The shuttle tanker fleet consists of a relatively modest 88 vessels, but is of critical importance to the offshore story. The sector has always played a key role in exports from fields divorced from established pipeline infrastructure. As the move offshore into deeper and more remote areas gathers pace, shuttle tankers will be required to support production, particularly off Brazil.
The fleet has a long track record of steady growth (it was just 19 vessels at the start of 1989), and has recently undergone another expansion phase, growing from 65 vessels at end 2010 to 88 currently (up 35%). There are 8 vessels on order: until the contracting of three specialised Arctic units at Samsung in July, no orders had been placed since January 2013.
This might appear, on the surface, to be a sign of a fleet sector with muted demand growth prospects, particularly when considered in conjunction with the decade-long decline in North Sea shuttle tanker transportation evident in the Graph of the Month. However, the outlook is actually somewhat brighter. Brazilian usage has gradually increased year on year. Brazilian fields are expected to be at the forefront of the sixty potential field developments identified globally which are likely to use shuttle tankers.
There are now 25 likely future field developments offshore Brazil, which are expected to need shuttle tankers, and potentially add 1.5m bpd to shuttle tanker movements off Brazil. In the pre-salt areas, pipelines are often not feasible due to deep water and long distances to shore, so fields need shuttle tanker offtake from FPSOs.
The North Sea is an established shuttle tanker region, and now one with much activity under way to halt production decline. There are 9 future start-ups expected to require shuttle tankers, including Bream and Johan Castberg. These are expected to help shore up North Sea oil transportation on shuttle tankers to above 1m bpd in the medium term.
Recent years have seen the fleet become more consolidated. At the end of 2004 there were over 10 companies with just one shuttle tanker to their name but as of September 2014 there are just two companies owning only a single ship. Teekay Offshore and Knutsen NYK continue to account for a large portion of the fleet, owning 32 and 25 units each. This year alone, Knutsen acquired Lauritzen’s fleet of 3 ships: these were the first recorded shuttle tanker sales for over 5 years.
Tread With Caution
Of course, shuttle tankers are not immune to the usual cyclic problems of the offshore industry. In the past 18 months, delays in field start-ups in Brazil and the North Sea have led some companies to let charter options expire or fail to renew existing timecharters. This may limit ordering (typically orders are placed with an initial charter in mind). Over the longer term, however, further fleet expansion will be required to service additional demand. Whilst the graph no doubt shows the ‘best-case’ scenario, and some field start-up slippage will no doubt intervene, the shuttle tanker sector looks positioned for a relatively bright future.