Oil & Gas Industry Update

1. Oil & Gas Industry Update

2. Thanks to…

3. Oil & Gas Industry Drilling vs. Production

4. Production Side, NDT Requirements: • Online Corrosion Monitoring • Pipeline Inspections (Corrosion & Erosion) • Pressure Vessel Inspections (API/ASME) • Structural Inspections (Jacket, Platform, Semi sub, Jack-up, Hull) • Cargo Tank Inspection FPSO, (IACS Class Society Requirements) • Lifting Gear Surveys (Loler) • Cranes, Flare Booms • Plus others…

5. Drilling/MODU Side, NDT Requirements: • Derrick Inspection (API) • Drilling Handling Equipment (API) • Structural Inspections (Drillship Hull, Semi sub, Jack-up) • Lifting Gear Surveys (Loler) • HP & LP Pipeline Inspections (Corrosion & Erosion) • Rig Service Pressure Vessel Inspection (Class Requirements) • Cranes, Flare Booms • Plus others…

6. Brent Crude Oil Price & Oil Industry Downturn

7. HISTORICALLY 1860’s to 2014

8. Brent Crude, 5 Year Trend

9. NCS Drilling Rig Utilisation

10. Worldwide Drilling Rig Utilisation (early 2017)

11. Worldwide Drilling Rig Utilisation (2017) Rig Utilisation Has Stabilised, but not had much Growth…

12. Worldwide Drilling Rig Utilisation (2018) Inventory of Rig Requirements Worldwide: (includes prospects, market inquiry/expression of interest, pre-tender or tenders) The RigLogix data base contained 390 noted requirements with a start date of Dec. 25, 2017 or later… Start dates in the first-half of 2018: 202 68 projects in the pre-tender or tender stage, meaning a rig selection is imminent or fairly close. Asia-Pacific region accounts for 21 of these (but delays are commonplace in this region.) Africa and the North Sea also have double digit requirements where tender activity is ongoing. The remainder of the projects are prospects, commitment wells or expressions of interest, meaning the start dates for most will slide into the final six months of 2018 or even beyond.

13. Location

14. Rig Hire Day Rates (2017) The Ripple Effect of lower day rates, is lower margins for NDT Companies and lower wages for employees…

15. However, there is light at the end of the tunnel…

16. One of the main reasons for lack of production output for 2017 was the crack in the forties pipeline which shut the North Sea export line for 3 weeks. • October: Borr Drilling placed orders for 9 new jackups • Nov/Dec: Netherlands, Hansa Hydrocarbons success with Ruby Field Discovery End of 2017

17. OPEC (Organisation of the Petroleum Exporting Countries) commit to maintaining supply limits in place through 2018, for a second year, to reduce a price denting glut of oil currently held in storage inventories worldwide. • OPEC controlling production rates to drain reserves. • Oil hits $68/Barrel, highest price since May 2015 • First New Build Rig of the year leaves Keppel Fels shipyard, (at its peak in 2013 Keppel Fels produced 21 rigs in a year.) • Maersk Announces 4 year contract with Tullow Ghana • Forties Platform Flare relit following shutdown due to Forties Pipeline leak • Norway, increased exploration in the Barents Sea test wells Jan 2018

18. North sea Oils Firms plan more exploration in the north Sea • BP announce 2 huge finds in North Sea & WOS that could extend beyond 2050 • BP announces it expects to double production by 2020 • Hurricane energy announce large find West of Shetland, FPSO being built in Dubai will be on site Q3 2018, and production begin Q1 2019. Feb 2018

19. Wintershall to expand production in Germany • Oil and Gas Authority (OGA) announce production expectations through to 2050 will be in on excess of 11 Billion Barrels of Oil • The Danish Energy Agency has approved the A.P. Møller – Mærsk’s proposed sale of its subsidiary Danish exploration and production company Maersk Oil & Gas (Maersk Oil) to global oil major Total for $7.45bn • International Energy Agency advised that the downward trend, may be about to turn. Mar 2018

20. Norway Minister of Petroluem and Energy commit to increasing hiring more people into the O&G industry, • “It’s hard to imagine that all the 50,000 jobs that disappeared during the industry’s downturn will be brought back,” Mar 2018

21. COSL Prospector currently on route to Bergen… Mar 2018

22. So how does all of this effect the NDT Companies…?? • Cost Cutting • Lack of investment into Assets • Reduced Contracts awarded • Tightened Budgets • Reduced PO Values • Drives down wages….

23. Most NDT Companies in Aberdeen expect there to be an NDT Skills Deficit in the near future (12-18 months) With some companies already struggling to find suitably qualified technicians for ongoing projects.

24. The unique problem faced by the offshore industry, is bed space… Bed space offshore is paramount, and NDT teams are required to consist of fully qualified, multi disciplined technicians.

25. Global Inspection Contracts

26. Turnaround evident: • Increased Interests, • Increased inspection contracts being awarded, • Increased reactivation of stacked rigs returning to service.

27. Hopefully, the trend continues

28. PCNISI UT Qualification in Corrosion & Erosion

29. The corrosion problem has not gone away.

30. Some operators guilty of turning a blind eye on NDT certification requirements…

31. Still no uptake from Operators due to continued Industry downturn and ongoing cost cutting.

32. May 2017, the Brent Charlie evacuated due to a Gas Leak

33. RBI Inspections/ ISO 31000, API 580, DNV-RP-G101

34. Should RBI be a potential area for PCN Certification in future..?? Thoughts..??

35. Question time

36. Thank you for your time.