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Offshore Drilling Industry in Asia-Pacific to 2016 - Rising Regional Demand Leading to Deepwater Focus in China

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The report, which is an offering from the company’s Energy Research Group, provides an in-depth analysis of the offshore drilling market in the Asia Pacific region and highlights the various concerns, shifting trends and major players in the region. The report provides forecasts for the offshore drilling industry in the Asia Pacific region to 2016. The report also provides segmental forecasts of the offshore drilling market in the Asia Pacific region by water depth and highlights the major countries in the region. The report provides in-depth analysis of the key trends and challenges in the offshore drilling market in the region. An analysis of the competitive scenario, data on the offshore wells and drilling expenditure in the region are also provided for each of the market segments.

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									Offshore Drilling Industry in Asia-Pacific to 2016
Rising Regional Demand Leading to Deepwater Focus in China
GBI Research Report Guidance




                                              GBI Research Report Guidance
                                              ·     Chapter two provides an introduction to the offshore drilling industry of Asia-Pacific and the topics
                                                    covered in the report.
                                              ·     Chapter three provides an introduction to the offshore drilling industry, with an explanation of the
                                                    functioning of the offshore drilling industry, basic technical terminology and key allied industry
                                                    segments supplementing the core offshore drilling business.
                                              ·     Chapter four discusses the key trends and challenges of the offshore drilling industry in the Asia-Pacific
                                                    region.
                                              ·     Chapter five gives a statistical overview of the offshore drilling industry of the Asia-Pacific region.
                                              ·     Chapter six gives statistical details of offshore wells and drilling expenditure by the shallow and deep-
                                                    water regions of key countries across the Asia-Pacific region.
                                              ·     Chapter seven is the report’s appendix, and provides details of the research methodology used, as well
                                                    as a references section for the report’s citations and contact details for GBI Research.




  © GBI Research. This is a licensed product and is not to be photocopied                                                      GBIGE00062MR / Published SEP 2012
                                                                                                                                                          Page 2
Executive Summary




                                              Executive Summary
       The current trend is a shift           The offshore drilling industry in the Asia-Pacific region has witnessed considerable investments by offshore
       towards an increase in                 exploration companies and offshore drilling contractors in the past few years. This is due to fresh offshore
       deepwater drilling                     oil and gas reserve discoveries being made in the region, and these investments have signaled that Asia-
       expenditure in the Asia-               Pacific is now considered a potential major region for offshore oil and gas production. Offshore discoveries
       Pacific region                         in the shallow water regions of offshore China, shallow and deepwater Australia, and in offshore India in the
                                              Arabian Sea and the Bay of Bengal have provided a boost to capital expenditure for the offshore drilling
                                              industry in the region.
                                              The most significant event in the recent past for the offshore drilling has been the steady rise of day rates
                                              for rigs encouraging rig contractors to venture with greater rigor into fresh offshore terrain. The day rates of
                                              rigs crossed the $600,000 mark in April 2012, which is an encouraging sign as far as the future of the
                                              industry is concerned. This points to a rise in offshore drilling activity and a greater potential for
                                              expenditure by oil and gas players. These levels are comparable to the day rate averages in 2008, prior to
                                              the financial meltdown, when the offshore drilling industry was blooming.
                                              Another associated trend of importance for the market is the increase in offshore drilling capital
                                              expenditure through January 2011 to Q1 2012. The offshore drilling expenditure relating to Asia-Pacific was
                                              $16.24 billion in 2011, and is expected to grow to $18.13 billion by 2012, with a major portion of the
                                              expected growth being due to increasing deepwater drilling expenditure. Of the expected increase of $1.89
                                              billion, about $1.55 billion will be from the deepwater drilling segment, due to the numerous planned
                                              deepwater drilling operations with major contributions from China and Australia.
                                              Rising Hydrocarbon Consumption Levels in the Developing Nations of Asia-Pacific are Boosting the
                                              Offshore Drilling Industry
                                              As a result of substantial major offshore discoveries in particular offshore regions in Asia and subsequent
                                              drilling activity, offshore drilling expenditure for the Asia-Pacific region has seen an overall steady rise in
                                              recent years.
                                              The current trend is a shift towards an increase in deepwater drilling expenditure, with shallow-water
                                              drilling expenditure being superseded by the former, as more and more international as well as National Oil
                                              Companies (NOCs) are successfully venturing into deepwater exploration and production for finding huge
                                              oil and gas reserves. NOCs such as CNOOC and Petronas are planning to increase offshore drilling
                                              expenditure in the near future, a move facilitated by deepwater reserves that are promising in terms of
                                              production. Factors like exploitable hydrocarbon reserves in offshore China and an abundance of gas
                                              reserves in offshore Australia are prompting major players like CNOOC and Shell to take up initiatives in
                                              offshore drilling. Even international oil firms like Husky Energy, Austria-based firm ROC British Petroleum,
                                              and Eni SPA are looking forward to investing in offshore drilling operations in Asia-Pacific.
                                              China is pursuing active development plans and is ready to boost its offshore drilling activity in the next five
                                              years. For instance, CNOOC’s expenditure on offshore drilling is expected to approach $1.75 billion in 2012,
                                              and expenditure is expected to rise in the future to around $2 billion by 2013, due to the rising deal
                                              activities of the company which are driving drilling initiatives. CNOOC’s deal with Husky Energy has enabled
                                              China to venture into deepwater drilling operations at drilling depths of over 1,500 meters.




  © GBI Research. This is a licensed product and is not to be photocopied                                                   GBIGE00062MR / Published SEP 2012
                                                                                                                                                       Page 3
Executive Summary




                                                Offshore Drilling Expenditure by Water Depth, Asia-Pacific, $bn, 2001–2016

                                                                                  30




                                                                                  25




                                                                                  20



                                                      Drilling Expenditure, $bn
                                                                                  15




                                                                                  10




                                                                                   5




                                                                                   0
                                                                                       2001                          2008            2016
                                                                                                                     Year


                                                Source: GBI Research, Oil and Gas Upstream Database (May 05, 2012)




                                              The growth of the offshore drilling market is being driven by high demand and rising prices for crude oil and
                                              natural gas. However, the Asia-Pacific offshore drilling market experienced a temporary slowdown as a
                                              result of relatively fewer investments by offshore exploration companies in 2009, due to the global financial
                                              crisis and a subsequent fall in demand. The offshore drilling expenditure is expected to rise from $16.24
                                              billion in 2011 to $18.13 billion in 2012, with most of the growth being a result of increasing deepwater
                                              drilling expenditure. The market’s growth is estimated to proceed at a greater pace in the next five years, at
                                              an average annual growth rate (AAGR) of 10%.
                                              Joint Ventures of Chinese Firms with Key International Oil Companies is Leading to Improved Business
                                              Synergy in Offshore Projects
                                              Firms in Europe and the US, especially International Oil Companies (IOCs), are known to be technologically
                                              adequate and innovative in terms of adopting breakthroughs and implementing them into actual
                                              production practice. Firms in Asia-Pacific are seeking to collaborate with IOCs to gain an advantage through
                                              innovations in the field of offshore drilling. Asian firms are able to produce more with the help of advanced
                                              technology, and IOCs are able to partake in a share of production in return for technological assistance. In
                                              the majority of cases, the local firm undertakes operatorship since it is more familiar with the various
                                              opportunities and constraints inherent in the local drilling scenario. CNOOC entered into a Production
                                              Sharing Agreement (PSA) with British Petroleum for developing assets in the South China Sea in December
                                              2010, which happens to be one of the most potentially rewarding regions of offshore China, being the
                                              fourth most reserve-rich offshore bay in the world. The Austrian firm ROC, the Italian firm Eni SPA and the
                                              global supermajor Chevron have all entered into joint ventures with Chinese firms in the latter half of 2010.
                                              Industry speculators have commented that such partnerships can be expected to grow in the future since
                                              there is a host of offshore blocks that have yet to be developed. in December 2010, the NOC of China to drill
                                              in the Liwan 3-1 field in offshore China, with the deepwater drilling to be handled by Husky Energy while
                                              CNOOC is going to handle the shallow-water exploration, creating a business synergy by combining the
                                              expertise of both companies. Though the sign-off happened in 2010, the collaboration started recently in
                                              May 05, 2012 with the drilling of the first deepwater well in offshore China and thereby set an important
                                              milestone in the energy history of China. The production sharing contract attributes 51% of the produce to
                                              CNOOC.




  © GBI Research. This is a licensed product and is not to be photocopied                                                   GBIGE00062MR / Published SEP 2012
                                                                                                                                                       Page 4
Executive Summary




                                              Active Exploration Plans Aimed at Increasing Natural Gas Production Offshore Australia to Attract
                                              Investments in the Region
                                              Domestic demand from Australia and New Zealand and demand from other regions in the Asia-Pacific have
                                              helped Australia emerge as the LNG hub of Asia-Pacific and it is expected to overtake Qatar in production by
                                              2017. The development plans for offshore Australia are heavily LNG-based as the reserves only contain
                                              natural gas. Since LNG is a tried and tested mode of monetizing natural gas, there are a number of major
                                              LNG projects under development in offshore Australia, such as the Pluto, Gorgon, Prelude, Wheatstone and
                                              Ichthys projects, which are being handled by Woodside, Chevron, Inpex, Woodside and INPEX (International
                                              Petroleum Exploration Corporation), respectively.
                                              With two supermajors involved and the remaining firms also having strong backgrounds in upstream
                                              activities, the ambitious projects are highly capital-intensive. For example, Shell’s Prelude project was the
                                              first Floating Liquefied Natural Gas (FLNG) vessel to be manufactured in the world, incorporating floating
                                              production technology into the LNG value chain. Offshore Australia is expected to see a cumulative
                                              expenditure of $3 billion in its offshore drilling industry by 2016, with deep-water expenditure rising at a
                                              greater pace than shallow-water expenditure. These projects are highly rewarding but highly capital-
                                              intensive, and are more risky than those in other offshore regions,
                                              Since 2004, the Australian offshore oil and gas exploration industry has been venturing into deeper waters
                                              in the search for fresh gas reserves. Potential gas reserves exist in deeper waters as well as in shallow-water
                                              blocks. The 2012–2016 period is expected to witness steady growth in expenditure due to increasing
                                              demand for oil and gas, increased offshore rig day rates, and an increased level of fresh exploration
                                              activities.

                                                Offshore Drilling Expenditure, Australia, $bn, 2001–2016

                                                                         3.5



                                                                          3



                                                                         2.5
                                                      Expenditure, $bn




                                                                          2



                                                                         1.5



                                                                          1



                                                                         0.5



                                                                          0
                                                                               2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
                                                                                                                      Year

                                                                                                      Shallow Water            Deepwater


                                                Source: GBI Research, Oil and Gas Upstream Database (May 05, 2012)




  © GBI Research. This is a licensed product and is not to be photocopied                                                                  GBIGE00062MR / Published SEP 2012
                                                                                                                                                                      Page 5
Executive Summary




                                              Innovations in Offshore Drilling at the Global Level and the Resultant Technological Infusion in Asia-
                                              Pacific are Facilitating Greater Efficiency in Drilling Practices
       New ways of drilling
       exploratory wells, horizontal          Technological advances have always helped in facilitating more efficient, effective drilling since the
       and vertical drilling, real-           beginning of the offshore drilling industry. Offshore drilling poses more challenges and risks than onshore
       time integrated monitoring             drilling, and necessitates constant innovation to deal with critical scenarios. Weather creates an additional
       mechanisms, flow rate                  factor of uncertainty in offshore drilling, making it a risky endeavor. Since a complex infrastructure of
       monitoring systems, and                umbilical connections and tubes are used, there is also a significantly high risk of a spill. In such a setting,
       temperature and pressure               risk mitigation measures and efficiency enhancing practices are vital to sustain the industry.
       gauges are all adding value
       to the offshore drilling               With 2D and 3D seismic surveys now giving way to 4D surveys, the drilling process is benefiting from the
       process                                increased aid this technology offers. New ways of drilling exploratory wells, horizontal and vertical drilling,
                                              real-time integrated monitoring mechanisms, flow rate monitoring systems, and temperature and pressure
                                              gauges are all adding value to the offshore drilling process. With innovations in drilling infrastructure such
                                              as the emergence of advanced satellite assisted drill-ships with complex anchoring systems and Floating
                                              Drilling Production Storage and Offloading Units (FDPSOs), the offshore drilling industry is set to see a
                                              tremendous rise in productivity. This is tangible in the improvements made in terms of production per unit
                                              well, development and completion times, and the success rate of exploratory drilling. With global players
                                              showing growing interest in Asia-Pacific, a fresh infusion of investment and activity is expected in the
                                              region’s offshore drilling industry.




  © GBI Research. This is a licensed product and is not to be photocopied                                                   GBIGE00062MR / Published SEP 2012
                                                                                                                                                       Page 6
Table of Contents




                                              1         Table of Contents
                                              1   Table of Contents ........................................................................................................................................ 7
                                                  1.1      List of Tables .................................................................................................................................... 9
                                                  1.2      List of Figures................................................................................................................................. 10
                                              2   Offshore Drilling Industry in Asia-Pacific to 2016 ...................................................................................... 11
                                              3   Introduction to the Offshore Drilling Industry .......................................................................................... 12
                                                  3.1      Overview ....................................................................................................................................... 12
                                                  3.2      Significance of Offshore Drilling and Major Offshore Areas in Asia-Pacific ................................... 12
                                                  3.3      Impact of the Offshore Exploration Business on the Offshore Drilling Business ........................... 12
                                                  3.4      Importance of Various Local Governmental and Private Regulations Influencing the Offshore
                                                           Exploration and Drilling Business .................................................................................................. 12
                                                  3.5      Offshore Drilling Business Development and Key Bid Evaluation Criteria ..................................... 13
                                                      3.5.1      Technical Suitability............................................................................................................... 13
                                                      3.5.2      Price....................................................................................................................................... 13
                                                      3.5.3      Availability ............................................................................................................................. 13
                                                  3.6      The Offshore Drilling Industry and Its Role as Part of the Upstream Oil and Gas Industry Value
                                                           Chain.............................................................................................................................................. 13
                                                  3.7      Types of Rigs and Support Services ............................................................................................... 14
                                                      3.7.1      Mobile Bottom-supported Rigs ............................................................................................. 14
                                                      3.7.2      Floating Rigs .......................................................................................................................... 15
                                                      3.7.3      Key Technologies Used as Supporting Mechanisms in Floating Rigs ..................................... 15
                                                      3.7.4      Subsea Production and Processing Systems .......................................................................... 16
                                                  3.8      Offshore Drilling Technology Concepts ......................................................................................... 16
                                                      3.8.1      Exploratory Wells .................................................................................................................. 16
                                                      3.8.2      Appraisal Wells...................................................................................................................... 16
                                                      3.8.3      Development Wells ............................................................................................................... 16
                                                      3.8.4      Deepwater Drilling ................................................................................................................ 16
                                                      3.8.5      Rotary Drilling Procedures..................................................................................................... 16
                                                  3.9      Key Allied Segments Supplementing the Core Offshore Drilling Business..................................... 18
                                                      3.9.1      Oilfield Services ..................................................................................................................... 18
                                                      3.9.2      Geo-scientific Support Services .............................................................................................. 18
                                                      3.9.3      Rig Support Services .............................................................................................................. 18
                                                      3.9.4      Engineering and Equipment Support Services ....................................................................... 18
                                              4   Offshore Drilling Industry in Asia-Pacific – Key Trends.............................................................................. 19
                                                  4.1      Rising Hydrocarbon Consumption Levels in the Developing Nations of Asia-Pacific Leading to a
                                                           Rise in Offshore Drilling Expenditure............................................................................................. 19
                                                  4.2      Initiatives Encouraging Deepwater Exploration in China are Helping the Industry Gain
                                                           Momentum ................................................................................................................................... 20
                                                  4.3      Joint Ventures of Chinese Firms with IOCs Leading to Lucrative Business Synergies .................... 21
                                                  4.4      Active Exploration Plans Aimed at Increasing Natural Gas Production Offshore Australia
                                                           Attracting Investments into the Region ........................................................................................ 21
                                                  4.5      Innovations in Offshore Drilling at the Global Level and Resultant Technological Infusion in Asia-
                                                           Pacific are Facilitating Efficiency in Drilling Practices .................................................................... 23
                                                  4.6      Rising Number of Offshore Drilling Ventures in the Region to Propel Shipbuilding Industry in
                                                           Korea ............................................................................................................................................. 23
                                              5   Offshore Drilling Forecasts for Asia-Pacific to 2016 .................................................................................. 24
                                                  5.1      Offshore Drilling Expenditure Forecasts for Asia-Pacific to 2016 .................................................. 24
                                                  5.2      Offshore Wells Forecasts for Asia-Pacific to 2016 ......................................................................... 26
                                                  5.3      Offshore Wells Forecasts for Asia-Pacific to 2016, by Country ..................................................... 27
                                                  5.4      Profiles of Major Offshore Drilling Contractors for Asia-Pacific .................................................... 29
                                                      5.4.1      Transocean Ltd. ..................................................................................................................... 29
                                                      5.4.2      Noble Corporation ................................................................................................................. 29


  © GBI Research. This is a licensed product and is not to be photocopied                                                                                       GBIGE00062MR / Published SEP 2012
                                                                                                                                                                                           Page 7
Table of Contents




                                                    5.4.3     Diamond Offshore Drilling ..................................................................................................... 30
                                                    5.4.4     Ensco International ............................................................................................................... 30
                                                    5.4.5     Seadrill................................................................................................................................... 31
                                              6 Key Asia-Pacific Countries’ Offshore Wells and Drilling Expenditure Statistics ......................................... 32
                                                6.1      Australia Offshore Drilling Forecasts to 2016 ................................................................................ 32
                                                    6.1.1     Australia, Offshore Wells Forecasts, 2001–2016 ................................................................... 33
                                                    6.1.2     Australia, Offshore Drilling Expenditure, 2001–2016, by Water Depth, Shallow Water vs
                                                              Deepwater ............................................................................................................................. 35
                                                    6.1.3     Top Offshore Leaseholders, Australia, 2011 .......................................................................... 37
                                                6.2      China Offshore Drilling Forecasts to 2016 ..................................................................................... 38
                                                    6.2.1     China, Offshore Wells Forecasts, 2001–2016 ........................................................................ 38
                                                    6.2.2     China, Offshore Drilling Expenditure, 2001–2016, by Water Depth ...................................... 40
                                                    6.2.3     Top Offshore Leaseholders, China, 2011 ............................................................................... 42
                                                6.3      Indonesia Offshore Drilling Forecasts to 2016 .............................................................................. 43
                                                    6.3.1     Indonesia, Offshore Wells Forecasts, 2001–2016 .................................................................. 43
                                                    6.3.2     Indonesia, Offshore Drilling Expenditure, 2001–2016, by Water Depth ................................ 45
                                                    6.3.3     Top Offshore Leaseholders, Indonesia, 2011 ......................................................................... 47
                                                6.4      India Offshore Drilling Forecasts to 2016 ...................................................................................... 48
                                                    6.4.1     India, Offshore Wells Forecasts, 2001–2016 ......................................................................... 48
                                                    6.4.2     India, Offshore Drilling Expenditure, 2001–2016, by Water Depth ....................................... 50
                                                    6.4.3     Top Offshore Leaseholders, India, 2011 ................................................................................ 52
                                                6.5      Thailand Offshore Drilling Forecasts to 2016 ................................................................................ 53
                                                    6.5.1     Thailand, Offshore Wells Forecasts, 2001–2016 ................................................................... 53
                                                    6.5.2     Thailand, Offshore Drilling Expenditure, 2001–2016............................................................. 55
                                                    6.5.3     Top Offshore Leaseholders, Thailand, 2011 .......................................................................... 57
                                                6.6      Asia-Pacific – Offshore Drilling Scenario in Other Key Countries................................................... 58
                                                    6.6.1     Offshore Drilling Scenario, Vietnam ...................................................................................... 58
                                                    6.6.2     Offshore Drilling Scenario, the Philippines ............................................................................ 59
                                                    6.6.3     Offshore Drilling Scenario, New Zealand ............................................................................... 60
                                                    6.6.4     Offshore Drilling Scenario, Pakistan ...................................................................................... 61
                                                    6.6.5     Offshore Drilling Scenario, Papua New Guinea ..................................................................... 62
                                                    6.6.6     Offshore Drilling Scenario, Malaysia ..................................................................................... 63
                                                    6.6.7     Offshore Drilling Scenario, Myanmar .................................................................................... 64
                                                    6.6.8     Offshore Drilling Scenario, Brunei Darussalam...................................................................... 65
                                                    6.6.9     Offshore Drilling Scenario, Azerbaijan ................................................................................... 66
                                              7 Appendix ................................................................................................................................................... 67
                                                7.1      Market Definition .......................................................................................................................... 67
                                                7.2      Abbreviations ................................................................................................................................ 67
                                                7.3      References ..................................................................................................................................... 67
                                                7.4      Methodology ................................................................................................................................. 68
                                                    7.4.1     Coverage ............................................................................................................................... 68
                                                    7.4.2     Secondary Research .............................................................................................................. 68
                                                    7.4.3     Primary Research .................................................................................................................. 68
                                                    7.4.4     Expert Panel Validation ......................................................................................................... 69
                                                7.5      Contact Us ..................................................................................................................................... 69
                                                7.6      Disclaimer ...................................................................................................................................... 69




  © GBI Research. This is a licensed product and is not to be photocopied                                                                                      GBIGE00062MR / Published SEP 2012
                                                                                                                                                                                          Page 8
Table of Contents




                                              1.1      List of Tables
                                              Table 1:     Offshore Drilling Expenditure by Water Depth, Shallow water vs. Deepwater, Asia-Pacific, $bn,
                                                           2001–2016 .................................................................................................................................... 25
                                              Table 2:     Offshore Wells Drilled, Asia-Pacific, 2001–2016........................................................................... 26
                                              Table 3:     Offshore Wells Drilled by Country, Asia-Pacific, 2001–2016 ........................................................ 28
                                              Table 4:     Transocean Ltd., Rig Fleet Summary for Asia-Pacific, 2011 .......................................................... 29
                                              Table 5:     Noble Corporation, Rig Fleet Summary for Asia-Pacific, 2011...................................................... 29
                                              Table 6:     Diamond Offshore, Rig Fleet Summary for Asia-Pacific, 2011 ...................................................... 30
                                              Table 7:     Ensco International, Rig Fleet Summary by Water Depth for Asia-Pacific, 2011 .......................... 30
                                              Table 8:     Seadrill, Rig Fleet Summary for Asia-Pacific, 2011......................
								
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