Before we begin

Transcription

1 Before we begin 1

2 Before we begin

3 Unconventional Oil & Gas Series: Deepwater and Arctic Drilling Alberto Serna Martín Associate Analyst, Sustainalytics Jeremy Kent Research Associate, Allianz Global Investors - RCM June 13, 2012

4 Speakers Moderator: Presenters: Hugh Wheelan Managing Editor, Responsible Investor Alberto SernaMartín Associate Analyst, Energy Sustainalytics Jeremy Kent Research Associate Allianz Global Investors - RCM 4

5 Agenda Background Risks and implications Recent controversies and risk mitigation Investor perspective (Jeremy Kent from RCM) 5

6 Background 6

7 Deepwater Production GULF OF MEXICO Production Anadarko Apache BHP Billiton BP Chevron Cobalt ConocoPhillips Devon Energy ENI ExxonMobil Hess Marathon Marubeni Murphy Newfield Nexen Noble Energy Petrobras Plains Repsol Royal Dutch Shell W&T Offshore Woodside Production Petrobras Royal Dutch Shell chevron Devon BG Group BRAZIL Exploration Total Anadarko Devon Repsol/Sinopec Statoil Sonangol Hess Ecopetrol Woodside ANGOLA Production Sonangol Chevron Total ENI BP Statoil ESSO Galp Exploration Devon Cobalt Repsol Marathon ConocoPhillips ExxonMobil 7

8 Arctic Production ALASKA BEAUFORT SEA Production BP Leaseholders ENI Royal Dutch Shell Total CHUKCHI SEA Leaseholders ConocoPhillips ENI Repsol Royal Dutch Shell Statoil GREENLAND Leaseholders: Nunaoil Cairn Chevron ConocoPhillips Dong Energy Exxon Husky Maersk Royal Dutch Shell RUSSIAN FEDERATION Near Production Gazprom Exploration Deals Rosneft ExxonMobil ENI Statoil 8

9 Offshore Oil Extraction 10 to 15 years 10 to50 years Exploration Development Production Sound waves Drilling Muds Cuttings Domestic waste Transport Discharges Produced Water Drilling Muds Cuttings Domestic waste Transport Discharges Air emissions 9

10 Risk & Implications 10

11 Key Impacts BIODIVERSITY Disturbance Planned discharges Unplanned discharges SOCIAL Contractors Communities Indigenous communities CORRUPTION Increased corruption in West Africa Use of shell companies 11

12 Increased Operational Risks Harsh and Remote Environments Reliance on Technology Increased uncertainty Failures = decreased efficiency and increased costs Ongoing R&D costs Low probability but high costs of unplanned events 12

13 ES(G) Regulatory Risk Affected Jurisdictions Revisions Moratoria Fines & Penalties European Union United Kingdom Canada Greenland China Increased costs due delays Increased compliance costs Decreased access to natural resources U.S International Maritime Organisation 13

14 Recent Controversies & Risk Mitigation 14

15 Cairn Energy plc (LSE:CNE) Lack of spill contingency plan leads to targeting by NGOs Transparency Emergency Management Disclosure and Thematic Reporting Example Good Example: Royal Dutch Shell LSE:RDS 15

16 Chevron Corporation (NYSE:CVX) Offshore spill leads to halted operations in Brazil large fines and litigations Well control Enhance drilling standards Laboratory testing of cement Improve Blowout Preventer (BOP) effectiveness Example Good example: BP s (LSE:BP) enhanced drilling standards for the Gulf of Mexico Emergency management Commit to follow IPIECA spill guidelines Pool resources Example Anadarko, Apache, BHP Billiton, BP, Chevron, ConocoPhillips, ExxonMobil, Hess, Royal Dutch Shell and Statoil (Marine Well Containment Company) 16

17 Cobalt International Energy Inc. (NYSE:CIE) Involvement in a corruption scheme with local partners in Angola Anticorruption Commitment to no bribery, no corruption, no facilitation payments Increase due diligence of shell companies Support EITI Example Repsol s (LSE:0NQG)disclosure on taxes paid to governments 17

18 Other Insights Rig Demand & Contractor Relationships Rig costs ~USD 500,000 a day, downtime is very costly Contractor selection is important: health and safety, green opportunities Deep Pockets Needed to Shoulder Risks High risk, low frequency events can be expensive Deepwater Horizon disaster = over USD 40 billion Uneven Regulatory Standards Deepwater growth in Angola and other areas with less transparent and weaker regulatory environments Mitigate with high company-wide standards (not geographic specific standards) 18

19 Potential Engagement Questions Transparency Does the company disclose information on the impacts and risks to move forward with an investment decision? Biodiversity Protection How is the company contributing to baseline environmental and biodiversity research? Does the company have a program to minimize discharges at sea? How is the company monitoring biodiversity during operations? What accommodations have been made for marine mammals? Emergency Planning Does the company have an emergency response plan? Is the plan public? Does the company have different plans for different jurisdictions? Why isn t the company applying leading practices everywhere? 19

20 Potential Engagement Questions Social Acceptance How has the local community been consulted and accommodated? How have international critics been addressed? Contractor Management Are contractors required to adhere to an audited safety and environmental management systems? Do operators and contractors complete comprehensive well-by-well bridging documents? Corruption (for offshore West Africa) Does the company have a strong culture of integrity? Is there a policy addressing bribery, corruption and facilitation payments? How are employees and contractors trained on the policies? Does the company conduct appropriate due diligence on the owners of shell companies? 20

21 Investor Perspective 21

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29 Thank you Alberto Serna Martin Sustainalytics Associate Analyst, Research Products Website: Jeremy Kent Allianz Global Investors - RCM Research Associate jeremy.kent@uk.rcm.com Website: Amsterdam ǀ Boston ǀ Frankfurt ǀ Madrid ǀ Paris ǀ Timisoara ǀ Toronto