Even with more wells being drilled and more production coming online, the actual spill rate and incident rate are both declining
Source: MMS
Future Deepwater Growth Potential
Maturing
• Congo
• Brazil
Growing
• Nigeria
• Gulf of Mexico
• Equatorial Guinea
• Angola
Emerging
• Egypt
• Malaysia
• Gabon
• GOM Ultra-deep
• Black Sea/Caspian
Remaining Exploration Potential HighLow
Exploration/Growth Potential of Major Deepwater Basins
Current and Projected Deepwater Growth
Petrobras 1,100,000 12%
Shell 780,000 5%
BP 550,000 20%
ExxonMobil 220,000 24%
ChevronTexaco 150,000 22%
TotalFinaElf 100,000 35%
ConocoPhillips 25,000 10%
Murphy <10,000 35%
Deepwater Production(Bbl/d)
Deepwater ProductionCAGR 2002-2007
Source: Deutsche Bank
The Keys to Success in the Deepwater
Build the right skill-set
Encourage and reward exploration
Think globally and move quickly
Exploit niches created NOC’s / SuperMajors
The Deepwater and Murphy – A Perfect Fit
Block K
Block H
Gulf of Mexico Deepwater
30% success rate
Medusa, Frontrunner are the cornerstones of a growing presence
Production will reach 75,000 bbl/d by 2005
Deepwater Malaysia
500 MMbbl potential
Low cost- $6.50/bbl all in
Murphy has 7 Million acres under lease
MEDUSA
FRONT RUNNER
HABANERO
0
50
100
150
200
Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
MBOE / D
Deepwater GOM Production
The Deepwater and Murphy – A Perfect Fit
+ Deepwater Malaysia Production
Conclusion
Demand growth is likely unstoppable through 2020
Most of the remaining reserves are either high-cost or located in unfriendly regions
The deepwater is open and offers tremendous growth and prospectivity
Murphy Oil has the skill-set and vision to become a leader in the Deepwater