Purpose

1. New & Old World of Offshore EnergyStockholm, European Offshore Wind ConferenceSeptember 2009Nial McCollamManaging DirectorSenergy Alternative Energy

2. Purpose • Review key factors in 40 years of offshore oil & gas • Discuss potential relevance for OSW • Explore potential “synergies” • Highlight where two industries may be just plain different

3. 40 Years of Offshore Oil & Gas 1960’s 1970’s 1980’s 1990’s 2000’s • Focus on “time to first oil • Bespoke designs • Escalating costs • High oil prices masked escalating costs • Oil price crash late 80’s • Huge shake-out • Piper Alpha tragedy • Major reshaping of the industry • Initiatives such as CRINE • Evolution of contracting strategies & structures • Service sector felt squeezed • Arguably this phase extended N.Sea viability • Increased focus on life cycle cost • Shallow water • Harnessing Gulf of Mexico experience • Moving North… • Deeper water, bigger waves, longer distances • Under-estimated costs • Projects 1-2 yrs over-run • High crude price saved a number of projects

4. Price volatility has been a key feature 70% swing

5. Grand Prix level of acceleration: £0 to £13Bn p.a. annual investment in ~ 6 yrs OSW investment by 2020+ if UK targets to be met £ Billion per annum OSW investment by 2015-2020 if UK targets to be met Current level of OSW investment Source: UKCS analysis - Professor Kemp, University of Aberdeen

6. Investor returns and government “cut” rose just as quickly What’s the reciprocal “tax investment” required to enable multi-giga-watt expansion? Source: Professor Kemp, University of Aberdeen

7. However, production costs have risen steadily – influenced by several factors • Increasing water depths • Supply chain supply-demand fluctuations e.g. drill rigs • Smaller discoveries / reservoirs • Supply chain cost escalation: commodity and people costs Source: UK government (DECC) statistics

8. Already we see four key differences between O&G and OSW • O&G project pay-back almost instantaneous once “first oil” is achieved • OSW has long project pay back periods • Government aligned & incentivised by huge tax raising opportunity • Governments must invest to achieve low carbon objectives • The product (oil) subject to significant price volatility • Will “green power” price be stable or volatile? • Experience curve gave access to previously uneconomic resources – but costs rose over time • OSW seeks to achieve long term cost-of-energy reductions

9. Despite differences – much to be gained from Oil & Gas hard won lessons 40 Years of Experience Over 100,000 full time professional eng’rs & technicians More than 4 million years of aggregated experience • Our research explored four areas of this experience : INFRASTRUCTURE TECHNOLOGY ECONOMICS COMMERCIAL

10. 1) Technical & Technological • Seismic data acquisition and processing • Subsea engineering and technology • Directional drilling; horizontal wells • Floating production & storage • Deeper water – structures, installation etc • Monitor While Drilling (MWD) and rotary steering • High Press High Temp (HPTP) developments All the above under-pinned by…. • IT and Computational power • Materials science • Decades dealing with harsh offshore environment

11. 2) Commercial and contractual • Partnering a critical building block for North Sea O&G developments • Close partnerships have worked well (but not in all cases) • Fragmented supply chain – but gives flexibility & adaptability • Increased recognition (project) owners were best placed to manage risk • LOGIC (1) CRINE(2) initiative stimulated supply chain collaboration • Drove competitiveness - by reshaping contracting strategies & approach • Alignment contracts increasingly used • 'Promote' licenses stimulated development (but tension between Oil & Service Cos) SUPPLY CHAIN EFFI- IENCY Source: (1) LOGIC = Leading Oil and Gas Industry Competitiveness (2) CRINE = Cost reduction initiative for the new era

12. 3) Economics and Investment £ • Oil price volatility massive influence • Increasing sensitivity as fields became smaller • Tax changes had large impact • “Boom and bust” nature due to oil price swings • Divestments by major oil cos a significant feature • Open the door to smaller (lighter footed) independents

13. 4) Infrastructure & logistics • Infrastructure available to wide range of developers/operators • FPSOs and Hub platforms provided flexibility • “Pipeline access code” major positive step • But developing “the code” took too long • Infrastructure not held too tightly by dominant “players”

14. O&G industry “interviewees” see a number of barriers to their increased involvement in OSW • Reliance on government represents too high a risk • Too busy on oil & gas opportunities to pursue OSW • Economics of OSW not attractive enough vs O&G opportunities • Sector will be dominated by power cos: O&G cos focus on O&G • Doubts over feasibility of OSW technology at full commercial scale Decreasing Consensus Amongst Respondents Source: Senergy industry survey and analysis

15. Individual’s from OSW industry perceive similar challenges – but some difference in views Shared View • Reliance on government represents too high a risk • Bureaucracy and inefficiency of related planning processes • Lack of T&D infrastructure and/or clear policies to provide such • O&M of many 1000s of offshore assets will be too challenging • Construction risks in North Sea weather window to high • Technical or technological issues not yet fully addressed Source: Senergy industry survey and analysis

16. Key barriers to harnessing synergies between OSW and O&G • Oil cos and power cos will find it inherently difficult to partner one another • Oil and gas technical solutions and equipment seen as too expensive • Perceived differences in attitudes or approach to HSE • Oil and gas resources (people) perceived as too expensive • Cultural & commercial approach of O&G vs Power Sector is too different ?

17. Conclusions • Not just about technological and operational experience • Commercial and contractual developments perhaps most significant • Economics & investment different but key factors inherently similar • Infrastructure very different but again some pertinent experience • Collaborative leadership critical – particularly when time’s are toughest • Finally, our research suggests some distance between the 2 industries but individuals are eager to cooperate • It’s imperative we harness the 4+ million years of experience

18. Senergy Overview • Senergy is an established energy service co: £75m turnover and more than 400 engineers • Working extensively across oil&gas and renewables • Delivering technical, engineering and commercial services to complex & challenging energy projects: • Conducting 100s of offshore surveys & geotech studies p.a. • Engineering & advisory > 50% of UK’s wind projects to date • Staff with centuries of accumulated offshore experience • Senergy’s committed to a diverse energy future • We believe OSW is an essential new frontier • We’re working hard to help our clients develop the full potential of this sustainable resource