www.sdi.co.uk

Taking the

Temperature of

Scottish oil & gas

industry Gerry Love

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Scotland has long been recognised as a

major oil and gas hub – a gateway to the

North Sea and the Atlantic Ocean.

The depth, breadth and strength of skills

and experience that the industry in Scotland

enjoys are renowned throughout the world.

Scotland’s role in the global oil and gas

industry has long been characterised by

constant evolution and development, with

Aberdeen at its forefront.

Introduction

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For the past 50 years, the oil and gas industry has played a critical role in Scotland & the

UK’s economic success. UKCS, within the EU, is estimated to have the largest oil

reserves in the EU and the second largest volume of gas reserves after the Netherlands.

UKCS – Current State of Play

• More than 42.3 billion barrels of oil equivalent (boe) have been produced from the UKCS and

10 to 20 billion boe are estimated to remain

• UK oil & gas sector supports over 300,000 across the UK

• Lift costs have halved over the last 2 years from $30 per barrel to $14

• July 17 – 30th Licensing round, including relinquished discoveries

• Decom is the only area with increasing expenditure, £1.2 billion

• Drilling activity at low level, 14 exploration wells and 8 appraisal wells drilled in ’16

• North Sea basin needs fresh capital investment – 3 new field approvals since ‘16

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• The past 5 years have seen exit of majors from UKCS and entrance of independents

• New entrants are often private equity backed and lack infrastructure and expertise to

manage their assets

• New entrants taking ownership of mature assets – maximising economic recovery

• Recently there has been a lot of activity on mergers & acquisitions, both corporate &

supply chain

• Current thinking is on future collaboration

• Potential to unlock incremental value through collaborative effort.

UKCS – Current State of Play

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Scotland’s oil and gas innovators set the pace when it came to working dangerous

and inhospitable conditions.

Innovation

Scotland’s track record in R&D is

recognised as one of the best in the world

and the infrastructure exists to take that

work into a new era.

International operators, have located

specialist teams in Aberdeen to be part of

the world-class R&D community.

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Technology – Digital Energy

• Development of digital energy / BIG data and it’s applications

• Plans for National Data Repository

• Historical asset integrity data – allows proactive maintenance, not reactive

• Marine logistics - offshore logistics optimisation

• OGTC Solution Centre

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1. Improve the viability of UKCS Operations.

2. Improve the viability of Scottish O&G Companies

3. Increased sales & exports of Scottish developed

Digital/ Data Oil & Gas products & services

Strategic

Objectives

5 Major

Challenges

Current

Production

Efficiency

is <60%

Current

UKCS

Exploration

Activity is

low

Too many

vendors offering

unproven

golden bullet

solutions

The cost of

implementing

DS solutions

perceived

to be high

Current price

is $70 and this

could be a

reality for

a while

4 Strategic

Ambitions

Improve

reliability &

efficiencies

through

DS

Increase &

Sustain

Exploration

through

DS

Support operators

to build the

Investment case,

prove & de-risk

Investment in DS

Support DS

companies to

develop

Competitive

aligned

Risk/reward

proposals

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Can Data Science Help Maximise Economic Recovery?

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1. Improve the viability of UKCS Operations.

2. Improve the viability of Scottish O&G Companies

3. Increased sales & exports of Scottish developed

Digital/ Data Oil & Gas products & services

Strategic

Objectives

5 Major

Challenges

Current

Production

Efficiency

is <60%

Current

UKCS

Exploration

Activity is

low

Too many

vendors offering

unproven

golden bullet

solutions

The cost of

implementing

DS solutions

perceived

to be high

Current price

is $70 and this

could be a

reality for

a while

4 Strategic

Ambitions

Improve

reliability &

efficiencies

through

DS

Increase &

Sustain

Exploration

through

DS

Support operators

to build the

Investment case,

prove & de-risk

Investment in DS

Support DS

companies to

develop

Competitive

aligned

Risk/reward

proposals

Next steps:

Develop the evidence base ,

economic model and potential

actions / investments

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Can Data Science Help Maximise Economic Recovery?

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1. Improve the viability of UKCS Operations.

2. Improve the viability of Scottish O&G Companies

3. Increased sales & exports of Scottish developed

Digital/ Data Oil & Gas products & services

Strategic

Objectives

5 Major

Challenges

Current

Production

Efficiency

is <60%

Current

UKCS

Exploration

Activity is

low

Too many

vendors offering

unproven

golden bullet

solutions

The cost of

implementing

DS solutions

perceived

to be high

Current price

is $70 and this

could be a

reality for

a while

4 Strategic

Ambitions

Improve

reliability &

efficiencies

through

DS

Increase &

Sustain

Exploration

through

DS

Support operators

to build the

Investment case,

prove & de-risk

Investment in DS

Support DS

companies to

develop

Competitive

aligned

Risk/reward

proposals

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Can Data Science Help Maximise Economic Recovery?

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The Oil and Gas Technology Centre (OGTC) will become the global “go to” centre for

solving offshore mature basin, subsea and decommissioning challenges. Driven by

industry, the OGTC will draw upon existing expertise residing within industry and

academia as well as developing new Centres of Excellence. Focusing on:

The Oil and Gas Technology Centre

Development & Production

Well Drilling, Completion and Wellwork

Subsea

FPSO

Land

Data Collection and Analysis

Asset Integrity & Production Efficiency

Produced Water Handling & Disposal

Cross-Cutting Technologies

Sensor Technologies

Asset Integrity

Material Science

Flow Assurance

Robotics

Environmental Science

Manufacturing Technology

Digital Technology

Exploration

Seismic Data and Geoscience

Non-seismic Technologies

Well Drilling

Data Collection and Analysis

Rock and Fluid Characterisation

Decommissioning

Subsea

Wells

Removal of Equipment / Topsides / Jackets

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Oil and gas decommissioning is a relatively new

market with a new set of challenges and

priorities.

There are strong synergies with oil and gas

exploration, development and production, but

also key differences.

Scottish Enterprise, Decom North Sea & HIE published

Decommissioning Action Plan – Dec 16

Working with UK Oil & Gas Authority, Decom North Sea &

OGTC to realise the potential for Scottish based companies

Scottish Govt announced £5m Decommissioning Challenge

Fund to support infrastructure upgrades and innovative

salvage & transport methods for Scottish ports

Decommissioning

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Decommissioning

•Decom – The prize on the horizon ???• £17.6bn to be spent to 2025

• 47% on P&A; only 1.2% on onshore recycling and disposal

• 900,000 tonnes of material to be brought ashore by 2025

• In Central and Northern North Sea, 28 platforms forecast for

removal by 2025 -82% of topsides and 90% of substructures yet

to be contracted

• GVA for Scotland could be £8.3-£11.3 billion based on capturing

between:

• 70-90% in CNS & NNS and 40-60% in SNS - Well P&A

• 70-90% in CNS & NNS and 40-60% in SNS - Operator

Project Management

• 35-55% in CNS & NNS and 10-20% in SNS - Removal

/associated activity

• 302 O&G installations eventually to be decommissioned in the

UKCS alone

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The Scottish oil and gas industry boasts a subsea engineering cluster that is

among the strongest in the world. With almost half of the world’s subsea

installations in the North Sea, Scotland is a global leader in the sector.

Subsea

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The Scottish oil and gas industry boasts a subsea engineering cluster that is

among the strongest in the world. With almost half of the world’s subsea

installations in the North Sea, Scotland is a global leader in the sector.

Subsea

Company Base

• 200+ companies employing 20,000 people with a strong focus on subsea markets.

• Annual turnover of £7 billion, more than half of which is exported (equates to one third of the global

market for subsea oil & gas).

• Expected to grow in other emerging markets such as renewable energy, subsea mining and aquaculture

Experience of Innovation

• Scotland is a hub of cutting-edge research and development work.

• Our track record in R&D is recognised as one of the best in the world and the infrastructure exists, or is

under development, to take that work into a new era.

World Leading Expertise

• Expertise residing within the Scottish workforce is exported around the world.

• All the major global oil & gas engineering companies have significant operations in Scotland, including

FMC, GE, OneSubsea, Aker, Subsea 7, Technip and Bibby Offshore.

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The Scottish supply chain’s ability to diversify is about much more than new

products, services and markets. It’s also about new industry opportunities,

including offshore wind and nuclear decommissioning.

Diversifying

Offshore Wind

A growing market concentrated

in the UK and Europe.

3 Scottish offshore wind farms

with a combined value of £3bn

will began construction in 2017.

Contributing to the £18bn of UK

offshore wind investment

forecast between 2016 and

2020.

Nuclear Decommissioning

The UK spend between £2bn and £3bn each

year on nuclear decommissioning activities.

It is forecast that the total cost of fully

decommissioning the UK’s existing nuclear

sites could reach £117bn over a 100 year

period.

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The quality of Scotland’s workforce is internationally recognised. The people of

Scotland make up one of the best trained, most reliable and cost-competitive

labour forces in the world, with generations of experience in onshore and offshore

services.

Skills

Scotland’s oil and gas industry has spawned

an education and training network that

features a diverse but interlinked range of

vocational training facilities, education

partnerships and specialist business services

to the industry.

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Scotland has an oil and gas supply chain of around 2,000 companies. 2016/17 –

Estimated Revenue was £19.1bn. £10.4bn was generated internationally.

Supplychain in Scotland

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How is the £10.4bn International Sales made up?

Country

1

2

3

4

5

6

7

8

9

10

2016/17

SDI / SE International

Oil & Gas Survey.

Total sales £19.1bn of which

£10.4bn was

international.

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HollandAzerbaijan

Germany

Angola

China

Qatar

Singapore

Saudi

Arabia

India

Canada

Equatorial

Guinea

Iraq

Australia

GhanaMalaysia

Kurdistan

Denmark

Norway

KazakhstanRussia

UAE

Nigeria

USA

Brazil

How is the £10.4bn International Sales made up?

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How is the £10.4bn International Sales made up?

Country Sales

1

2

3

4

5

6

7

8

9

10 Saudi Arabia £0.29bn

Germany / Netherlands

India

China / Qatar

Angola / Malaysia

Nigeria

UAE

Canada / Kazakhstan

Norway

USA

£0.30bn

£0.31bn

£0.32bn

£0.33bn

£0.39bn

£0.45bn

£0.43bn

£0.55bn

£1.8bn

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Company Target Growth Opportunity - 2018

Region Percentage

1

2

3

3

5

6

7

8

9

10 Central America 3%

South America

Australasia

Caspian

North America

Africa

Asia Pacific

Non –EU

EU

Middle East

7%

11%

16%

24%

28%

31%

31%

53%

57%

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Aberdeen has long been recognized as a major oil and gas hub – a gateway to the North

Sea and the Atlantic Ocean. The oil capital of Europe is ranked as one of the highest

performing cities in the UK.

Aberdeen

Despite the adverse effect of lower oil

prices, Aberdeen still ranks in the top ten

performing cities in the UK, according to

Demos-PwC.

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Aberdeen – Infrastructure Growth

Prior to oil crash drop, Aberdeen was planning for the future

A number of major infrastructure projects are in the pipeline or already being developed:

• Aberdeen Western Peripheral Route

• Harbour Expansion

• New Aberdeen Exhibition & Conference Centre

• New Industrial Parks – Westhill ( Subsea Centre ) & Prime 4 ( Statoil, Apache )

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Aberdeen Harbour

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Road

Significantly improve travel in and

around Aberdeen

Easier routes to industrial areas and

Peterhead supply base.

Aberdeen Western Peripheral Road

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Aberdeen – New AECC

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Thank You