CORSO DI

“ STRATEGIE DI INNOVAZIONE TECNOLOGICA“

Process Plant Industry Market

18 Novembre 2016

Dott. Dario Pirovano

 Oil & Gas Value Chain Segments

Upstream Midstream Downstream End-users

Onshore LNG (Liquefaction
Refining &
Conventional On/Off, Regas On,
FSRU, LNG Storage) Petrochemicals

Onshore Pipelines
Gas-to-Liquid
Unconventional (On/Off)
(GTL)
Shale Gas /
Oil Sands
Tight Oil
Small LNG

Fertilizers
Offshore Storage and (Ammonia & Urea)
Shallow Water Platform, Terminals
Subsea Field Dev’pm., FPSO
/FPU/TLP
Oil & Gas Industry Outline
Supply Chain Structure

3
 Petrochemical Industry
Major building blocks

Steam Cracking

Olefins Polyolefins

PDH

MTP® MTO®

Syngas Methanol

Ammonia -Urea Fertilizers

biomass
Biochemicals/
Biofuels

Not exhaustive
Petrochemical Industry
Products

5
Derivates Outlook
Global Demand

6
 Oil price (WTI) and Gas price (HENRY HUB)
2012 - YTD
Oil Price (WTI) Nymex

“Lower For
Longer”
Scenario
Gas price (HENRY HUB)

Source: Bloomberg 7
Shale Gas Development

8
Unconventional Gas

9
“Lower for Longer”

10
 “Lower for Longer”
Impact on upstream capital expenditure

“Cost deflation,
efficiency
improvements
and reduced
activity levels
might lead for
the first time to
three
consecutive
years of
investment
decline” - IEA

Source: IEA, WEI (2016) 11

 “Lower for Longer”
Impact on downstream capital expenditure

Refining (2015 – 2020) Petrochemical

Total spending = 320 bln USD Total spending = 325 bln USD

100
80

Data in bln USD

80 69
63 59
60 54

40

20

0
2014 2015 2016F 2017F 2018F

 CLEAN FUELS LEGISLATIONS

 LOW QUALITY OF CRUDE OIL

 NEW CONFIGURATIONS

12
 Major Oil&Gas, Chemical and Petrochemical
Listed Companies (1/2)

Total:
1H 2014 – 2,191.2 bn/USD
Major Oil&Gas, Chemical and Petrochemical Listed Companies
1H 2016 – 1,719.4 bn/USD
Capitalization (in bn USD)
500
429.4

450
388.7

400

350
262.3

247.9

300
231.2
219.3

197.8

190.3

250
172.2

200 1H 2016
120.2

116.6
111.4

106.8

100.7
150

98.8
1H 2014

91.8
86.2

82.9

70.3

64.9

61.4
59.9
57.9

56.6

56.0

54.7
100

50.1

46.1
42.3

35.9
50

Source: Bloomberg 13
 Oil&Gas, Chemical and Petrochemical
Listed Companies (2/2)
Total:
1H 2015 – 540.0 bn/USD Other Oil&Gas, Chemical and Petrochemical Companies
1H 2016 – 450.7 bn/USD Capitalization (in bn USD)
RosNeft 54.7
38.6 44.5
Petrobras 53.4
32.1
Praxair 34.2
LyondellBasell 31.2
48.5
27.7
PPG Industries 31.1
25.9
Linde 35.3
24.6
Shin-Etsu Chemical 26.5
17.6
Sasol 24.1
15.7
Akzo Nobel 18.1
15.4
Formosa Plastics 15.0
14.9
LG Chem 16.4
13.9
Evonik Industries 17.7
13.6
Potash Corp 25.8
13.5
Toray Industries 13.6
Agrium 12.4 15.2 1H 2016
11.2
SK Innovation 10.0 1H 2015
Koninklijke DSM 10.0
10.1
Solvay 9.8 11.7
Asahi Kasei 9.6 11.5
Celanese 9.5 11.0
Yara 8.6 14.3
Lotte Chemical 8.3 8.7
Sumitomo Chemical 6.6 9.8
Mitsubishi Chemical 6.6 9.2
Braskem 2.5 4.0
Lanxess 4.0 5.4
Shenergy 3.9 7.3
Mitsui Chemicals 3.63.7
Huntsman Corp. 3.2 5.4

0 10 20 30 40 50 60

Source: Bloomberg 14
 Expected Growth of Global CAPEX for Oil&Gas
Plant Development is ~ 0% CAGR 2014 - 2016

Global CAPEX for Oil&Gas plant development, Billion USD

Note: not considering Exploration and Drilling CAPEX

Source: SupplHi analysis on public data, SupplHi Projects Database 11/2015

15
 Oil&Gas E&C: International players...
1H 2016 vs 1H 2015

Total:
1H 2015 – 55.4 bn/USD Oil&Gas E&C International Players
1H 2016 – 44.3 bn/USD
Capitalization (in bn USD)
9
7.7

8
6.9

6.6
6.5

7
6.0

6 5.4
5.2

5.0
5.0

4.8
4.6

5
4.0

3.6
3.6

3.5

2.9
2.8
1H 2016

2.7
2.5
2.5
3
2.3

2.3

2.0
1.9
1H 2015

1.7

1.7

1.7
1.7
1.7

1.4
2

1.3
1.0

1.0
0.8
1

*Including new capital increase of about 3.6 bn/USD

Source: Bloomberg 16
 Oil&Gas E&C: Employees
2015 vs 2014

Total Employees Number: - 19 thousands

in 2014 – 338.5 thousands
in 2015 – 319.5 thousands
Employees 2015 vs 2014
400,000

350,000 4,276
8,552 4,596
20,974 8,820 Maire Tecnimont
300,000 19,800 15,221
16,635 Tecnicas Reunidas
25,000
22,000 Aker Solutions
250,000
37,508 27,195 Petrofac

31,400 KBR
200,000 35,600
Fluor
24,225 40,000
Worley Parsons
150,000
Foster Wheeler
54,400 42,000
CB&I Lummus
100,000
47,604 Saipem
54,637
Jacobs
50,000
53,500 64,000

-
2014 2015

Reduction of personnel due to the slow down of the investments in the O&G sector 17
especially in the Offshore
 EPC Contractors : Reshaping Backlog

Project value of TOP50 Int’l EPC Contractors Composition of 2Q16 backlog

(Onshore and Offshore), Billion USD
Δ DELAYS /
20% DISCOUNTS

76 -10%

62 15% Δ
54 SEGMENTS
50 -40%
44 46 Oil Price
12% Δ
34 (Brent, GEOGRAPHIES
$/bbl)

Δ
5% PROJECT SIZE
& RISK
PROFILE

IN REALITY, ONLY ~50%THE BACKLOG IS

“SIMILAR” TO PREVIOUS YEARS

18
Three main EPC arenas with global footprint:
USA, Europe and South Korea

19
 EPC Contractor services and value chain

Technology Project development EPC contracting O&M

20
 Major Licensor, Hydrocracking and
Licensing Technology Polypropylene players

Catalyst Positioning

Source: websites 21
 Competitive scenario, International EPC Players
Business Coverage

Tecnicas Reunidas

Worley Parsons
Foster Wheeler
Aker Solutions

CB&I Lummus

Samsung E&C
Selected
Players

Tecnimont

Petrofac
Chiyoda

GS E&C

Technip
SK E&C
Saipem
Jacobs
Daelim
Maire

Linde

Uhde
Fluor

Toyo
KBR
JGC
Industries
Petchem/
Chem

Oil & Gas

Power

Infra

Pharma/
Healthcare
Industrial/
Other
Number of
4200 16000 22900 6100 6000 39000 12100 4200 66000 5800 25000 5800 20200 39000 5500 3500 36000 5500 4500 5000 30000
Employees

Players progressively leaving power & infra sectors, focusing their attention in
more profitable markets or selected projects
Core Business Some presence 2
2
 Competitive scenario, International EPC Players
Distinctive Competencies

Tecnicas Reunidas

Worley Parsons
Foster Wheeler
Aker Solutions

CB&I Lummus

Samsung E&C
Selected
Players

Tecnimont

Petrofac
Chiyoda

GS E&C

Technip
SK E&C
Saipem
Jacobs
Daelim
Maire

Linde

Uhde
Fluor

Toyo
KBR
JGC
Core activities

R&D/
Technology

Eng. serv./
PMC

EPC

Const-
ruction

MMO

Different business models based on distinctive competences of each contractor

(from high value Engineering Services to EPC)
2
3
 EPC Contractors
Japanese and European

JGC

CHIYODA

Maire
Tecnimont

SAIPEM

24
 EPC Contractors
Other European

Technip

TECNICAS
REUNIDAS

LINDE
ENGINEERING

PETROFAC

25
 EPC Contractors
Most focused on Engineering Services

FLUOR

AMEC FOSTER
WHEELER

KBR

WORLEY
PARSONS

26
 EPC Contractors
Koreans

GS
ENG&CONSTR

SK
ENG&CONSTR

SAMSUNG
ENGINEERING

27
 Engineering Industry In Italy
CTIP: first Italian Contractor (dissolved 1995)

CTIP (1934-1997) one of the first engineering company operating in Italy, originally being an equipment
manufacturer in Rome in 1934: founded by Varvaro, Angelini (both engineers) and Banca Privata Italiana
1938 lube oil plant for ANIC refinery in Livorno
1946 reconstruction of the refineries of Livorno and Bari
1950–1960 becoming a contractor specializing in modernizing refineries in Italy and expanding activities
outside Italy and working for major clients/licensors CF Braun, Dow Chemicals, Union Carbide etc
1960-1967 Michele Sindona as major shareholder. The company targeting unsustainable acquisition of big
projects with the prime objective to resell the company. Aromatics project for Mobil (Naples),ethylene cracker
for Montecatini (Brindisi) and a grass root refinery in Egypt for Suez refinery (first turn key project of big size)
new refinery for Esso in Norway and France and many other projects for major clients. Due to financial
difficulties Sindona is compelled to sell to Sofina (Belgian company) and thereafter to McKee (US)
1966-1969 two secessions caused by the exit of people to form the Company. Formation of Coming (drafting)
and Technipetrol a new company controlled by Technip (France) and few ex managers of CTIP today Technip
Italy
1970-1975 new turn key projets for Liquichimica for the duplication of the plants of Augusta and protein plant
implemented without financing were cancelled by the Italian Government and caused the bankruptcy of
Liquichimica and CTIP was saved by Bastogi to whom McKee sold the company. Then CTIP becoming a pure
service engineering
1990 SIC buying CTIP from Bastogi and later on Kellogg 20% and Fochi 10% entered the company without
any commitment
1995 Sic selling CTIP to GIFI of Renato D’Andria an unreliable entrepreneur and in 1997 was declared
bankrupt

Source: Vittorio Cariati, Impiantistica Italiana 28

 Engineering Industry In Italy
Maire Tecnimont
1973 Tecnimont was formed through the spin off of the engineering division of Montedison
1920-1940 Montecatini was active in developing and licensing its technologies in the fertilizer sector (Fauser urea and Casale
ammonia technologies)
1960 an innovative process for the production of acetylene of Montecatini fail to be implemented on industrial scale in Brindisi,
Russia and Poland causing heavy damages and financial difficulties to Montecatini which was forced to be taken over by Edison
having significant availability of cash due to the nationalization of the power industry in Italy
1963 Giulio Natta a Montecatini scientist discover polimerization of propilene to produce polypropilene (Nobel Prize)
1950-1980 former engineering division of Montedison and Tecnimont were very active in licensing, engineering and supplying
chemical and petrochemical plants to Russia and East Europe countries as well as India (Fertilizers)
1966-1985 Tecnimont was supporting the engineering of all the new projects for the Montedison group in all sectors like chemical ,
petrochemical, intermediates, fine chemicals pharmaceuticals etc
1985-1992 Ferruzzi group becoming a major shareholder of Montedison. Tecnimont to enlarge its business into the agro business
while continuing its geographical expansion and becoming more and more an independent international EPC contractor specializing
in the polyolefins sector. In addition to former Soviet Union countries Tecnimont open new markets in China, Far East Asia, Africa
1992 – 2005 financial crisis of Ferruzzi group in 1992. sale of major non strategic assets and decision by Montedison (which will be
renamed Edison ) to focus on power business. Tecnimont to become more and more independent from Montedison investments
and to consolidate its market position forming alliances with major licensors in many sectors and diversify its business by
geography (South America , Middle East, North Africa) and business sector (Oil&Gas, Fertilizers, Speciality Chemicals etc.)
Tecnimont entering into the infrastructure technology area (TAV). Tecnimont to form a low cost engineering center in india in 1996
employing today almost 1800 people. Tecnimont taking over Sofregaz (Paris) specializing in LNG terminals. Largest projects being
gas processing plant in Lybia and petrochemical complexes in Abu Dhabi (Borouge)
2005 to date Maire acquiring Tecnimont from Edison and merging with Maire Engineering (who took over Fiat engineering in 2004)
and forming Maire Tecnimont.
2007 listing of Maire Tecnimont group at the Milano stock exchange.
2007 2012 MT acquiring Stamicarbon (Netherland) and KTI (Italy) renamed TKT and becoming a leading EPC
contractor worldwide in the C&P, Oil&Gas, Fertilizer, Power And Infrastructure business employing 5500 people
wordlwide with a successful track records of projects in Middle East, Russia, India, China, South America and Europe

29
 Engineering Industry In Italy
Technip Italy

Formation of Technipetrol in 1969 through the exit of managers and about 150 employees from CTIP
owned at that time by the us company McKee. The French company Technip was a majority
shareholders while few managers also became shareholders
Technipetrol managers and shareholders where in disagreement with their US controlling shareholders
about the business model preferring the contracting activity with a clear inclination towards EPC
business model versus pure engineering service model (typical of the US) companies.
Technipetrol enjoyed a certain freedom to do business in selected reserved geographical areas in
addition to Italy, like middle east (Iraq, Iran),north Africa, South America and China, particularly where
it could show its capabilities of managing EP-C project and good relationships with clients in difficult
countries
At the beginning Technipetrol core business was more in the Oil&Gas sector than chemicals and
petrochemicals inheriting the capabilities from CTIP
In 1992 the top managers and founders of Technipetrol like many Italian Contractors working in the
public works infrastructure business were prosecuted and sanctioned for illegal practices and two
separate companies have been formed Technipetrol wholly owned by Technip working in the process
plant industry and TPL to continue the business in the public sector works like the TAV
The French shareholders gradually took over the full control of the company renamed Technip Italy
Today the company employ over 2400 people and is working in strict coordination with Technip Paris and
cover important areas like many countries in Middle East, South America, Russia etc. specializing in the
Oil&Gas and petrochemical sector
In 2016 Technip merged with FMC to integrate the offshore deepwater business, and rationalizes the
worldwide structure

Source: Technip Italy website 30

 Engineering Industry In Italy
Foster Wheeler Italiana

Foster Wheeler Italiana s.r.l. was established as a corporate entity on December 12, 1957.

The rapid expansion of the refinery industry in Italy during the sixties provided many opportunities for Foster Wheeler
Italiana, whose capability to handle larger and more complicated projects grew rapidly as well, materializing in a number of
important projects in the refining, petrochemical, fine chemicals and pharmaceutical sectors.

One important area of business was (and still it is) the design and supply of fired heaters for the refining and petrochemical
industry. Business was very successful until the early 70’, with significant projects in Italy and abroad, including the
realization of big, grass-roots refineries.

The oil crisis in late 1973 and a dramatic collapse of fibers and plastics market in Italy had a serious impact on the refining
and petrochemical industries so that Foster Wheeler Italiana widened its sales efforts worldwide, landing contracts in
Kuwait, Saudi Arabia, Arab Emirates, Libya, Greece, Belgium, Singapore, Egypt and Korea. The late seventies show an
85% of Foster Wheeler Italiana’s workload outside of Italy.

New fields of activity were explored such as the environmental sector: a new company was formed, Fosweco, which in only
a few years grew to become one of the most important Italian companies in the environmental field. A significant and
successful development in the eighties was the acquisition of a small company specialized in clean room design and similar
specialized technologies, steril. Thanks to this expansion, the company was involved in the design and construction of
many manufacturing plants and research facilities for major pharmaceutical clients, in Italy and abroad.

In the nineties and beyond, Foster Wheeler Italiana continued to pursue traditional refinery works with major refinery
modernizations and upgrading and entered the power business as owner and operator of power generation plants,
launching various build, own and operate (BOO) initiatives.

The activities in which Foster Wheeler Italiana is involved include traditional power generation plants like combined cycle
units and the generation of power from renewable sources, such as wind farms.

In 2015 AMEC acquired FW and rationalized their operationas worldwide

Source: Foster Wheeler Italiana website 31

 Engineering Industry In Italy
Snamprogetti today Saipem
Saipem is now a world leader in the oil & gas contracting services sector, both onshore and offshore. The Company began
operations in the ’50s. During the ’50s and ’60s it accumulated competencies in onshore pipe laying, plant construction and
drilling, operating initially as a division of Eni and then on a stand-alone basis, becoming definitively autonomous in 1969.
Offshore operations commenced in the Mediterranean in the early '60s and expanded to the North Sea in 1972.

The Company started offering its services to customers outside the Eni group in the early ‘60s and progressively widened
its customer base to include almost all the Major nationals and independent oil & gas companies worldwide. At the end of
the ‘90s with the migration of the business towards deepwater and developing countries, Saipem has carried out an
investment plan in order to adjust the capacity of its own naval assets to the ever challenging market conditions. The
primary areas of investment include deepwater drilling, deep water field development, pipe lay, leased floating production
storage and offloading (Fpso), and subsea robotics. Saipem has led the trend in boosting local content by developing
impressive facilities in West Africa and the FSU and in the Middle East by employing a large number of local workers with
no equal in the industry. While developing the fleet and the local content, the Company started to reinforce its engineering
& project management capabilities to cope with the other important market trend towards large integrated EPC projects at
first in the offshore activities and later on in the onshore activities. Onshore was achieved principally through a number of
acquisitions, culminating in the acquisition of Bouygues Offshore in 2002.

This was the largest cross-border acquisition in Europe in the oil services sector. Subsequently responding to the recent
industry trend towards large onshore EPC projects, including those related to gas monetization, exploitation of difficult oil
(heavy oil, tar sands, etc.), and in order to strengthen its position in the Middle East and its national oil company client
base, in 2006 Saipem acquired Snamprogetti, one of the major engineering and construction companies active in the
international market in the design and execution of large onshore projects for the production and treatment of
hydrocarbons and natural gas monetization.

The result has been the creation of an exceptional contractor with a strong bias towards oil & gas related activities in
remote areas and deepwater, a leader in the provision of engineering, procurement, project management and construction
services with distinctive capabilities in the design and the execution of large-scale offshore and onshore projects, also with
high technological competences such as gas monetization and heavy oil exploitation.

Recently the company resctrured its business reducing their workforce and creating 5 new divisions/companies keeping
Saipem as holding companies

Source: Saipem website 32

 Engineering Industry In Italy
Techint

Compagnia Tecnica Internazionale" -which was soon to be named Techint after its original abbreviated telex code name-
was founded as an international corporation in 1945.

The founder, Agostino Rocca, was an innovative engineer, manager and entrepreneur, and a key force behind the
development of the Italian steel industry in the 1930's.

The newly formed company began by providing engineering services to a growing number of clients in Latin America and
Europe. Construction activities soon followed: one of the company's first major projects was to build a network of large
diameter pipelines in Argentina and Brazil.

As the sole EPC contractor in both projects Techint Engineering & Construction was responsible for the construction of
1,700 km of pipelines and related facilities.

Currently, the company is committed to the development of civil construction projects in Argentina and for the pipelines
segment in Saudi Arabia. Several works for Petrobras in Brazil include the construction of a catalytic cracking, towers and
tanks in important refineries in the country.

At the same time, it has an outstanding presence in Mexico, performing high power transmission lines projects,
boilers and electrical substations, as well as the El Bajio gas pipeline, which arrives to the city of Aguascalientes. The
company also finished construction works in Tijuana Hospital in the first months of 2001.

Techint Engineering & Construction also develops projects in Egypt and Nigeria, where it is carrying out
electromechanical assembly of power generation facilities and natural gas liquefaction plants.

In Italy, the construction of two Emergency Units for the Humanitas Group has been completed, and the New Legnano
Hospital is being built. Regarding the energy segment, it has completed the construction of a power plant in Piacenza and
in Dalmine, and it is developing the power plants of Turbigo and Scandale. In the LNG sector, it leads the consortium in
charge of the construction of an LNG regasification terminal in the port of Rotterdam. Besides, Techint Engineering &
Construction will execute one of the world's largest methanol plants in Egypt.

In 2014 the company decided to reduce the business and workforce in Italy, keeping South America market

33
 L’albero della plastica

L’albero della Plastica prima delle nuove tecnologie che

impiegano gas, carbone ed in futuro biomasse
34