INTSOK 12 th Annual Russian-Norwegian Oil & Gas Conference Kvaerner Concrete Solutions for Arctic Exploration Drilling, LNG and Oil & Gas Production Platforms By Erik Gulbrandsen Vice President Business Development, Russia Kvaerner Moscow Branch 22.01.2014 Agenda for the presentation 1. Kvaerner experience and contribution to the Russian Oil & Gas Industry 2. Current Arctic platforms and the potentials in Russian Arctic areas 3. Opportunities and challenges in Arctic areas 4. Kvaerner concrete solutions for Arctic areas 5. Actual GBS projects designed and developed by Kvaerner 6. Kvaerner s contribution to Russian Content in Russia 7. Cost effective Project Execution 8. Requirement for infrastructure supporting Offshore development projects 9. Summary of Presentation and Concluding Remarks 2 1
Concrete substructure solutions GBS (Gravity Based Structure) In Arctic Areas 3 Topsides, floaters & onshore facilities In Arctic Areas 4 2
The Kara Sea and Sea of Okhotsk Potentials The size of North Sea: Norwegian and UK Sector The size of North Sea: Norwegian and UK Sector Source TU Meaning: 1 installation in place per month in 30 years!! 5 World wide Arctic Platforms in operation, at location or currently in fabrication Varandei Sakhalin 2 PAB Hibernia Prirazlomnaya ExxonMobil Gazprom Lukoil Sakhalin 1 Orlan SEIC/Gazprom Sakhalin 2 LUN-A Hebron Exxon/Rosneft SEIC/Gazprom Exxon Sakhalin 2 Moliqpack Sakhalin 1 Berkut SEIC/Rosneft Exxon/Rosneft 7 in Russia and 2 in Canada Kvaerner s contribution is 5 out of 9 Platforms 6 3
Opportunities and challenges in design of Exploration Drilling and Production Platforms in Arctic Areas 1. Soil conditions and water depth 1. Limited soil data available 2. Relatively new settlements at the sea bed 3. Weak soil with limited capacity, however, feasible. 4. Water depth 5-60 meter 2. Ice loading 1. Ice conditions severe with stamukha, fresh water ice ridge action and level ice 2. Open water vary with seasons. 3. Sizing of substructure base slab versus ice loading 3. Environmental awareness 1. Sensitive to consequences of pollution 2. Rescue operations require zero tolerance 4. Logistic 1. Sizing of Topside storage areas including winterization 2. Ice management issues 3. Transportation of material and personnel 7 Advantages and features of concrete substructures Robustness for the Arctic environment Tailored made for fixed or floating structures Support large topside weight Spare capacity for topside weight increase Integrated oil, diesel and drill fluid storage Protection of risers, j-tubes, pipes Minimum maintenance (low lifecycle cost) Significant Local Content Independent of heavy lift vessels Year around drilling and relocateable GBS Adriatic LNG terminal Sakhalin 2 Sakhalin 1 8 4
10 1/23/2014 Atshore: Nakhodka / Vostochney Site establishment 9 Page 9 Sakhalin 2 - delivered in 2005 to SEIC & Gazprom Concrete works in minus 20 C degrees 10 5
Adriatic re-gas facility delivered in 2009 to Exxon Principle concept also applicable for LNG plants 11 LNG concept alternatives Conventional onshore concept Barge Float-in concept Cost and schedule lucrative with minimum in place hook up & commission. Plus substantial Russian Content Near-shore, non-arctic concept Arctic Concept Near-shore FLNG concept 12 6
Sakhalin I delivered in 2012 to ENL & Rosneft 13 Hebron GBS ongoing (Canada) for Exxon 14 7
Slide 15 1/23/2014 Concrete Gravity Base Structures gives: High National Content (Sakhalin 2 data) Materials (weight ratio) Manpower 97% Purchased In RUSSIA 3% - Imported Cement Aggregate Sand Rebar Formwork Mechanical Post-Tensioning 92% Russian content 8% - Expats All rough materials: cement, sand, aggregate, rebar, steel profile etc. All trucks (exception dumpers for basin digging), earthmoving equipment, mobile cranes and construction fleet (floating crane, tugs, barges, vessels) All personnel transportation services All Fuel, Wood, Electricity, Water, Telecommunication, Tools and majority of other consumables 95% Russian Content for GBS structures built in Russia 15 Kvaerner: EPCI contractor delivery model Long-term presence in strategic regions Local partnership/jv approach in regions of operation for project execution and construction Engineering management, execution by long term partners Self performing construction in regions of operation VOSTCO yard, Nakhodka, Russia Significant local Russian content Successful project execution is all about people 16 8
18 Aker Kvaerner 23.01.2014 Page 17 Kvaerner 2011 1/23/2014 Project development and execution in sequence: Studies Concept FEED E Engineering P Procurement C Construction Commissioning Ice resistant Exploration Drilling Platform Concept selection + FEED Period for a concept selection study: 6 month Detail Engineering Procurement Approval Process with Russian Authorities Fabrication Topside/GBS Integration Hook-up 17 Norwegian Coastline Infrastructure Coastline HSE Training (10) Major Coastline Supply Bases (8) Coastline Main Rescue Helicopter Centers (5) Major Fabrication Yards for Modules and assembly of Topsides (9) 18 9
Number of employees 1/23/2014 CHALLENGES when developing a new O&G industry ARKHANGELSK & MURMANSK REGIONS: POPULATION: ~3 mill people NUMBER OF SUPPLIERS: <50 ROGALAND REGION: POPULATION: ~0,4 mill people NUMBER OF SUPPLIERS: >500 19 Norwegian Content in Oil & Gas projects 100000 Total Suppliers Norwegian Suppliers 80000 After 10 years: 60% Norwegian Content 60000 40000 20000 1972 0 0 5 10 15 20 Years after start of the Norwegian sector SOURCE: HYDRO SURVEY, SSB 20 10
Marine operations from a Dry Dock in Far East Russia to Kara Sea Ice limit March 100+m Ice limit August - September 100+m 20-40m 37m Vilkitsky Strait 32m Northern Sea Route Ice limit August - September 50m 20m Murmansk fjord exit channel 330mw x 100mwd Murmansk PROSPECTS: Dry Dock in Murmansk 100+m Kara Gate 21m Yugorskiy Shar 13m Ob-Taz fjord 11+m Sannikov Strait 13m Laptev Strait 12m 33m De Long Strait 20m Bering Strait 30m 21 From To Distance Tow time VOSTCO yard Tow at speed of average 3 knots Sakhalin 1,2 fields 1,021 nm 14 days Magadan fields 1,290 nm 18 days Kvaerner 2011 23/01/2014 Kara Sea fields 4,950 nm 67 days Nakhodka bay exit channel 11-22m Sources: Norwegian Mapping Authority and Arctic Marine Shipping Assessment 21 Ice limit March 500 m La Peruz Strait 20+m Ice limit March Kamchatka Strait 300 m Summary of Presentation 1. Kvaerner is an EPCI contractor that offers both Substructure and Topside: Feasibility Studies and Front End Engineering Design (FEED) and Detail Engineering, Procurement, Construction, marine towing and Installation for Exploration and Production Platforms in Russian Arctic Areas 2. A Concrete Gravity Based Structure (GBS) is a durable solution in Arctic Areas 3. GBS fabrication leaves ~90% Russian content to the local Industry 4. Topside integration and mating with a GBS sub-structure is possible in Russia 5. A Re-locatable Exploration Drilling Platform will soon be concluded for operation in year around Russian Arctic Areas 22 11
Copyright and disclaimer Copyright Copyright of all published material including photographs, drawings and images in this document remains vested in Kvaerner and third party contributors as appropriate. Accordingly, neither the whole nor any part of this document shall be reproduced in any form nor used in any manner without express prior permission and applicable acknowledgements. No trademark, copyright or other notice shall be altered or removed from any reproduction. Disclaimer This Presentation includes and is based, inter alia, on forward-looking information and statements that are subject to risks and uncertainties that could cause actual results to differ. These statements and this Presentation are based on current expectations, estimates and projections about global economic conditions, the economic conditions of the regions and industries that are major markets for Kværner ASA and Kværner ASA s (including subsidiaries and affiliates) lines of business. These expectations, estimates and projections are generally identifiable by statements containing words such as expects, believes, estimates or similar expressions. Important factors that could cause actual results to differ materially from those expectations include, among others, economic and market conditions in the geographic areas and industries that are or will be major markets for Kvaerner s businesses, oil prices, market acceptance of new products and services, changes in governmental regulations, interest rates, fluctuations in currency exchange rates and such other factors as may be discussed from time to time in the Presentation. Although Kværner ASA believes that its expectations and the Presentation are based upon reasonable assumptions, it can give no assurance that those expectations will be achieved or that the actual results will be as set out in the Presentation. Kværner ASA is making no representation or warranty, expressed or implied, as to the accuracy, reliability or completeness of the Presentation, and neither Kværner ASA nor any of its directors, officers or employees will have any liability to you or any other persons resulting from your use. 24 12