Shipping Offshore Seminar 2018

Bergen 19 September 2018 Programme

08:00 Breakfast and Registration

08:30 Welcome – Shipping offshore September 2018 – where are we and how does it look going forward?

08:45 Ocean space and new markets – offshore concepts in aquaculture Jan Vatsvåg - Chairman and CEO of MariCulture AS and co-founder of Global Maritime.

09:15 Emission regulations – CO2, SOx and NOx and their impact on charters Partner Øyvind Axe Wikborg Rein

09:45 Coffee Break

10:00 Offshore contract trends – has the oil crisis changed contract practice? Partner Birgitte Karlsen Wikborg Rein

10:30 Brazil – reopening for business – what has changed? Joyce Jacobsen from Wikborg Rein's Brazilian partner Viera Rezende Advogados in Rio de Janeiro

11:00 Closing remarks

11:15 End of programme Ocean space and new markets – offshore concepts in aquaculture

by Jan Vatsvåg Chairman and CEO of MariCulture AS and co-founder of Global Maritime TRANSFER OF OFFSHORE COMPETENCE AND EXPERIENCE TO OTHER BUSINESS AREAS

Including presentation of MariCulture – The first offshore fishfarm

September 2018 BACKGROUND

- Education - MSc Structural Engineering (University in Trondheim) - MSc in Ocean Engineering (University College of London) - Experience - 30 years as Managing Director of Global Maritime Group

- Founder and co-founder of several different companies Business entrepreneur - Global Maritime - GM Eiendom 7 important issues; • - HMT - Heavy Marine Transportation Knowledge and an idea • - SLT - Single Lift Technology Market for the product • - Marine Contracting Construction of the product • - COSL Drilling (Former OffRig) Cost of the product • - Island Drilling Company (Former Maracc – Marine Investment/Investors • Accurate Well) Marketing of the product • - SnowVision Timing - Norse Asset Solutions - MariCulture - IDS Engineering GLOBAL MARITIME

- Co-founder of Global Maritime - Started Global Maritime Norway in 1989 as a subsidiary of GM UK (with offices in London and Aberdeen) - Managing Director of Global Maritime Group of companies from 2005 - Management buy-out in 2006 - Built the company to have offices in 23 countries and 36 offices - Annual Turnover of USD 150m and about 300 employees from 2012

Speciality of Global Maritime • Highly innovative engineering company • Highly skilled engineers and mariners (Recruited the best people) • Specialist in several fields GLOBAL MARITIME – SERVICES THROUGH THE FIELD LIFE CYCLE

Design and Marine Engineering Marine Quality Marine Warranty Engineering and Consultancy Assurance Services

Early Phase Development DP FMEAs Marine Warranty and Advisory Stability and Weight Analyses Engineering studies and Annual Trials Services

Design/Modifications of Riser Analyses Vessel Audits and Inspections Jack-up Location Approvals existing/new Platforms Mooring Analyses and Suitability Surveys Procedures

Installation Design of Subsea Mobile Offshore Location development Software Structures Approvals DP Capability Analyses DP HIL (Marine Control System)

Design of own Developments Operability and Downtime Load Outs Testing and Certification Simulations

Model Test Preparations and Third Party Verification Project Management Transportations

Verifications

Software 3D andSoftware Visualisations 3D visualisation 3D

Risk and Safety

Risk in Design and Marine Major Accident Risk & Project Risk Risk Framework Emergency Preparedness Operations Barrier Management GM DESIGN AND SOFTWARE SOLUTIONS

Design MODUs – 11 built Design Accommodation units – 3 built

Jackup designs– 3 built Well intervention units– 1 built

© Global Maritime 2014 Design of Fish farm – 1 built COMPARISON ORS PIONEER WITH 4TH AND 5TH GENERATION RIGS COSL DRILLING (OFFRIG) - Co-founder of COSL Drilling (OffRig) - Started company in 2005 - The established drilling contractors preferred rigs that could be used for all water depths - Market for tailor-made rigs, built up an organisation - Secured investment for building several rigs

• ORS Pioneer has the same capabilities as a modern 3/4th Generation Rig with regards to; • Drilling capability • Deck space • Payload capacity 5/6th G Rig ORS Pioneer • Operational water depth capability

• ORS Pioneer has • Full DP Equipment Class 3 versus most • 3/4th Generation Rigs having mooring as staion keeping

• ORS Pioneer capabilities versus 5/6th Generation Rig • Less water depth capability with 18 ¾” stack • Less deck space and payload capacity • Same DP capability

• Operability ORS Pioneer versus 3/4th G and 5/6th G Rigs (North Sea Operation) Pioneer 3/4th G Rig 5/6th G Rig • 99.2% 99.6% 99.9% COSL DRILLINGAGE STRUCTURE (OFFRIG) AND REPLACEMENT – MARKET SCENARIO TRENDS

CURRENT FLOATER SUPPLY TECHNICAL LIFE EXPECTENCY SCENARIOS NUMBER OF UNITS 250

200

150

100

1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013

YEAR 31.05.2005 Rig life scenario: Between 30 to 35 Average age total floater fleet = 21.1 years The supply side in Norway can only be increased by years, undersupply within 2010! - 40.5% of total fleet is 25 years or older newbuilding. Newbuilding cost for a Norwegian specified, deepwater / harsh environment unit is around USD 500 – 550 million. Replacement dayrate AVERAGE DAYRATES NORWAY SEMI SUBMERSIBLE DRILLING UNITS is about USD 375 – 420K/Day. 350 2nd Gen Norway 3rd Gen Norway 300 4th Gen Norway 5th Gen Norway 250

200

150

THOUSAND USD THOUSAND Empirically, tight market dayrates for lower specified equipment, tend to

100 approach high specification dayrates.

06.04.05 ID:143 COSL DRILLINGCOMPARISON (OFFRIG)

ORS Pioneer Typical New Drilling Rig

Total light ship weight with drilling equipment < Total light ship weight with drilling equipment > 25,000t 35,000t

Price $ 300 mill. Price $ 550 mill. SNOWVISION

- Co-founder of SnowVision - Started SnowVision in 2016 - Develop RPAS platforms for detecting avalanches and identify and rescue snow victims - Research project into optimization of avalanche models for predictions of avalanches due to climate changes NORSE ASSET SOLUTIONS

- Co-founder of Norse Asset Solutions - Started Norse Asset Solution in 2017 - Develop technical solutions to enhance the Asset Integrity of new and ageing offshore platforms - Apply the same technology to onshore Assets

Norse Asset Solutions AS • Established in 2017 • Several business areas within Asset Integrity Management and Digitalisation • Use of new technology to protect/prolong the life of the Assets • Specialising in use of UAV technology

Milestones - 8 year Frame agreement with the State Road Directorate - 100% Inspection of a bridge (Karmsundbru) - 3D modeling of part of a MODU, offshore - 3 year fram agreement with the Norwegian Coast Guard Authority for delivering RPAS systems for their missions Asset Integrity – Inspection and 3D Scanning

• 3D laser scan (point cloud data management) • DSM (Digital surface model) • Detailed visual inspection & condition monitoring • Geophysical examination of loadbearing structure • Road surface analysis • Near shore mapping • Concrete and re-bar inspection and detailed measurement of concrete overlay Geophysical examination

• Geophysical examination of loadbearing structure • Concrete and re-bar inspection and detailed measurement of concrete overlay. • Ground penetrating radar <150m depth • Identification of piping, cabling, soil stratification and other objects in the ground Offshore

• Photogrammetry of weldment and added structure on board a North Sea installation in offshore operation utilizing the use of High-def imaging sensors. Structural In-service Inspection Military

• Unmanned systems supplier and engineering contract with the Norwegian Coast Guard and Coastal Administration initially supplying • UAV’s and sensors for the Coast Guard • Sensor (Exhaust chimney sniffer) for Norwegian Maritime Authority (NMA) • Sensor (Radioactivity monitoring) for Norwegian Radiation Protection Authority THE OCEAN – POTENTIALS BESIDE OIL BUSINESS

- The ocean and seas - An important supplier for global food security (About 3 billion people rely on fish) - About 30% of all human food is produced in sea on an area < 2%. The sea is covering 70% of earth and contains 97% of the total water on the planet. - Seafood important in human diet and necessary to feed the growing population - Host a huge reservoir of biodiversity - Primary regulator of the global climate - A sink for greenhouse gases - A provider of water and oxygen - An energy source - Use our competence and experience within offshore industry to develop - Alternative renewable energy sources related to wind, waves, tide and current - Sustainable offshore fish farming - Mariculturing other species for food, pharmaceutical products etc. - Methods and equipment for extraction of minerals (Seabed mining) - Systems for protection and cleanup the sea pollution - Ships and other systems for maritime transportation of commodities - Freshwater generation - Carbondioxid sequestration (storage) THE OCEAN – OFFSHORE FISH FARMING

- Offshore fish farming - Develop sustainable ocean farming based upon - knowledge about the ocean environment, - the working conditions offshore in harsh environment, - technical requirements and - environmental friendly asset solutions

- Fish farming challenges are - Offshore fish farming required to overcome todays challenges in order to obtain a sustainable growth business - Overcome todays environmental and illness challenges the industry is facing - Supply of marine ingredients for fish feeding - Breeding supply FISH FARMING IN NORWAY - BACKGROUND

- A regulated market controlled by - Provision of licenses - Need also a location approval that have to be approved by the local community

- Commercially initiated in the1970’ies - Started as an add-on income for farmers and part of the regional development - The licenses were given free of charge

- The fish were produced in the Norwegian fjords – benign waters - Historical challenges - Gone through several phases with bankruptcies due to market price collapse (-23%), high use of antibiotics, custom export barriers, etc.) - Environmental challenges due to lice and escape - Deficiencies in marine ingredients for feeding - Fish welfare and health

- Obtained high growth rate until 2010 despite the challenges Extracted from Norwegian Fishing Directorate FISH FARMING IN NORWAY - BACKGROUND

- The market was also regulated (In addition to the licenses) by - Local ownership (dissolved in 1985) - The Norwegian Fishing Directorate - the supervisory authority - Provision of licenses - Initially, licenses were provided free to farmers – could not be sold and were supplementary income - Licenses granted 378 (to 1977), 330 (from 1981 to 1989), 101 (2002-2003) (The latter for a fee of up to NOK 5m), 65 (2009)(fee of NOK 8m) - 68 Research and 45 green licenses Consolidation of ownership - In 1990 licenses were sold for NOK 200 000,- - In 2001 licenses were sold for up to NOK 40 – 50m - 2018 – Government Auction NOK 150 – 200m

- Industry today - About 150 companies owning all the licenses (About 1 000 licenses) - Producing about 1,2 million ton fish (2017) - Export revenue: NOK 61,3 billion (2017) FISH FARMING IN NORWAY - BACKGROUND

- Norway vision in accordance with Stortingsmelding Stm 16 (2014-2015) is to increase the fish production by a multiplication factor of 5 (from 2010 with 1 million ton fish to 5 millions tons in 2050)

- The industry has to be sustainable and environmental-friendly - Licenses today - Introducing of production zones (2017) with traffic lights for coordinated increase of production in the fjords due to high concentration of fish and concurrent lice problems 1: Svenskegrensen til Jæren 2: Ryfylke - Proposed increase in volume 24 000/1 219 235 = 2% of total produced 3: Karmøy til Sotra volume 4: Nordhordland til Stadt Pressemelding 30.10.2017 5: Stadt til Hustadvika 6: Nordmøre til Sør-Trøndelag Regjeringen har besluttet hvilke farger de 13 ulike 7: Nord-Trøndelag med Bindal produksjonsområdene for oppdrett av laks, ørret og 8: Helgeland til Bodø 9: Vestfjorden og Vesterålen regnbueørret får i 2017. Beslutningen kan potensielt gi en vekst 10: Andøya til Senja på om lag 24 000 tonn. (Tilsvarer rundt 30 lisenser) 11: Kvaløya til Loppa 12: Vest-Finnmark 13: Øst-Finnmark The North Sea is the home of the salmon! FISH FARMING IN NORWAY – TECHNOLOGICAL DEVELOPMENT

- The cages have been based upon the same principles as from the start in 1970’ties - Based upon a plastic floating circular ring with circumference varying from 40m (1970) to 160m (2010) - Some square steel boxes were also produced - Single fish net - Benign waters in the fjords - Most of the operations are manually - New developments - Subsea structures - Rigid type of structures - Flexible structures - Challenges (No benefit for Norway) - Onshore production - Closed structures

To fulfil the vision – new technology and production areas required – basis for “Development licenses” FISH FARMING IN NORWAY – DEVELOPMENT LICENSES

- Development licenses - Objective to stimulate to increased sustainability, restructuring and innovation and increased wealth growth - New technological solutions with the objective of increasing the production areas - To bridge the gap between research and commercialization of the OF Havmerd (8) Akvadesign semilukket (2) technical solutions - The application period was from 20th November 2015 to 17th November 2017 - Status; - Total number of applications: 104 (890 licenses) - Not processed: 46 Nordlaks Havfarm (21) Marine Harvest Egget (6) - Approved: 8 - Approved subject to clarification: 7 - Rejected: 43

Hydratank (4) NRS Arctic farming (8) MNH Produksjon Aquatraz (4) Atlantis subsea farming (1) SMART FISH FARM – THE FIRST OFFSHORE FISHFARM

- Located in the open sea and harsh environment; - Increases the available area for fish farming tremendously - Open fish farm utilizes the natural flow of water in the sea and the fish will live in its natural environment - Reduce risk of lice attack and other diseases due to being located in the Atlantic and coast current with continuously change out the water in the fish farm - Less variable water temperature – improves the fish welfare and growth - Challenges – Harsh environment - Robust and construct/transport-friendly structures - Handling of fish - Fish welfare - Safe operations - Health, Environment and Safety (HES) of personnel - Prevention fish escape (Environmental challenges) - Logistics of all operations

- The fish farm will provide insight in fish welfare and health for operation in open seas FISH FARMING IN NORWAY – REGULATORY REQUIREMENTS

- Overall regulations - No regulations outside the productions zones - No supervisory authorities nominated - No local community present to provide location approval - What HSE rules to apply? - For inshore – Statens arbeidstilsyn (The Norwegian Labour and Welfare Administration) - For ships – Norwegian Maritime Authority - For offshore operation – Petroleum Safety Authority - How to control pollution requirements – ensuring a sustainable business? - Current design rules not applicable for operation in harsh environment - Licensing - No licensing arrangement present - No taxation regime

To overcome/mitigate – selected an area inside the production zone; - Limited lice exposure and open sea environment SMART FISH FARM – DESIGN

- RULES AND REGULATIONS - A mixture of different rules

- Location – Offshore UNPROTECTED

Hentet fra NORSOK N-003 – 100 års storm Hs og Tp verdier med 3t storm varighet SMART FISH FARM – THE FIRST OFFSHORE FISHFARM SMART FISH FARM – MAIN PARTICULARS SMART FISH FARM – MAIN PARTICULARS SMART FISH FARM – MAIN PARTICULARS OFFSHORE FISH FARMING– A NEW INDUSTRY AREA To meet the governmental vision, the production must increase by about 120.000 tons annually until 2050 ( Construction of 10 Smart Fish farms every year)

- No hardware currently available for offshore operations in harsh environment - Transportation of personnel to “fish farm fields” - New vessels requirements - Supply of goods - Supply of fish feed - Transport of smolt and of salmon to be harvested (Limited capacity of well vessels (74) and relatively small vessels) - Equipment for treating and handling of fish in harsh environment - Lifting equipment (i.e. cranes) for handling - Internal transportation of equipment - Sensors and systems for surveillance and monitoring factors for welfare - Crowding/harvesting - Deadfish handling and treatment - Cleaning of nets - Feeding - Treatment of lice and other diseases - Maintenance and operation of the units Emission regulations

SOx, NOx and CO2

Advokat Øyvind Axe Shipping Offshore Seminar Bergen 19 September 2018 Green Shipping

Discharge Zoological Pollution Pollution › Oil tankers › Ballast water › Bunker Oil treatment › Hazardous › Biofouling and noxious substance › Sewage / Garbage

Recycling Air Pollution

› SOx › NOx › CO2 › Particulate matter Air Pollution – Emission regulations

› MARPOL – Annex VI - Prevention of Air Pollution from Ships › Limits the main air pollutants contained in ships exhaust gas, including progressive reduction globally in emissions of SOx, NOx and particulate matter › Emission Control Areas Baltic Sea, North Sea, North American and the US Caribbean Sea area

› EU and national regulations

› Enforcement of regulations › Flag State Certificates › Port State Control SOx – Sulphur Cap

› IMO Marpol Annex VI – 4.5 Cap on sulphur content in fuel Global Cap: Currently 3.5 %, World › 3.5 reduced to 0.5 % from 1 January 2020 › Emission Control Areas (ECAs): Existing cap of 0.1 % maintained, but number of ECAs may increase Sulphur limit (%) 1.5 ECA › EU Sulphur Directive 1.0

› 0.5% cap in EU waters (2020) 0.5 EU in Ports › 0.1% cap in EU ports (2010) 0.1 › Some EU countries have limits on scrubber water 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 SOx – Sulphur Cap › Port state regulations › China (designated ports) / Hong Kong: 0.5% cap (may go down to 0.1% by 2020) › Sydney: 0.1% cap for cruise ships MGO / › California: 0.1% cap – limit on ULSFO scrubber water › Taiwan: 0.5 % cap as from 1 January 2019

› Three main options to comply 1. Switch from HFO to compliant fuel – MGO < 0.5% sulphur / HFO ULSFO < 0.1% sulphur

2. Exhaust gas cleaning systems (scrubbers) SCRUBBER ALT. FUEL 3. Using alternative fuel (such as LNG) Effect on charters

Fitness and Operation Fuel maintenance