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The Dutch oilfield services analysis 2014

3The Dutch oilfield service analysis 2014 |2 | The Dutch oilfield service analysis 2014

Contents Introduction 4

Summary 6

Dutch oilfield services industry: the 2013 vs. 2012 comparison 9

The Rotterdam region is a strong OFS hub in the Netherlands 10

Reservoir/seismic: weakening demand in a niche market 11

Exploration and production drilling: a mature market with dominant multinational companies and local niche players 12

Engineering, fabrication and installation: a strong heritage 14

Operations: a broad segment with stable growth, but challenges expected 15

Activity going forward 16

Challenges and opportunities facing the Dutch OFS industry 18

Methodology 20

Abbreviations 21

Appendix 22 • Strong oil and gas heritage 23

• Stable and mature E&P sector 25

About EY 28

Contacts 29

Thought leadership 30


IntroductionEY conducts regular analysis of the various North Sea oilfield services segments. Recently we have published reports on the OFS industry in Norway and the UK. We have now expanded our research to other areas including the Netherlands.

We have analyzed annual financial information published by the companies in our sample from 2009 to 2013. As such, the analysis does not reflect any recent developments in the industry, such as the dramatic collapse in oil prices seen over 2014. Our sample of companies includes those we deemed to be relevant, with more to be added in future reports, but the analysis by nature offers an understated view of the entire Dutch OFS industry.

However, to complement this research, we also take a moment to look ahead and discuss opportunities and challenges facing the industry now and in the future. In the appendix, we also included a snapshot of the Dutch oil and gas industry for a further read.

We hope that you find the report useful and we welcome any feedback you may have. MethodologyA company is included as a Dutch OFS company if:• At least 50% of its activities is deemed to be related to the oil and gas sector.• It is a legal entity registered in the Netherlands.

Welcome to EY’s first annual review of the Dutch oilfield services (OFS) industry. In this report, we quantify the size of this diverse industry and analyze the dynamics across the industry.

Industry segmentsWe have distinguished four segments within the Dutch OFS industry for the purposes of our analysis:• Reservoir/seismic• Exploration and production drilling• Engineering, fabrication and installation• Operations (production, maintenance and offshore logistics)

The stand-alone financial statements of each legal entity have been analyzed when available to capture financial and nonfinancial information. Large corporations have therefore not been analyzed as a group (unless stand-alone financial statements were unavailable) but rather as the sum of their stand-alone legal entities. We have taken this approach to show a more detailed view, when possible, with regard to location and activities across the industry. Intercompany transactions are therefore not eliminated when aggregating financial figures. Each company has been linked to one geographic region only, on the basis of the company’s business address.

Companies have also been linked to a single segment of the OFS industry, based on each company’s assumed main activity in the sector. Companies will most likely have activities in several geographic regions and industry segments; however, this is not accounted for in the analysis. In addition, not all financial and nonfinancial information will relate to the Dutch activities; for

instance, each company’s total headcount disclosed in the annual reports is usually a worldwide figure of FTEs.

Please note that the completeness of our data depends on the financial information disclosed in companies’ annual accounts submitted to the Dutch Chamber of Commerce. In this respect, we have not been able to retrieve financial information in full for all of the companies in our sample because:• Dutch-registered legal entities are not obligated by law to publish full profit and loss statements and balance sheets below certain thresholds.• Dutch-registered legal entities part of a group do not in all cases publish (stand-alone) financial information. Most often, the parent companies disclose this information on a consolidated level.

This limits the financial analysis of the individual companies and our ability to derive segment-specific trends. However, we did take guidance from listed or large companies that publish comprehensive annual reports, including management summaries. Because of the limitations described, numbers used for our analysis are likely to be understated rather than overstated.


Summary The Dutch OFS industry is strong and makes a significant contribution to the nation’s economy. It covers all supply and service activities for the oil and gas industry — including seismic research exploration and production drilling, engineering, fabrication, installation, and support with day-to-day operations — with a particular emphasis on the upstream segment. Large companies in the industry, many of whom are global players, generally provide a wide range of services across the value chain. Small companies tend to be more specialized and focus on a narrower part of the value chain or specific technologies. Our sample includes roughly 280 companies registered in the Netherlands, with financial information being available from roughly a third of them. Our analysis shows that 2013 has been a productive year, with collective revenues of €17.2b, an increase of 6% from 2012. This increase is in line, albeit somewhat lower, with what we see happening in neighboring countries as Norway and the UK. We refer to our separate studies on Norway and UK for further details.

The Dutch OFS industry ranks among the strongest in the world, with companies involved in onshore and offshore projects all across the globe. This leading position stems from deep heritage, and profound knowledge and expertise carefully built over the years. There is a strong setup in the Netherlands, with good education facilities and reliable infrastructure, such as the Port of Rotterdam and the Port of Den Helder in the north. The Netherlands is renowned for its high standards in innovation and technology, and the safety standards in the North Sea are among the highest in the world.

The North Sea area is however a mature market. However, the offshore, and to a lesser extent onshore, reserves and resources are still sizeable, but declining. Total oil and gas production remained relatively stable in 2013 compared with previous years, but the long-term production outlook is decreasing. Overall, activity on the Dutch Continental Shelf (DCS) dropped during 2013. Seismic activity was limited to just two surveys, and fewer exploration and appraisals and production drillings were recorded, representing the lowest activity on the DCS over the last five years. In line with the characteristics of a mature area, some of the oil majors continue to sell (part of)

their upstream assets. Shell, for instance, has announced plans to divest US$15b in assets over 2014 and 2015, and both Shell and ExxonMobil sold their stakes in the Sean field on the UK Continental Shelf to Oranje-Nassau Energie. Chevron also divested interest in blocks on the DCS over 2014.

Nevertheless, the North Sea area still offers good business opportunities for Dutch companies.

The Netherlands continues to retain a strong position in the oil and gas industry. Due to the mature nature of the North Sea, most of these companies nowadays generate most of their revenues outside of the Netherlands. Our analysis indicates that the country has a more dominant position in ancillary activities with the engineering, fabrication and installation (EFI) and operations segments, reflecting the mature state of the DCS. The outstanding knowledge and expertise, as well as high standards in innovation and technology, has kept the nation’s leading position secure, illustrated by the strength of companies such as Fugro, Boskalis, Heerema, Allseas and Huisman.

OFS is a strong industry with great significance to the Dutch economy, providing employment opportunities and contributing to the infrastructure across the Netherlands.

Besides these renowned players, the Dutch OFS industry also harbors hundreds of smaller players, typically active in a niche of the oil and gas industry. These companies are the cornerstone to the Dutch OFS industry, contributing to the strong reputation and innovative character of the industry worldwide. Altogether, these companies achieved revenues of €17.2b and employed more than 50,000 people in 2013, underpinning the OFS industry’s great significance to the Dutch economy, providing employment opportunities and contributing to infrastructure across the whole country. We note that the Dutch oil and gas cluster is in reality effectively far larger than the companies reviewed by us, as many companies such as shipyards (e.g. Damen Shipyards) or shipping companies (such as Vroon or Kahn) have diverted their activities to the oil and gas industry.

Although this analysis only covers the period up to 2013, one cannot disregard recent oil and gas developments. Amid the dramatic drop in oil prices, capital expenditures budgets have been cut worldwide, with decreases of 20% to 25% forecast in global exploration and production (E&P) from 2014 to 2015. This will present a challenge to the Dutch OFS industry, calling for the innovative character of the individual companies. Looking forward, the fundamentals of the industry offer reasons to be optimistic. The International Energy Agency, in its World Energy Outlook 2014, anticipates that energy demand will increase 37% by 2040 — a yearly average of more than 1% — mostly driven by China and non-OECD countries in the near and long term. Supply, on the other hand, is expected to increase only 16% over that time — or an average of 0.6% per year — specifically from US, Canadian and Brazilian exploits in the near term, with the Middle East mostly being looked to for continued supply growth after the mid-2020s. Some US$900b per year will need to be invested in upstream oil and gas development to balance out demand and supply by the 2030s. From this forecast, one could presume that oil prices will eventually correct themselves, though the medium

term is still too foggy to gauge the pace of increases. There seems to be consensus that the relatively low price levels will continue for at least two to three years.

Based on guidance from listed E&P companies regarding capital spending, we expect revenues across the entire OFS industry to fall in 2015. Firms with robust order books and activity in strong geographical areas, such as the Gulf of Mexico, may be sheltered from this decline. Conversely, reduced spend by major oil companies and their focus on controlling costs can hit highly leveraged or smaller OFS companies harder, especially those that lack a differentiated product or service offering or international footprint. On an overall basis, one can expect a pressure on prices for the coming years.

With the outlook for 2016 still uncertain, we expect companies to focus more on gaining efficiencies, driving down operating costs and achieving economies of scale, potentially through collaboration and consolidation. We also expect more restructuring activities. Given its strong heritage, leading knowledge position, and innovative and flexible character, we expect that the Dutch OFS industry will continue to play an important role in the oil and gas industry going forward. In order to retain and leverage this position, it is recommendable for the Dutch OFS industry to join forces and to act, where needed, as a cluster (including those companies which are presently not officially considered oil and gas companies).

The Dutch OFS industry will continue to play an important role in oil and gas going forward.

Operations: 35%

Reservoir/seismic: 4%

Exploration and production drilling: 7%

Engineering, fabrication and installation: 54%


Dutch oilfield services industry: the 2013 vs. 2012 comparison

Revenues up from 2012

Industry revenues increased by 6% compared with 2012, reaching a total of €17.2b. The reservoir/seismic, and exploration and production drilling segments mainly saw the growth while companies in the engineering, fabrication and installation (EFI), and operations segments experienced a mixed performance. The rise in revenues in the early-stage upstream sub-segments came mainly through the increase in exploration activity seen worldwide. It is recognized that the easy-to-reach oil caches have a limited supply life, so new reserves need to be found and set up. New exploits will focus on harder-to-reach areas such as deepwater fields.

2,639 new employees in 2013

The number of people directly employed by the OFS sector increased by 5% in 2013, compared with 8% growth in 2012. In 2013, the industry employed 51,422 people.

Distribution of companies

In terms of the number of companies, the EFI and operations segments dominate, reflecting the mature state of the DCS. The expertise and skills built over the last decades have allowed Dutch entities to become world leaders, offering their services and products on a global scale.

Large companies (selection)

Fugro Reservoir/seismicBoskalis OperationsHeerema EFIAllseas EFIGustoMSC EFISBM Offshore EFIHuisman Equipment EFI


The Rotterdam region is a strong OFS hub in the Netherlands

Our sample consists of legal entities situated across the Netherlands. The figure below displays the spread of OFS companies per province. Dutch OFS industry provides employment opportunities and contributes to infrastructure across the whole country, with three main clusters around the western part of the Netherlands: • The Rotterdam cluster• The Amsterdam/IJmuiden cluster• The Den Helder cluster

Overview of OFS per province

Within North Holland, a cluster of firms is situated around the Port of Den Helder. This port serves as an important supply base for the offshore oil and gas sector given its close proximity to the offshore fields on the DCS. Many fields are serviced from this supply base because of the port’s infrastructure and because it offers the shortest sailing times to many offshore platforms. Key companies located in the Den Helder region are Peterson and Vroon Offshore Services. Also, a strong cluster of OFS companies is situated around the Amsterdam/IJmuiden area.

The largest and most important cluster is situated around Rotterdam, harboring several of the largest OFS companies active in the Netherlands, such as SBM Offshore and Boskalis. The Port of Rotterdam is just one reason for this clustering: the Rotterdam region also encompasses a wide array of storage, refining and transport assets for the oil and gas sector. The refineries of integrated oil and gas companies like BP, ExxonMobil and Shell are located in the Port of Rotterdam, which are surrounded by the oil storage infrastructure of Vopak and many other players.

A significant number of companies are located elsewhere in the country, illustrating the importance of the OFS industry to the Netherlands as a whole.

Source: EY

Reservoir/seismic: weakening demand in a niche market

Reservoir/seismic OperationsEngineering, fabrication and installation

Exploration and production drilling

Employees

Key financials

About the segmentThe reservoir/seismic segment includes Dutch legal entities that operate seismic vessels and equipment, as well as companies whose services are centered around analyzing and interpreting geophysical and petrophysical data.

The DCS can be best characterized as a mature area. That said, new fields are still being discovered, although the long-term potential in the North Sea area lies at increasing depths or in exploring new plays, such as shale gas and tight gas. Seismic activity dropped significantly: 925km² of offshore surface was mapped in 2013, compared with 7,060km² and 8,800km² in 2012 and 2011, respectively. In 2013, only two surveys were performed on the DCS.

The reservoir/seismic segment consists only a few companies, with Fugro being the dominant player and others including Amsterdam Petroleum Geoscience and SGS Horizon. The relatively small domestic market, as well as the need for a global footprint and the presence of a dominant player like Fugro, explains the limited number of smaller players in this segment.

Segment highlights• Easy-to-reach reserves are believed to be depleting, with new

reserves needed. These reserves will probably lie in more challenging areas like deepwater, requiring new seismic acquisition to find new spots to drill.

• With new seismic acquisition vessels in the pipeline, prices for seismic acquisition are expected to drop.

• During 2014, oil companies cut back on their exploration budgets due to the dramatic drop in oil prices, which also affected the seismic market.


Exploration and production drilling: a mature market with dominant multinational companies and local niche players

About the segmentExploration and production drilling is a multifaceted segment of the OFS industry, including Dutch companies that own and/or operate drilling rigs as well as the more traditional oilfield service companies that deliver products and services to these rigs. Internationally, the more traditional oilfield service segment is being dominated by multinationals such as Schlumberger, Halliburton and Baker Hughes (with the latter recently being acquired by Halliburton, pending regulatory approvals).

Typically these companies provide a wide variety of services, such as cementing, stimulation, intervention, completion, field and reservoir modeling, drilling, evaluation, coiled tubing services, production optimization, subsea solutions, well testing, well monitoring and pipeline integrity. From a Dutch perspective, the E&P drilling segment is a mature market. Notwithstanding the available reserves today, the potential for exploration and production drilling on the DCS going forward is getting more limited.

Current drilling activities already show a decline in demand, with just a few Dutch-based companies involved. Noble Drilling and Paragon Offshore, which spun off from Noble Corporation in 2014, have a strong position in the DCS. Considering the low-reserves fields and the dramatic drop in oil prices, we do not see much room for other dominant players on the DCS.

This explains the limited number of companies in our subsample. In our subsample, we also see the usual suspects — the large OFS companies, like Schlumberger, Halliburton and Baker Hughes, together with Weatherford — supplying all the required resources with respect to E&P drilling.

We also come across more niche companies providing services toward the likes of Noble Drilling and Paragon Offshore, such as Bohr Instrument Services (offering data systems and drilling instrumentation) or Cebo Holland (supplying the minerals and additives for oil and gas drilling). With the need for further optimization — as the Dutch onshore and offshore reserves and resources are declining — and the strong Dutch heritage, we might expect more innovative companies to emerge in this segment in the longer term.

Segment highlights• Oil companies are looking at exploring new wells more in

deepwater and new frontiers. These trends have spurred sales for Dutch entities that supply equipment and services on a global basis.

• In Europe, where there are more mature wells/fields, exploration and appraisal activity has slowed.

• Going forward, E&P spend is expected to be cut due to the decline in oil prices in 2014 and continued oil price uncertainty.



Employees

Key financials


Engineering, fabrication and installation: a strong heritage



About the segmentThis segment comprises Dutch legal entities involved in engineering, fabricating and installing production platform and supporting units, such as offshore support vessels, floating production, storage and offloading units (FPSOs), and accommodation platforms.

Traditionally, Dutch contractors have a good reputation and strong track record in EFI thanks to their high standards of quality, innovation and safety. The segment is a global market and many Dutch contractors have been involved in many oil and gas and offshore wind energy projects all over the world. Dutch engineering firms are recognized worldwide, designing numerous mobile offshore units, such as semi-submersibles, drillship or jack-up drilling rigs, and FPSOs and offshore support vessels.

Also, Dutch contractors are well-known far beyond the North Sea. For example, Boskalis was involved in a series of rock-dumping projects in the North Sea using rock-dumping fallpipe vessels engineered by Vuyk Engineering.

Furthermore, Allseas deployed several pipe-laying vessels for the Gorgon Jansz LNG project in Australia. Seaway Heavy Lifting, Allseas and Heerema Marine Contractors, among others, were involved in installing jackets and topsides on oil production platform. The vessels deployed on such projects are typically built by Dutch companies. Segment highlights

• Total revenues reported in 2013 (€8.4b) increased by 2% compared with 2012. Average growth in this segment is at 7%.

• The number of employees of the companies operating in this segment has been increasing year-on-year for the last three years. In 2013, the number of people working at EFI companies increased by 5%. This adds to the average growth factor of 10%. The industry now employs 16,823 people.

• Most revenues are reported in this segment by large international companies that generate sales on an international basis.

Employees

Key financials

Operations: a broad segment with stable growth, but challenges expected



About the segmentThe operations segment comprises entities that support oil companies in the production phase; with production units, including support vessels, modification and maintenance of the production units; and with logistical services, such as helicopter transport and onshore bases.

Segment highlights• Total segment revenues climbed 10% in 2013, the fourth

consecutive year of increases. The average growth rate for the segment over the last five years has been 11%.

• Employee numbers have been rising for the last three years. In 2013, the number increased 7%. This is roughly on par with the five-year average growth rate of 9%.

• Rig operators have previously announced cuts in maintenance, so we expect a slowdown in the operations segment.

Employees

Key financials

16 | The Dutch oilfield service analysis 2014 17The Dutch oilfield service analysis 2014 |

Activity going forward

The outlook for the OFS industry has weakened over the past year. Large E&P firms have recently announced cuts in capex budgets for 2015, and analysts expect that global E&P capex spending will fall by 20% to 25% in 2015. If oil prices remain at the March 2015 level of around US$60 per barrel, there is a risk of further cuts to this estimate.

Beyond 2015, the outlook depends to a large extent on how oil prices will develop. At the prevailing prices as of March 2015, investments in (unconventional) new plays will probably not be profitable. Reducing costs and increasing productivity in the OFS industry may to some extent reduce the break-even prices of some developments, but even accounting for this, oil prices need to be closer to US$70 to US$80 per barrel to avoid further investment declines from 2016 onward.

Effects on the OFS industryThe worsening outlook will impact OFS segments differently. Several EFI and operations firms have already announced job cuts and are experiencing diminishing order books at the start of 2015. At the same time, companies with longer contracts and larger order books can expect to be shielded from the weakening market circumstances at the beginning of 2015. However, once contracts expire, these companies can expect a more challenging market with lower prices. This is what was observed following the financial crisis and the oil price collapse in 2008. The full effects of the current downturn may therefore not be visible in the companies’ financial accounts until 2016.


Niche interest in low-reserve fieldsOver the last few years we have seen others, like GDF and Oranje-Nassau Energie, keen on acquiring low-reserve fields located on the DCS from the more established incumbents, like Shell, Chevron and ExxonMobil. This might require more specific knowledge from the OFS industry on the midterm to longer term. These new entrants may also have different requirements in terms of contract structures and sizes and when work can be performed. Companies able to manage this complexity will gain competitive advantage relative to their (international) peers.

Increase in decommissioning of platforms We have seen relatively limited decommissioning activity on the DCS until now. Although some installations have reached the end of their expected lifetime, decommissioning has been postponed through rebuilds and modifications for most. Nevertheless, major decommissioning projects are expected, with currently around 190 fixed topside installations operating on the DCS, of which more than 100 are older than 20 years. In 2013, Shell awarded Allseas the contract for decommissioning the topsides of its Brent field platforms. This was one of the first contracts for Allseas’ installation/decommissioning vessel, the Pioneering Spirit, with removal expected to start in 2015 or 2016.

Increased collaboration and clustering of activitiesIn view of the cost challenges presented by the dramatic drop in oil prices, and the oil majors’ subsequent capex cuts and cost focus, the Dutch OFS industry would benefit from increased collaboration throughout the industry in order to solve the cost challenges.

Dominant position in engineering, fabrication and installation as well as operationsThe Netherlands has a solid track record in engineering, fabrication and installation, and in operations, and a lot of Dutch companies are active in these segments. We see it as a great opportunity to further leverage the dominant position in engineering, fabrication and installation on a global scale and seek collaboration to promote the Dutch OFS industry.

Lower drilling activity on the DCS going forwardOver 2013, we have witnessed a decline in exploration and appraisal as well as production drillings on the DCS. Considering the expected oil prices in the near term, this trend is anticipated to continue.

Urge for technology and knowledgeAlthough global E&P spending has been cut, especially in high-risk frontiers — and new (unconventional) plays have been put on hold thanks to the recent turmoil in the oil and gas industry — general consensus suggests these plays will eventually be developed, with demand for more advanced technology and specific knowledge growing in the future.

Need for an international footprintAlthough we see a shift away from deepwater frontier and emerging basins, new markets remain active, such as the Gulf of Mexico spurring the demand for offshore equipment and technology. Some OFS companies have already established local presence, while others have to respond to the need for an international footprint going forward.

Shortage of skilled laborActivity in the oil and gas industry worldwide is expected to pick up again, and even increase, generating a strong growth in demand for skilled resources. This will present a significant challenge to OFS companies in terms of recruiting, training and retaining employees, stressing the importance of educational institutions and the need to overcome any gaps between educational supply and market demand.

Greater focus on efficiencyWith the expected oil price uncertainty in the coming months, it becomes more important for companies to have lean operations that spur profits, which can be deployed to make investments in the years to come. The key challenge here is to make the right investments and cut costs to streamline the business in such a way that operations and project assignments are not harmed. Already, companies have been looking at ways to cut labor costs through optimizing human capital and tackling projects together with other companies in partnerships to improve profitability.

Challenges and opportunities facing the Dutch OFS industry


Accounting information is publicly available from the Dutch Chamber of Commerce obtained from the REACH database. The companies’ registered business addresses have been used to reflect their geographic location. The number of companies included in the analysis varies somewhat due to a lack of available financial information.

We have used the stand-alone financial statements for each legal entity in our analysis. As a result, large corporations have been analyzed as a series of individual companies and not as a consolidated group, when possible, to get a more detailed demographic view with regards to location and activities across the supply chain. The implication is that intercompany transactions are not eliminated when financial figures are aggregated.

A company is defined as a Dutch OFS company if:• At least 50% of its activities is deemed

to be related to the oil and gas sector.• It is a Dutch-registered company.

CategorizationEach company in the OFS portfolio has been reviewed individually, and an assessment has been made with regard to its position in the value and supply chain.The value chain has the following categories:• Reservoir/seismic• Exploration and production drilling• Engineering, fabrication and installation• Operations

m Million

b Billion

Capex Capital expenditures

DCS Dutch Continental Shelf

E&P Exploration and production

EFI Engineering, fabrication and installation

FTE Full-time equivalent

OECD Organization for Economic Co-operation and Development

OFS Oilfield services

SFP Small Fields Policy

Methodology

Abbreviations

LocationThe regions used in the analysis have been chosen to reflect and illustrate the main clusters of OFS companies in the Netherlands. The regions are:• Friesland• Drenthe• Flevoland• Gelderland• Groningen• Limburg• North Brabant• North Holland• Overijssel• South Holland• Utrecht• Zeeland


Appendix

The discovery of oil in the Dutch village of Schoonebeek in 1943 marked the start of the oil and gas industry in the Netherlands. Gas reserves were found several years later in Coevorden (1948), followed by the discovery and development of the large Slochteren gas field in 1959 in the Dutch province of Groningen.

The discovery of onshore reserves stimulated interest in potential offshore hydrocarbon reserves and resulted in the first offshore drilling in Western Europe. To date, more than 300 offshore reserves have been discovered and are hence an important addition to the Groningen gas reserves for the Netherlands. The Dutch oil and gas sector can be described as a mature industry and a sizable OFS sector that is home to several leading players.

Oil production in the NetherlandsOil production in the Netherlands encompasses both onshore and offshore activities. Since the peak production of 5.2 million standard cubic meters of oil in 1986, the Netherlands has experienced declining production levels. Annual production levels averaged around 2 million standard cubic meters from 1995 to 2013. For many years, oil production in the Netherlands mainly stemmed from offshore fields, as shown in the adjacent figure. However, since 2011, the onshore Schoonebeek field came back online after being closed in 1996 because it was no longer considered viable for oil extraction.

Traditionally, the international oil majors, and in particular Shell and ExxonMobil, had a significant presence in the Dutch E&P industry. However, in recent years, we have seen smaller niche parties entering the market as shareholders and operators.

An extensive network of infrastructure is present in the Netherlands for oil products. Several pipelines connect the offshore fields to the mainland where refineries, transport and storage infrastructure are located. The Port of Rotterdam especially plays a pivotal role with respect to refining and distribution. The port areas Pernis, Botlek and Europoort house several of the largest refineries in Europe. The Rotterdam area is recognized as an important hub for oil trading and distribution. In addition, significant oil and gas storage capacity is available in this area. Furthermore, various pipelines connect the industrial zone with neighboring nations.

Strong oil and gas heritage

Oil production onshore/offshore, 1995–2013

Source: ”Delfstoffen en aardwarmte in Nederland 2013,” Ministry of Economic Affairs Note: Oil production is quoted in million standard cubic meters, based on a temperature of 15°C and 101.325 kPa.


Gas production onshore/offshore, 1995–2013

Gas production in the NetherlandsGas production in the Netherlands mainly stems from onshore fields and, to a lesser extent, smaller offshore fields. To stimulate the development of smaller offshore gas fields, the Dutch Government introduced the Small Fields Policy (SFP) in 1974. This measure was aimed at preserving the giant Slochteren field, with its unique gas-balancing function. Since the introduction of the SFP, dozens of new gas fields have been found and developed. Over the past few years, a sophisticated and advanced gas industry developed in the Netherlands. Extensive cross-border pipeline connections mean that the Netherlands plays a central role in the natural gas market of Northwest Europe.

Since 1995, gas production in the Netherlands has been relatively stable, with average annual production around 76 billion standard cubic meters (Sm³). After the peak production level of around 101.4 billion Sm³ in 1976, a relatively stable plateau level was achieved. Offshore gas fields’ production volumes declined about 38% in the last 10 years, from about 29 billion Sm³ in 2004 to about 18 billion Sm³ in 2013. However, this decline was offset by higher onshore production levels. With about 84.4 billion Sm³ in gas and 1.3 million Sm³ in oil produced in 2013, gas is clearly the main product in the Netherlands. Looking forward, gas production at Groningen will be cut over the next three years due to concerns over earth tremors in the area. Consequently, it remains to be seen how this will influence gas production in the Netherlands on the long term.

Stable and mature E&P sector

The E&P industry has been an important sector of the Dutch economy for the past 50 years. While oil production on the DCS decreased over the last few years, the Netherlands is still the second-largest producer of natural gas in the European Union, behind Norway, according to June 2014 Statistical Review of World Energy by BP. It is expected that the oil and gas sector will continue to be of great importance to the Netherlands, given the presence of sizable oil and gas reserves that will likely allow for production for at least 20 to 30 years. Significant investments in E&P and new technology will likely be required.

Volume development and remaining reservesAs of 1 January 2014, total gas reserves amounted to 1,044b Sm³, of which 97b was classified as contingent resources that are estimated to be commercially viable. The majority of the remaining reserves relate to the Groningen field (768b Sm³) and small-field reserves (160b Sm³). The development of the gas reserves over time illustrates that there were no major discoveries in the last 10 years. Current reserve estimations therefore result in declining production levels for the future, albeit with significant available accumulations for production in the nearby future.1

With respect to oil, the majority of Dutch reserves relate to onshore accumulations. In total, 48 oil accumulations were found in the Netherlands, of which 15 fields were in production in 2013. Total oil reserves amounted to 47.1 million Sm³ as per 1 January 2014, of which 24.1 million were classified as contingent. The development of the oil reserves over time depicts an increase in onshore oil reserves as of 2004, which coincides with the redevelopment of the Schoonebeek field and several other accumulations in later periods.

Development of oil reserves

Development of gas reserves

Source: “Delfstoffen en aardwarmte in Nederland 2013,” Ministry of Economic AffairsNote: Gas production is quoted in million standard cubic meters, based on a temperature of 15°C and 101.325 kPa.

Source: “Delfstoffen en aardwarmte in Nederland 2013,” Ministry of Economic Affairs



The Dutch oil and gas market experienced low levels of seismic research activity in 2013, with 925km² of offshore surface being mapped. The significant majority of this research was related to 3D seismic surveys in the K18 and L16 blocks commissioned by Wintershall.

The development of mapped surface over time is in line with the maturity of the Dutch reservoir.

In 2013, six exploration drilling projects and three appraisal drilling projects were conducted in the Netherlands, which is a decrease from 16 total drillings in 2012 and represents the lowest activity level in the last five years.

Exploration and appraisal success rates have developed positively in the last few years, which is in line with the maturity of the Dutch basin. As more wells are drilled and additional data is gathered, success rates in general tend to go up. On the other hand, the maturity of the basin also translates into smaller discoveries.

Exploration and appraisal activity is likely to remain at low levels in the near future, as it is expected that the development of several potential new plays will be temporarily put on hold due to the significant decrease in oil prices in 2014.

Drilling activity

Seismic activity

1 “Delfstoffen en aardwarmte in Nederland 2013,” Ministry of Economic Affairs.

The production outlook for the coming 25 years, published by the Ministry of Economic Affairs, illustrates that gas production is expected to play a major role in the Netherlands, albeit at a decreasing rate over time. The majority of the gas is expected to come from the Groningen gas field, for which production was recently capped due to a new production plan in light of local earthquakes. Over time, production from the Groningen field is expected to decline due to pressure depletion. The remaining forecast production stems from the smaller fields.

Historical oil production and 25-year outlook

The total oil production forecast was based on the production projections of existing accumulations communicated by the operators to the Ministry of Economic Affairs. In the near future, oil production is expected to increase as undeveloped accumulations are forecast to come online, after which production gradually decreases.

Volume development and remaining reserves

Historical gas production and 25-year outlook





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Contacts

BeNe Oil & Gas LeaderJeff SluijterPartnerMobile: + 31 6 212 52 650Email: [email protected]

TAXEdwin de Jong PartnerMobile: + 31 6 290 84 060Email: [email protected]

Transaction Advisory ServicesRené CoenradiePartnerMobile: + 31 6 212 51 453Email: [email protected]

Transaction Advisory ServicesGuillaume Petit Senior ManagerMobile: + 31 6 290 83 290Email: [email protected]

AdvisoryGuill van den BoomPartnerMobile: + 31 6 212 52 118Email: [email protected]

AssuranceEmilya Aliyeva ManagerMobile: + 31 6 212 52 838Email: [email protected]


EY’s Global Oil & Gas Center keeps you updated with monthly thought leadership publications, exploring the latest developments within the sector. Our deep industry knowledge can help you anticipate trends, manage regulatory changes, drive down costs and compete more effectively.

Fuelling the next generation: a study of the UK upstream oil and gas workforceAs part of the Oil & Gas Industrial Strategy, EY was commissioned by Oil & Gas UK, OPITO and BIS to produce a report identifying the current workforce profile and the employment disciplines that will be in greatest demand over the next two to five years.

Spotlight on oil and gas megaprojectsThis document kicks off a series that explores capital projects in the oil and gas industry. We researched the performance of 365 oil and gas megaprojects and found that 64% are facing cost overruns and 73% are reporting schedule delays. Take a closer look at why this happens and what we can do to help.

Global oil and gas tax guide 2015The Global oil and gas tax guide summarizes the oil and gas corporate tax regimes in 74 countries and also provides a directory of EY Oil & Gas tax contacts. Our guide can help our clients implement local legislation, which varies greatly from general corporate tax regimes.

Navigating geopolitics in oil and gasGeopolitics is a central concern for the oil and gas sector and can be viewed as a source of both risk and opportunity. The trend toward more nationalistic and assertive political behavior indicates that global instability is on the rise. So it is no coincidence that one of the top risks facing oil and gas companies, as identified by EY in our most recent risk study, was geopolitics.

Global oil and gas transactions review In this report, we look at some of the significant trends in oil and gas deal activity over 2014 and the outlook for transactions in the sector in 2015. We analyze the diverse dynamics in the upstream, downstream, midstream and oilfield.

Global oil and gas reserves studyThe Global oil and gas reserves study is a compilation and analysis of certain oil and gas reserve disclosure information as reported by companies in their annual reports filed with the United States Securities and Exchange Commission or in their publicly available annual reports.

Oil and Gas Capital Confidence BarometerEY’s Capital Confidence Barometer is a regular survey of senior executives from oil and companies around the world conducted by the Economist Intelligence Unit (EIU). This snapshot of our findings gauges corporate confidence in the economic outlook and identifies boardroom trends and practices in the way companies manage their capital agenda.

Review of the UK oilfield services industryEY has reviewed UK-registered oilfield companies’ 2013 trading performance and finds that it continues to be one of Britain’s industrial success stories.

Competing in the global LNG marketThere’s no denying Canada’s potential in the global LNG market, but success for players won’t come easily. See which factors will determine their competitiveness.

The Norwegian oilfield services analysis EY has been conducting the oilfield services analysis every year since 2006, and the report has been developed and expanded each year in line with the growth of the industry it seeks to cover.

Thought leadership

EY | Assurance | Tax | Transactions | Advisory

About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.

How EY’s Global Oil & Gas Sector can help your businessThe oil and gas sector is constantly changing. Increasingly uncertain energy policies, geopolitical complexities, cost management and climate change all present significant challenges. EY’s Global Oil & Gas Sector supports a global network of more than 10,000 oil and gas professionals with extensive experience in providing assurance, tax, transaction and advisory services across the upstream, midstream, downstream and oil field subsectors. The Sector team works to anticipate market trends, execute the mobility of our global resources and articulate points of view on relevant sector issues. With our deep sector focus, we can help your organization drive down costs and compete more effectively.

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This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice.

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