EIC Sector Analysis: UKCS Contracting Report

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1 No. of Contracts EIC Sector Analysis: UKCS Contracting Report 194 major contracts awarded on the UKCS (Jan 1-Jul 13) Total estimated investment of US$87.8bn on UKCS BP most active operator in terms of contracts awarded As a mature province, the UKCS has become a diverse arena for the oil and gas industry: the operating environment varies from marginal developments led by a growing number of independents, major developments in frontier areas driven by IOCs, and also redevelopment projects and decommissioning. And with a forecasted record investment of US$2 billion on the UKCS in 213, the scale of opportunity for the supply chain continues to grow. According to the EICDataStream global project tracking database, there are currently 136 projects proposed or under development on the UKCS, worth a total potential investment of US$87.8 billion. Between January 21 and July 213 there were 194 major contracts (FEED, EPC and SURF) awarded in the UKCS upstream sector. In this period, the top 1 operators awarded 125 (64%) of these contracts and the top 8 contractors won 91 (47%) of the total number of contracts awarded. Figure 1 illustrates a decline in the number of contracts awarded since 211, nonetheless the reported growing levels of investment indicate that in the mid- to long-term, contracting levels will remain healthy. Figure 1: Number of Contracts by Year (Jan 21-Jul 213) SURF FEED EPC 2 1 Source: EICDataStream

2 No of Contracts Operators Figure 2 shows the top ten most active operators on the UKCS in terms of the number of major contracts awarded across 69 developments between January 21 and July 213. Figure 2: Top 1 Most Active Operators (Jan 21-Jul 213) BP Centrica ConocoPhillips GDF Suez Group Ithaca Energy Nexen Shell Statoil Talisman Energy Operator Total BP has led contracting activity in recent years, awarding 31 major contracts across seven North Sea developments. In total BP has awarded 13 EPC contracts, 4 FEED contracts and 14 SURF contracts, almost half (15) of which are associated with expansion projects. BP s main area of investment is the UK Atlantic Margin, home to both the Schiehallion and the Clair Heavy Oil Field (Phase 2) expansion projects, where the operator has awarded a total of 13 contracts. As a major international oil company, BP is joined in the top ten by ConocoPhillips, Total, GDF Suez, Statoil, Shell and Centrica, who together account for 88 major contracts awarded. These oil companies are accountable for contract awards on the majority of high-capital investments on the UKCS, including heavy oil field developments in the Northern North Sea and new projects in the frontier region West of Shetland. All of Statoil s major contract awards have been made on the Mariner and Bressay heavy oil fields in the Northern North Sea.

3 No. of Contracts Second to BP is Nexen, a previously independent oil company that was recently bought out by Chinese national oil company CNOOC for US$18 billion. Nexen accounts for a total of 18 major contracts across three developments, awarding eight EPC contracts, four FEED contracts and six SURF contracts across a series of tie-back projects in the Central North Sea. Nexen s main area of investment has been the Golden Eagle Area Development (Golden Eagle, Pink and Hobby oil fields), for which the company has placed 12 major contracts since January 21. Nexen is joined in the top ten by another company that has joined forces with a major Chinese operator, Talisman Energy (Sinopec), along with independent Ithaca Energy, who together have awarded 36 major contracts in the Central North Sea, again largely made up of tie-back projects as well as redevelopment projects. Contractors Figure 3 shows the top eight most successful contractors on the UKCS in terms of number of FEED, EPC and SURF contracts awarded across 69 developments between January 21 and July 213. Figure 3: Top 8 Contractors (Jan 21-Jul 213) Aker Solutions AMEC GE Oil & Gas Heerema Saipem Subsea 7 Technip Wood Group Contractor Source: EICDataStream

4 Technip has been prolific in terms of activity, having secured a total of 23 contracts on the UKCS since January 21 from 16 different operators. Technip has secured the highest number of SURF (15) contracts in this time, and is joined by Subsea 7 to lead EPC contract awards (eight contracts each). Subsea 7 s successful bids include the EPC contract for the installation of rigid flowlines and flexible riser systems on Statoil s US$7 billion-plus Mariner project the largest capital investment on the UKCS for more than a decade and a SURF contract for Talisman s Montrose and Arbroath Area Redevelopment project. It is worth noting that in addition to SURF contracts, many of the EPC contracts cover major subsea engineering elements to the work, for example Technip s EPC contract for subsea construction on the Greater Stella Area Development. Technip is followed by a tranche of well-known North Sea contractors taking the greater share of high value contracts. GE Oil & Gas has been a particularly successful SURF contractor on the UKCS, securing 14 contract awards from 11 different operators since January 21. GE s SURF contracts largely cover the supply of subsea xmas trees, wellheads and control systems. Although Aker Solutions features much less prominently, securing four SURF contracts since January 21, it has been widely speculated that Aker s recently announced US$44 million subsea contract is for the development of the Kraken heavy oil discovery, its largest single subsea contract on the UKCS. According to Aker, the order includes subsea technologies that are new to the UK market, including manifolds and trees that can enable the use of hydraulically submersible pumps to improve oil recovery and flow assurance. Heerema has also been a particularly successful EPC contractor on the UKCS, securing seven contract awards from five different operators since January 21. Heerema s EPC contracts largely cover the offshore fabrication and installation of platform modules. Despite not securing as many contracts as the top eight contractors on the UKCS, it is worth mentioning the growing presence of South Korean contractors bidding for EPC contracts on the UKCS, a trend to watch for the future. Hyundai Heavy Industries secured three EPC contracts from January 21 to July 213, one of which is the estimated US$1.2 billion contract to build the FPSO for the Schiehallion expansion project. Daewoo Shipbuilding & Marine also entered the scene in 212, having secured two significant EPC contracts since then. AMEC and Wood Group, who have both secured six FEED contracts each across a total of ten developments, dominate FEED work on the UKCS. Contracting relationships On the UKCS, Technip has fared particularly well with BP (see Figure 4), who has awarded the French contractor three major SURF awards. As has Subsea 7, securing three major EPC contracts since January 21. Wood Group is a favoured FEED contractor for BP, securing two FEED contracts for the Andrew oil field expansion and the Kinnoull oil field, going on to secure an EPC contract for the Kinnoull field.

5 No. of Contracts Figure 4: Contracting Relationships on the UKCS (Jan 21-Jul 213) Total Talisman Energy Statoil Shell Nexen (CNOOC) Ithaca Energy GDF Suez ConocoPhillips Centrica BP Operator Contractor Source: EICDataStream Other successful bidders for work from BP include Aker Solutions and GE Oil & Gas, who have secured two EPC contracts and two SURF contracts respectively. Technip has not won any awards from Centrica and ConocoPhillips, with Centrica placing two contracts each with Heerema and SLP Engineering among others, and ConocoPhillips favouring Subsea 7 and Saipem for both SURF and EPC contracts. ConocoPhillips has also awarded a significant amount of work to Saipem since January 21, with the Italian contractor securing one EPC and two SURF contracts on the UKCS from the operator. The EPC contract was for the installation of three platforms on the major Jasmine development in the Central North Sea.

6 Since January 21, Nexen has utilised eight of the most active contractors on the UKCS, with Technip and GE Oil & Gas the more prominent contractors. Both companies have secured two contracts each from Nexen, an EPC and a SURF contract apiece. These are all for the Golden Eagle Area Development apart from Technip s SURF contract, which is for the Greater Rochelle field area. GE Oil & Gas is also popular with Ithaca Energy, securing two SURF contracts, one for its Greater Stella Area Development and one for the Athena oil field development. In terms of FEED contracts, AMEC has fared well with GDF Suez, securing a contract for the Cygnus gas field, followed by a further detailed design FEED contract on the project. SNC Lavalin also secured a FEED contract on this project for the detailed design of four jackets. Main developments The majority of contracts awarded (89) have been for developments in the Central North Sea. The main development on the UKCS in terms of the number of major contracts awarded from January 21 to July 213 is Nexen s Golden Eagle Area Development, for which 12 major contracts have been awarded including seven EPC contracts. Operating conditions in the Central and Southern areas of the North Sea are not as harsh as northern areas of the North Sea, making project economics for marginal developments more favourable for the smaller, independent operators that tend to be concentrated in this area. A total of 38 contracts were awarded on projects in the Northern North Sea, which is home to the majority of large-scale heavy oil developments. This includes the Mariner project, for which five major contracts have been awarded since 21, two FEED contracts and three EPC contracts. In the frontier area West of Shetland, 26 contracts have been awarded on capital-intensive projects in harsher operating conditions, including Total s Laggan and Tormore Gas & Condensate fields, for which a total of six major contracts have been awarded. Summary The advancement of breakthrough technologies, a sustained high oil price and a favourable package of tax reforms are together breathing new life into the oil and gas industry on the UKCS, spurring a new wave of project development activity. These major investments are translating into abundant opportunities for the supply chain, and with investment levels expected to be maintained in the near-term, the data from EICDataStream underlines the scale of the market.

7 Notes to Editors: Please note that all graphs are copyright of the EIC and may not be reproduced without the express permission of the EIC. EICDataStream EICDataStream is the EIC s global online energy database, which tracks over 1, active and future projects worldwide to deliver high-value intelligence to the supply chain. About the EIC The EIC is the leading trade association providing dedicated services to help members understand, identify and pursue business opportunities worldwide. Established in 1943, the EIC is a not-for-profit organisation with a large membership of UK-registered companies who deliver goods and services to the energy industries worldwide. The EIC s membership operates across the oil & gas, petrochemical, pipeline, power, nuclear and renewable industries, collectively employing over a million people and generating over 1 billion in revenues out of their UK-based operations. Headquartered in London, the EIC has a global network of offices, from regional UK offices in Billingham and Aberdeen, to international offices in Rio de Janeiro, Houston, Dubai and Singapore. To find out more about the EIC and see a full list of members, visit: Neil Golding, Head of Oil & Gas at the EIC, will be available on the EIC stand (Hall 3, B62) to take enquiries from 3-5 September. Please drop by at your convenience, or call Andrea Frost, Marketing & Public Relations Manager, to schedule an appointment. For further information: Andrea Frost, Marketing & Public Relations Manager, Tel: +44 () Mobile: +44 () andrea.frost@the-eic.com ** ENDS **