Markets

Market Development and Trends
The Oil- and Gasmarket

Investments by the oil and gas industry once again increased by a substantial 15 – 19% during the year under review. The entire market sector, including Fugro, profited from this increase. 74% of Fugro’s revenue is related to oil and gas.

According to recent external market research, US dollar investments by oil and gas companies will again rise by about 10% worldwide in 2008. An increase of 12 to 16% is anticipated in the international market segment that is important to Fugro, which excludes the United States. This segment represents approximately 70% of the global investments. Investments in the United States are expected to increase by 4 to 5% in 2008 and in Canada they are expected to fall slightly, as they did in 2007. Regarding these predictions, it should be noted that in recent years the actual increase in annual global investment was more than double the initial market forecast.

Increasingly, as a consequence of its broad package of related solution-oriented services Fugro is involved throughout almost the entire life-cycle of oil and gas fields. This cycle can last for several decades. It starts with the search for fields and continues from surveys related to the design and construction of the structures required to bring new fields into production, to improving production from existing fields and finally decommissioning. Fugro will, therefore, be able to continue profiting from the further increase in the investments (which were already substantial in recent years), now being made by the oil and gas companies. For a number of years these investments were relatively limited while, at the same time, the demand for energy increased throughout the world. To close the gap between demand and supply it is anticipated that oil and gas operators may make additional investments in the coming years. Fugro’s response to this development includes the expansion of capacity already underway.

Many of the exploration and development activities, especially those related to deepwater projects, take place in the Gulf of Mexico, West Africa and Brazil. Other regions that continue to be very active are the Middle East, the Caspian Sea, the North Sea and parts of Asia, India and Australia. There is also increasing interest in detailed reservoir information from existing fields to enable production levels to be maintained for as long as possible, and to permit the maximum possible percentage of available oil and gas to be extracted.

Demand for gas is also creating a strong global growth market. Some of the demand is met by production of liquefied natural gas (LNG), which can be transported over the sea. Fugro is carrying out surveys for a number of LNG terminals now under development in various parts of the world. High energy prices are making the development of gas fi elds located at some distance from the user markets more attractive. This is especially applicable in the Middle East where there are considerable gas reserves within transportation distance of India, China and Japan. Large-scale developments are also taking place in countries that have been exporting gas for some time, such as Australia, Nigeria and Indonesia. This will reinforce the trend towards the creation of a global gas market and could result in gas remaining more attractive than alternative energy sources.

Oil prices remained high throughout the year. In 2007 the average price of a barrel of Brent crude was USD 72.44 (2006: USD 65.51). The rise was caused by the global economic growth (demand side) combined with the relatively limited production and distribution capacity that cannot be increased quickly (supply side). External publications indicate that oil companies are basing their economic viability calculations for larger projects on an oil price of USD 30-40; well below the current price level. Considering the long duration from start to finish of these kind of projects, Fugro anticipates that its services will continue to be in high demand in 2008 and the following years.

The market for infrastructure projects
Infrastructure related activities accounted for approximately 14% of Fugro’s activities in 2007. These projects are very regional in character, and their scale increases in the course of the year thanks to strong economies in a large number of regions and a trend to consider larger, integrated developments. Fugro performs large contracts associated with airports, land reclamation, (LNG) harbour expansions, dykes, tunnels, and major building and construction works all over the world. Fugro has strengthened its market position in this segment, steadily and continuously. One reason for this is the fact that Fugro has increasingly positioned itself as a supplier of integrated solutions in order to fulfil the customer’s preference for handing over the responsibilities for various data acquisition and consultancy activities across a broader front to a single service supplier. Fugro can benefit from this market trend, thanks to the Group’s unique combination of activities, specialists, equipment and technologies, combined with its scale of operation and leading market position.

Mining
Mining-related activities accounted for around 6% of revenue in 2007. The current price of minerals has led to a substantial increase in investment in exploration by mining companies. The search for new mining prospects has generated a high demand for this kind of survey. Government agencies are commissioning geophysical information mapping programmes on a more frequent basis to stimulate exploration activities. Exploration initiatives are also on the rise in the developing countries in Africa where the World Bank, the European Union and the African Development Bank have financed regional surveys.

Other market segments
Fugro not only supplies services to the markets mentioned above but also to a number of other niche markets. These services include precise positioning for machine guidance in agriculture, route surveys for offshore telecommunications cables and airborne mapping using laser technology for governmental authorities. Combining several activities into ‘Geospatial Services’ is Fugro’s primary response to the globalisation of these markets that has been brought about by, for example, technical developments such as the use of satellites and increasingly precise measuring techniques. Approximately 6% of annual revenue is generated by these segments.