sagia presentation on energy sector_final
TRANSCRIPT
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Energy sector in GCCFinancing the change toward an integrated value chain
12th March 2013
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2013 World Gas Reserves
GCC Oil & Gas
15
5
9
9
11
18Others
China
2USA 1
Russia
Iraq
Iran
Canada
GCC30
Venezuela
GCC is a major contributor to world economy
~3x
GDP
1.9%
Population
0.7%
7.9
6.5
5.2
4.3
2.3
1.5
China
India
GCC
Brazil
USA
UK
100% = 1638 Bn bbls
100% = 6,793,369 Bcf
21
4 4
17
25
3 3United StatesNigeria
Others
23GCC
Iran
TurkmenistanVenezuela
Russia
2013 World Oil Reserves
SOURCE: Oil & Gas Journal, Tecnon, United Nations, Team analysis
GDP Growth (real),
GCC GDP & Pop. as a % of World GDP & Pop.
%
2011-2016
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GCC is also a very competitive and attractive business location
65
115
205
225
560
750KSA
Bahrain
Oman
Kuwait
Qatar
UAE
Kuwait
Lebanon
Oman
Qatar
Saudi Arabia
UAE2
Bahrain
JordanIranIraq
Yemen
Siria
Palestian
Saudi example
Population is distinctly youthful - 30% of Saudis betweenthe ages of 15 and 29
Starting a business used to require 13 procedures in 2006;now it takes only 3
The time to start a business fell from 39 days in 2006 tojust 5 days in 2012
1 Projects that are planned or underway - public spending programs on infrastructure, education, and health
2 Survey from June 2012; http://www.doingbusiness.org/rankings
SOURCE: MEEDProjects, Samba 2012-2016 Report, Team Analysis, World-bank reports
22
22
xx
xx 2013 Ease of doing business rankings2
26
26
40
40
82
82
47
47
42
42
GCC Total Population: ~47 million Public Spending,1 USD Bn
Local Workforce and Reform Facts
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Nominal GDP
Percent, 20111Country
Oil Exports
% of Total Govt
Revenue
8080
4040
8080
7070
7070
8484
The energy sector is prime driver of our economy and
competitive advantage
SOURCE: CIA World Factbook; Economist Intelligence Unit
1 Oil/non-oil GDP split based on 2010 data for Saudi Arabia, UAE and Bahrain. Estimates for other countries.
2 Includes oil, gas, and refined products
3 Primarily includes construction, real estate, transportation and communication, and banking sectors
11
12
5
8
10
13
10GCC 10045 38 6
Bahrain 10030 57
Oman 10041 40 9
Qatar 10068 24
Kuwait 10055 40
UAE 10030 43 15
Saudi Arabia 10046 38 5
Hydrocarbon2
Other Non-Hydrocarbon3
Trade Manufacturing
Source of
competitive
advantage
Source of
competitive
advantage
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Regional players have successfully taken initiatives, structured
partnership and even made some acquisitions recently to grow
local content
SOURCE: Press Articles; Team Analysis
Company Successful Initiatives & Partnerships
TAQA in Saudi Arabia has subsidiaries that are partnering withprominent service providers, such as Schlumberger and CCG Veritas
TAQA in Abu Dhabi was founded in 2005 and has made largeacquisitions to get onshore and offshore production assets
However, there are few local significant oilfield service and equipmentproviders in the region and international companies capture >80% of
NOC spend
NOCs focused on training and development of local workforce
Saudi Aramcos General Engineering Services Plus (GES+)initiative requires that the majority of engineering services
requirements to be conducted in KSA
The ADNOC Sustainability Performance Initiative was launched toassure a homogeneous balance between the communitys needs
and Earths resources
Qatar Petroleum is working towards an Oil & Gas Sector National
Workforce Development Initiative to improve skill shortages andgaps that limit performance and business objectives achievement.N
OC
s
OFSEComp
anies
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The energy sector is strong but still young in many aspects
84% of GCC petroleum exports is crude oil (89% for KSA)
Only 25% of basic petrochemicals produced in GCC are exported
Very little engineering activities take place in GCC for example incase of KSA less than 20% of engineering is done locally
Most of the R&D and education capabilities are still in early stagesas the majority of O&G related institutions were established after
2000
SOURCE: GPCA 2012, institution websites
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6SOURCE: Team Analysis
Value chain analysis for oil field product categoriesLimited Activity
Reservoir/
Seismic
Oilfield product categories value chain
National OilCompanies
Regional
OFSE
companies
Intl OFSE
companies
with
regional
offices
Intl OFSE
companies
outside of
region
Type
of Company
Drilling Equip
Manufacturing
Downhole &
Well Services
Other Drilling
Services
Field Ops &
Transportation
Strong presence
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Distribution of spend on large CapEx projects
1 Some pre-engineering, engineering, and procurement activities happen in parallel
NOT EXHAUSTIVE
Total
184
GCC
34
Foreign
based in GCC
36
Foreign
114
Weatherford
TPIC
PTT
Daqing
Daelim
Iraqi Drilling
Company
Halliburton
Baker Hughes
China Petroleum
Hyundai -
Snamprogetti
STX
Sonangol
Schlumberger
Global Petro
Kish
SK E&C
Samsung
Petrofac
Foreign GCC
SOURCE: Zawya
Oil and gas and petrochemical project mix among EPC contractors
USD bn, active projects, varying end dates
CCE
MMG
JGC
Al Ahmadiah
Jv of Almeer
and Fluor
Kuwait
Zamil Group
Kharafi
National
Occidental Middle East
JV of Schlumberger and
Iraqi Drilling
Saipem SpA Kuwait
Samsung Saudi Arabia
Company Limited
McDermott International
Middle East JV of Chiyoda - Qatar
and Technip Doha
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Isolated actions to
develop the local
industry, often
leveraged by foreigncapital to boost use
of local workforce
and improve local
infrastructure
Clear view on supply
gaps and programs
initiated to address
the gaps. E.g.,minimum local content
requirements to bid
for exploration and
acquisition of blocks
Clearly defined and
implemented strategies
based on supply gaps.
High-level of professionalqualification, import
substitution and
technology development
initiatives
Supply industry at world-
class level (competitive
to export goods and
services). Achieved highemployment generation,
maximized income and
limited local content
incentives
Local contentmaturity level
National industrialdevelopment
Emerging localcontent model
Basic localcontent model
Isolated initiativesfor the local industry
Compared to other countries with similar natural reserves GCC countries
are lagging behind with regards to local content development
SOURCE: Accenture analysis, Press search
NorwayUK
Tanzania
Indonesia
South Africa
Colombia
Trinidad
& Tobago
Nigeria
Malaysia
Angola
Mexico Brazil
GCC
China1
1 Follows different economic model focused on exporting low-end goods
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Active projects in GCC by sector, 2012
USD bn
We must leverage heavy spend on the sector to build local
economy around energy sector
242
124
104
141
Total
611
Power
and water
Pet-chemRefiningOil & gas
upstream
SOURCE: DMS Projects, Source: Rystad Energy
CapEx expected to grow at
~3.6 % p.a till 20201CapEx expected to grow at
~3.6 % p.a till 20201
1 Combination of expected CapEx growth in onshore and offshore spend till 2020
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Some thoughts on actionable localization programs
Themes Description
Structured national /
regional manpower
plan for oil and gas
sector
Regional and/or national level planning exercise to identify andfill skill gaps to meet demand over the next 10 years
Partnership with international institution to train local talent ona wide range of skills over a longer time frame
Enhanced
manufacturing
capabilities
Focus on developing local manufacturing capabilities for oilfield equipment e.g. tubular goods, drilling equipment etc
Develop cluster program and strategy procurement to enableattraction of leading manufactures
Localization policy
mindful of need to
optimize development
Policy guidelines to ensure meaningful share of local contenton manufacturing and services. Examples mandating:
- % of engineering done locally- % of work awarded to locally manufactured materials- % of work to SMEs
Leading edge
technology
development through
R&D
Development of technology and engineering skills for oil & gassector (e.g. for oil field service equipment) staring with low to
medium complexity engineering
1
2
3
4
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In conclusion,
Energy sector is a key enabler and source of pride forthe region, yet it remains attractive and young for
investors across the value chain. This is an opportune
time for investors to leverage and build on an already
strong foundation
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Back up
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GCC countries play a much larger role in the global economy
than their size may indicate
SOURCE: 2011 United Nations data
2011 GDP
USD Bn
GDP
Rank2011 Population
Millions
Population
rank
26
73Oman
KSA
339
597
Kuwait
UAE
161
173Qatar
Bahrain
20
30
51
54
62
93
43
94
132
148
131
1551.3
3.4
3.6
1.9
8.3
28.1
GCC share of global GDP is
~3x share of global population
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We have not built sufficient capacity to leverage our natural
resources; GCC has the lowest refining capacities compared to
leading oil
SOURCE: Oil & Gas Journal , OPEC, 2010 BP Statistical Yearbook
21
34
41
58
168
281
62
52
28
18
Saudi Arabia
UAE
USA
China
Canada
Iran
Russia
Venezuela
Kuwait
Iraq
The GCC countriesare the lowest
among the top
producers in terms
of refining capacity
as compared to oil
produced
Among developingcountries,
Venezuela, Iran,
and China are also
way ahead of the
GCC
Refining Capacity vs. Oil Production
Percent
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1515SOURCE: Press clippings, Tecnon, Team analysis
Downstream3Upstream2
Example ; For hydrocarbon-based petrochemicals, the focus
today is on base chemicals upstream step
1 Based on 65 petrochemical products produced in GCC (excluding speciality chemicals)
2 Basic petrochemical= 2-3 production steps from cracker/aromatics unit
3 Rest of petrochemicals, no converted products
99 98 96
100% =
2015F
112
4
10
87
2
2005
46
1
PETRCOHEMICALS
GCC petrochemicals capacity1
Mtpa
Small capacity
market share in
value chain
steps withhigher margins
Globally,
downstream accounts
for >15% of total
capacity
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We have also not invested enough to build local HR capabilities
in-line with the importance of energy sector; Example on
petrochemicals
SOURCE: Tecnon, Federal statistical office, Team analysis
~10
2 - 3
Despite 3x relative GDP contribution of petrochemical
industry in KSA compared to Germany, KSA will add 12x
Germanys capacity
Additional chemical
engineers between
2013 and 2020
No. of graduates(thousands)
1 Non oil and gas GDP, direct contribution
but only 30% of their
chemical engineers
ESTIMATES
2011 petrochemical
GDP contribution
1
Percent
1.5
4.5
Germany
KSA
~1.5
~15
Petrochemicals
capacity addition
between 2013 and 2020Mtpa
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Brazil, Norway, and China have successfully demonstrated how
local content development can be achieved
SOURCE: Team Analysis
Background
Applicability
Cluster & Technology
Driven Approach
Regulation & Target-Driven
ApproachCreation of Big National
Champions Approach
Major discoveries in pre-
salt basins with significantpetrochemical resources
prompted action to develop
local capabilities
Prominp program launched
to ensure long-term survivalof local O&G industry (25
sectors & 185 employment
categories identified aiming
to deliver 250,000 trained
people by 2015.
No direct regulation ofmanpower, but instead oflocal content (up to 65% of
goods and services used in
the oil industry must be
produced in Brazil).
In 1970s-80s, the
Norwegian governmentdeliberately pushed local
capabilities in the E&P
sector through its prefe-
rence for local companies
Statoil is the NOC, and it
develops new technologyventures. Recent
successes include pipeline
rehab and tong to handle
complex casing operations
Schlumberger invests 12%of R&D in Norway
State owned enterprises
CNOOC and CNPC havebeen acquiring capabilities
and expanding through
smart acquisitions and
innovation investments
CNOOC recently acquired
a Norwegian drillingcompany to get deepwater
equipment and expertise
CNPC invests and recruitsfrom national R&D
institutions as well as
working with foreign
contractors for skills thatthey lack internally
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GCC countries therefore need to make strategic choices by
targeting a set of industries to diversify their industrial base
SOURCE: Hausmann and Klinger (2008), drawn from the 2012 Growth Ventures study:A View from Economic Complexity, prepared for National
Industrial Clusters Development Program
Low
Low economic complexity, with few
nearby opportunities for
diversification
Low economic complexity, but withmany nearby product opportunities
to move into
High economic complexity, andmany products achievable given the
national industrial capabilities
High economic complexity, but with
few remaining opportunities for
diversification
Strategic choices
Parsimonious industrial policy Natural diversification
Competitiveness policy
Proximity of new opportunities to existing
products and capabilities
High
Current level ofcomplexity in
the economyLow
High