An Industry Perspective - SchlumbergerTom ZimmermanDirector Of Research Ridgefield Connecticut & Schlumberger Fellow

Oil Demand versus E&P Expenditures

BP Statistical Review, IEA Oil Market Annual Summary, OPEC Secretariat, Solomon Smith Barney. Data Revised March 2005

Challenges To Growth In Supply

Investment levels remain insufficient for industry needs.Decline rates gain in significance.New exploration areas present issues of access and risk.Investors view commodity price levels in the short term.Service sector constrained by capacity and people.

Challenges for the Service Industry

Offshore rig capacity constrained until 2007 or 2008 while lack of trained professionals may delay projects – neither will slow growth.

Increasing exploration – both brownfield and greenfield – will need a changing technology mix.

Digital enablement of operations and IPM-type services will make more effective use of industry professionals.

Technologies for unconventional hydrocarbon recovery and production will become more and more important.

The Supply Side Response

Industry now more sophisticated than in previous cycles.Geographical access more open than five years ago.Exploration activity showing signs of accelerationNatural gas development has advanced in breadthTechnology continues to contribute to industry economics

2005 – A Whirlwind View

Oil demand and supply both grew by 1.3% with supply growth limited to OPEC production – non-OPEC production was flat.

Supply hit by hurricanes, and constrained by slower growth in Russia, no improvement in Iraq, and shortages of rigs and people.

Saudi Arabia announced massive investment in development of new capacity requiring substantial rig count increases.

Seismic activity grew dramatically with even higher growth to come.Renewed exploration efforts underway in many areas.

North America– Accelerated growth in high risk exploration.– Continued exploitation of gas

opportunities.– Rejuvenation of mature basins by small

and mid sized independents.North Africa

– NOC activity and IOC exploration work following license round driving growth in Algeria. Activity in Libya will be similar both in scope and timing.

Growth in 2006 by Geography

Growth in 2006 by Geography

Russia– Growing demand for IPM type work and Drilling & Measurements services.– ESP manufacturing facility opened.– Training center opening end 2006.Middle East– Strong growth driven by Saudi Arabia where rig count has been increasing by ~50% year on year – 2004 to 2005.

Global Reach and Culture

Source Company Data

Schlumberger R&D CommitmentSLB OILFIELD SERVICES R & D EXPENDITURES VS TOTAL DRILLING RIGS

0

100

200

300

400

500

600

79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 0 1 2 3 4 5

Tots

l Dril

ling

Rigs

0

1000

2000

3000

4000

5000

6000

R &

D E

xpen

ditu

res

$mm

Growth through Technology Leadership

5 Research Groups21 Major Product Development Centers25 Manufacturing Centers

2,600 People in Product Development3,700 People in Manufacturing

$506 M Investment in R&E in 2005

500 Projects in Product Development$1.9 B in Manufactured Products

Source: Company Data

Technology Needs and Drivers

Scanner Wireline New TechnologyWhat?– New –generation wireline services that

make true 3D measurements of formation and fluid.

– Technology enables measurements deeper into the formation.

– A family of services the first three of which provide resistivity, sonic and magnetic resonance data.

Why?– Increases reservoir understanding– Reduces risk associated with more

complex reservoirs and smaller hydrocarbon accumulations

Scope MWD/LWD Technology

What?– State-of-the-art formation evaluation integrated

MWD/LWD tools that combine measurement sensors.

– Higher efficiency and greater reliability through fast rigup and performance measurement and monitoring.

– New measurements including formation pressure and deep electromagnetic imaging-while-drilling.

Why?– Well placement in development of smaller and

more complex reservoirs.– Faster more efficient drilling.

Digital Enablement-Real-Time Operations

What?– Integrates communications technology with

oilfield equipment to enable connection of field operations to remote support centers where specialist staff are available

– Includes workflow processes to identify, diagnose and suggest remedies to operational issues.

– Provides remote technical expertise.– Supports less-experienced field crews.Why?– Provides a technology-driven response to

the demographically-limited workforce.

Oilfield Technology Percentage Growth

506.70.39.8-2.721.9Production Testing7613.514.713.7-9.419.4Wireline Logging

7516.59.7-2.20.920.6Geophysical Equip. & Services

10111.917.910.5-0.423.3Artificial Lift10520.816.59.5-2.520.9Logging While Drilling11422.417.38.5-3.824.1Completion Equip. & Services13826.521.819.2-16.532.8Pressure Pumping14026.526.216.7-19.535.8Coiled Tubing Services14225.816.09.21.130.4Directional Drilling200620052004200320022001

Summary

Expanding production capacity through stemming decline, improving recovery and exploiting reserves creates an environment in which we will thrive.

Within this environment, the development and application of appropriate technology will be the key to our shared success.

Commitment to technology development and application has always been and will continue to be our primary focus.