1. New Markets in Offshore Industry- West Africa OSVC 2013 The Leela, Mumbai May 22, 2013 Suchint Miglani Senior Analyst miglani@drewry.co.uk

2. © Drewry 2013 2 Drewry | New Markets in Offshore Industry- West Africa Agenda Market Overview Demand & Supply Scenario Charter market Opportunities & Entry Requirements Conclusion

3. © Drewry 2013 3 Drewry | New Markets in Offshore Industry- West Africa Market Overview Demand & Supply Scenario Charter Market Opportunities & Entry Requirements Conclusion

4. © Drewry 2013 4 Drewry | New Markets in Offshore Industry- West Africa Key offshore Regions- West Africa Region Proven Reserves (Billion Barrels) Major Oil BasinsKey Players Nigeria37.2 Niger Delta, Anambra, Benue Trough, Chad, Benin, Bida, and Sokoto Nigerian National Petroleum Corporation (NNPC), Shell, Total, Eni Angola10.5 Lower Congo Basin, Kwanza basin, Namibe basin Sonangol (NOC), Chevron, BP & Exxonmobil Gabon2 Gamba/Ivinga/Totou, Grondin Mandaros, Rabi Total, Shell, Perenco and Addax Equatorial Guinea 1.1 Zafiro, Ceiba, and Okume Exxonmobil, Tullow Oil, GEPetro Ghana0.6 Inland Voltaian, Offshore Accra-Keta, Offshore Saltpond, Offshore Tano, Offshore Cape Three Points Ghana National Petroleum Corporation (GNPC) Source: Drewry Maritime Research

5. © Drewry 2013 5 Drewry | New Markets in Offshore Industry- West Africa  Africa has proven oil reserves of 127.5 billion barrels currently, accounting for 8% of the world’s oil reserves.  West Africa consists over 40% of the total oil reserves in Africa.  West Africa reserves growth by 5% CAGR for the past 20 years.  Key reserves located in countries including Angola, Nigeria, Equatorial Guinea and Gabon. Source: Drewry Maritime Research /EIA Oil Reserves - West Africa

6. © Drewry 2013 6 Drewry | New Markets in Offshore Industry- West Africa  West Africa has a significant resource potential. Almost half of the total oil production in African continent comes from West Africa.  The total oil production in the region reached 4.9 MMbbl in 2012, almost double of that in 1992.  Angola and Nigeria have been the major oil producing regions with a collective share of 90%. Source: Drewry Maritime Research /EIA Oil production - West Africa

7. © Drewry 2013 7 Drewry | New Markets in Offshore Industry- West Africa Types of Rigs deployed  West Africa E & P activities is a mix of shallow and deepwater drilling.  The utilization levels of semi-submersible and Drillships are high in comparison with Jackups  The future E&P activity is expected to venture into deeper waters therefore the share of deep-water drilling rigs is also expected to grow further. Rig utilization Source: Drewry Maritime Research Rig Snapshot

8. © Drewry 2013 8 Drewry | New Markets in Offshore Industry- West Africa Market Overview Demand & Supply Scenario Charter Market Opportunities & Entry Requirements Conclusion

9. © Drewry 2013 9 Drewry | New Markets in Offshore Industry- West Africa Demand Drivers High E&P Capex Increasing Offshore activity as onshore fields mature Robust OSV Demand High Energy demand & Oil prices Source: Drewry Maritime Research /Barclays  Global E & P spending is expected to be $644 bn in 2013, up 6.6% from the previous year.(Barclays research)  Africa E & P around 4% of the World E & P spending. Forecasted to increase by 4-5% in 2013 reaching to $25 bn.  Oil prices provide a major boost to the spending capabilities. Africa E& P Spend Vs. Oil prices

10. © Drewry 2013 10 Drewry | New Markets in Offshore Industry- West Africa AHTS deployment by Size PSV deployment by Size  More than half of the AHTS deployed are between 5-10,000 bhp.  The market progressively inclined towards high power sophisticated vessels. Approximately 20% of AHTS are greater that 15,000 bhp at present. Most of these high capacity vessels are deployed in Angola owing to the deepwater activity in the region.  Around 53% of the current PSV fleet in West Africa is above 2,000 dwt. A majority of the PSVs in West Africa are owned by Tidewater and Edison Chouest with their deployment centered in Angola and Nigeria. Source: Drewry Maritime Research Fleet Supply Pattern

11. © Drewry 2013 11 Drewry | New Markets in Offshore Industry- West Africa OSV demand pattern  The demand for AHTS mainly comes from Angola and Nigeria, which together account for 33 % of the total AHTS market in Africa. These two countries also account for 37 % of total PSV demand in Africa.  A relative growth in the supply side shows an increase of AHTS by15% & PSV by 10% CAGR for the past five years. This indicates the increase in the level of E & P activity happening in the region. OSV supply pattern Source: Drewry Maritime Research Demand-Supply progression

12. © Drewry 2013 12 Drewry | New Markets in Offshore Industry- West Africa Leading OSV players  The accelerated growth in offshore exploration in West African region has attracted major international OSV companies to explore the potential in the region.  While Tidewater, Bourbon offshore and Swire Pacific enjoy a high market share being the first entrants, a gradual inflow of newer players such as Bumi Armada, Maersk and Topaz Marine has raised the total operater base and henceforth the competitive environment within the region.  The average age of OSV’s (13.5 years) in the region has surpassed the global average of 17 years. This indicates that the older tonnage is being replaced by fresh vessels with advanced technology (DP1, DP2). Average vessel age Source: Drewry Maritime Research Major Players & Age profile

13. © Drewry 2013 13 Drewry | New Markets in Offshore Industry- West Africa Market Overview Demand & Supply Scenario Charter Market Opportunities & Entry Requirements Conclusion

14. © Drewry 2013 14 Drewry | New Markets in Offshore Industry- West Africa Historical OSV day rates in West Africa and indicative projections  Drewry is of the opinion that day rates for OSVs in the West Africa could hover around the five year average in 2013, or could stay marginally under it.  The year 2014 could see day-rates heading downwards as 80% of the current orderbook is scheduled for delivery in 2013 which might cause oversupply in the target markets.  In 2015 and 2016, we may see dayrates regain momentum as there are not enough AHTS vessels on the orderbook for 2014 and 2015 delivery. Indicative projections Source: Drewry Maritime Research Charter Market- declining yet hopeful…!!

15. © Drewry 2013 15 Drewry | New Markets in Offshore Industry- West Africa Market Overview Demand & Supply Scenario Charter Market Opportunities & Entry Requirements Conclusion

16. © Drewry 2013 16 Drewry | New Markets in Offshore Industry- West Africa OSV Fleet Ordering Pattern- Global Current Orderbook- PSV Current Orderbook- AHTS Source: Drewry Maritime Research

17. © Drewry 2013 17 Drewry | New Markets in Offshore Industry- West Africa Around 30% of vessels are aged and will be phased out soon.  OSV market is very competitive in the West African region due to the presence of major players.  The age of the vessels remains a concern, since 30% of the OSV’s are likely to phased out in the next 5 years.  An equivalent replacement tonnage will be necessary to maintain the demand-supply balance.  Additional demand will be required to fill the gap and hence the opportunity for the vessel owners, investors lies in this region. Source: Drewry Maritime Research Old is gold…doesn’t hold true here!!

18. © Drewry 2013 18 Drewry | New Markets in Offshore Industry- West Africa Although average utilization is less, the younger vessels have high share than the older ones.  Overall utilization levels in the past show a decline, but further bifurcation reveals that the younger vessels are better utilized than the older ones.  Younger and sophisticated vessels needed in the future, as the world moves towards ultra deepwater exploration.  An opportunity for the vessel owners to deploy their vessels in this region. Source: Drewry Maritime Research Younger fleet….better utilized!!

19. © Drewry 2013 19 Drewry | New Markets in Offshore Industry- West Africa CountryLocal Joint VentureRegulatory Requirements Nigeria Nigerian government exerts pressure on companies to get into joint ventures with Nigerian oil companies typically taking away 60% of equity stakes. Nigerian built vessels preferred. Local Crew preferred. Angola Angolan government makes it mandatory for companies to form joint venture, with their national oil company Sonangol. Local crew preferred, training programs for skill enhancement of local crew GhanaA joint venture with local company is preferable. Local crew preferred, training programs for skill enhancement of local crew Entry barriers

20. © Drewry 2013 20 Drewry | New Markets in Offshore Industry- West Africa Market Overview Demand & Supply Scenario Charter Market Opportunities & Entry Requirements Conclusion

21. © Drewry 2013 21 Drewry | New Markets in Offshore Industry- West Africa  West Africa has emerged as the most favourable arena for offshore drilling in the recent times.  Increasing oil and gas prospects have led to huge capital investment from leading international oil companies.  The charter market in the West Africa has been very competitive due to presence of abundant number of vessels.  Stringent regulatory norms by West African nations make the entry into African market difficult when compared with Asian and the Middle East markets.  The market is primarily dominated by players of international repute like BP, Shell, Total among others. These operations prefer OSV operators with quality tonnage and excellent operating history. Conclusion

22. © Drewry 2013 22 Drewry | New Markets in Offshore Industry- West Africa About Drewry Across four decades, our advisors have worked at the heart of international shipping and supply chains so we can apply our know- how to support client ambitions… creating a virtuous circle of knowledge and expertise. Our staff includes experienced market analysts, economists and financial planners who have had top-level exposure to wide aspects of the maritime industry. Drewry is also able to call on the services and expertise of a number of freelance consultants for projects requiring specialist knowledge. Reflecting the global nature of 21st century maritime business, we have management centres in London, Gurgaon in India and Singapore. Each base has permanent and associate teams drawn from the broad sweep of shipping, ports and supply chain management including people experienced in working with different nationalities and cultures. Whatever the issue, wherever the problem, we can be on the spot or operating remotely, whenever the client need arises. That is why the leading shipping companies, port authorities, government departments and financial institutions choose Drewry. The Drewry imprint on any report or consultancy work is accepted throughout the global shipping industry as a sign of quality and authoritative research and analysis. Since its founding in 1970, Drewry has grown into one of the world's most respected international maritime research & advisory providers.

23. © Drewry 2013 23 Drewry | New Markets in Offshore Industry- West Africa Sector based expertise Integrated advice: A client might approach Drewry needing advice on vessel acquisition vs chartering. We can analyse the market sector in which the client operates; make recommendations on the most suitable vessel type; access information on vessels for sale; identify a range of finance options; advise on pricing structures; help input effective management systems, structure attractive remuneration packages. And after a certain length of time in operation, we can benchmark commercial and operational performance. At Drewry, we can advise on all major sectors of shipping with research analysts and business consultants in every field.

24. © Drewry 2013 24 Drewry | New Markets in Offshore Industry- West Africa Research Through Drewry, clients have unparalleled access to shipping intelligence and the reassurance that our people are the best informed in the business. Research and analysis lie at the heart of everything we do. The result is that our advice is never speculative but evidence-based and our analyses are data driven. That is why, at Drewry, we place such importance on research. To support the research, we have the most comprehensive and up-to- date maritime databases available anywhere. And we have a global network of contacts that reaches across all major shipping sectors, organisational structures and management functions. Drewry can apply know-how to support client ambitions… creating a virtuous circle of knowledge, expertise, problem solving, implementation and results

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