Archives for posts with tag: demand

For the golfers contesting this week’s Ryder Cup, the impact of bunkers can be minimised through skill, practice and a little luck. For shipowners, bunkers are unavoidable, and over the past few years high oil prices have ensured that they have been a major handicap. Shipowners are getting plenty of practice at dealing with high oil and bunker prices, maybe they are due a change in their “luck”?

When an onlooker suggested he may have been lucky holing three bunker shots in a row, golf legend Gary Player famously replied “the more I practice, the luckier I get”. Well, over the past few years a combination of low rates and high fuel costs have given shipowners plenty of “bunker practice”.

Par For The Course

The Graph of the Week tracks the share of freight revenue accounted for by bunker costs. In the early part of the period shown, the low and relatively stable oil price ensured that bunkers did not become too much of a burden, with peaks and troughs corresponding to the strength of the freight markets. Then in 2007-08 oil prices started to rise steeply, but the strength of the freight market helped to cover the impact of rising bunker costs and ensure that the share of bunker costs remained below 50%.

In The Rough

However, in the wake of the global financial crisis, a combination of high oil prices and weaker markets caused the share of freight revenues accounted for by bunker costs to climb to much higher levels. This peaked in late 2012 and early 2013, when bunker costs exceeded 80% of freight revenue on the example tanker voyage, with the extra costs of low sulphur fuels generating even higher shares on some routes.

Driving Down Costs

Well-practiced shipowners responded by finding ways to reduce fuel consumption: slow-steaming, retro-fitting fuel-saving equipment and ordering “eco-designs”. They have found environmental regulations pulling in the same direction, and in a way helping. After all, the risk of ordering a slower but more efficient ship is greatly reduced if everyone has to do so to meet regulatory targets.

Out Of The Woods?

Further help has come from the 15% fall in oil prices since June resulting in a reduction in bunker costs (Rotterdam 380cst currently stands at $540/t, down from $601/t in June). Oil prices are on track for their third straight monthly fall, with a combination of sluggish demand and ample supplies seeing the benchmark Brent crude spot price drop below $96/bbl this week, the lowest level for two years.

Bunkers’ share of freight remains volatile and dependent on market fluctuations. Recently the percentage has started to fluctuate in a slightly lower range than previously as lower bunker prices have helped to reduce the fuel cost burden. However, bunkers’ share of revenue is still uncomfortably high for many, and shipowners have had to learn to deal with high bunker costs. For those currently in a position to benefit from lower prices today, is it luck, or is it practice?


In the well-loved sitcom Absolutely Fabulous, Jennifer Saunders, Joanna Lumley and company provide an apt demonstration that even totally dysfunctional families can muddle through pretty well in the end, and have fun doing it. Could these comedy characters be a possible role model for regulating the shipping family?

Step Change For Regulators

As shipowners struggle with a long recession, escalating fuel costs and tricky credit, it’s easy to see why changing regulations seem like yet another chaotic burden in an already dysfunctional world. And, to be fair, the regulatory framework has made life harder in the last decade. Regulation of emissions, carbon footprint and ballast water have propelled regulators into the heart of shipping economics, leaving many owners struggling with hard choices about how to meet the new rules.

A Real Little Scrubber

Sulphur emissions illustrate how tricky things have become. Ideally regulations have a well-defined timescale and global adoption, but the sulphur regulations have neither. Although the timetable cuts the 3.5% global sulphur cap for marine fuel to 0.5% in 2020, the implementation date could be 2025 if the IMO’s distillate fuel study indicates supplies may not be available. And the global cap is not global either. The “Emission Control Areas” (ECAs) in North America, the Baltic and the North Sea have different rules. From next January ships trading in ECAs face a 0.1% sulphur cap.

Unquantifiable Options

More complexity is added by the options for getting down to 0.1%. One is to use eye-wateringly expensive distillate fuel; another is LNG; and the third is to install a “scrubber”. Since distillate fuel costs about 50% more than MFO, that’s unattractive, but LNG is unlikely to be much cheaper and scrubbers can cost in the region of $2-4m each.

Undecided Or Indecisive?

Luckily, the immediate decision is not too difficult because most ships will not spend long in ECAs. For example, a ship trading between Rotterdam and New York sails about 3,400 miles on the high seas, and around 20% of the distance is in ECAs. However, with more diverse trading the average over the year should be less, say 10%? From January 2015 a bulker sailing 300 days a year at sea, with 10% in ECAs, would spend an extra $0.2m a year on distillate fuel. Is it worth fitting a scrubber to save $0.2m pa? For bulkers no, but for ferries, offshore units and the like trading full time in ECAs, it might be. But when the global sulphur cap drops to 0.5% in 2020 the annual fuel bill will jump by over $2m, which would pay for a scrubber in a year or two, so that’s when the big step change in scrubber installation will happen. Unless, of course, the IMO defers to 2025.

Fabulous Future, Darling

So there you have it. Fuzzy regulations, but for most the economics are not too tricky. Intra-ECA ships should scrub up soon, global traders “wait-and-see”, and Transatlantic traders follow the ‘Ab Fab’ strategy – mix up a distillate cocktail and have a bit of fun! Have a nice day.


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.

Exponential Growth

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.

Fleet Consolidation

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.


When the shipping market boom of the 2000s came to an abrupt end with the onset of the financial crisis in late 2008, vessel earnings underwent a severe and well-documented downturn. Almost six years on, it may seem there have been ups and downs since then, but for the shipping markets as a whole, to what extent has this been the case?

Cashflow Crunch

Since the onset of the downturn in Q4 2008, although residual asset values have survived relatively well (see the analysis in SIW 1134), vessel cashflow has struggled. The graph makes this clear, showing the quarterly average of the Clarksea Index since the start of 2007. Following the huge recalibration of earnings in late 2008, the average of the ClarkSea Index in Q1 2009 stood at $11,516/day. After five and a half years of painful downturn, in Q3 2014 (to 22 Aug), the average was $10,900/day, just 5% different. Are we back to square one?

Well, although it is the case that there have been some interesting moves in the markets since end 2008, the average value of the Clarksea Index has moved within a quite narrow band. The quarterly average of the index peaked $5,522/day above the ‘post-downturn’ average (since end 2008) and has dipped as far as $3,078/day below the average. Across this period, the average divergence of the quarterly average from the post-downturn average has been just $1,864/day, with 14 of the 23 quarters seeing the index within $2,000/day of the average ‘line’.

Bouncing Up (And Down)

The post-downturn period can be split into phases. In Phase 1, late 2009 through to mid-2011 the index ‘bounced’ from its post-crash trough on the back of Chinese government stimulus driving the bulk markets and the rapid reactivation of boxships idle in the immediate aftermath of the downturn. During this phase the quarterly index averaged 19% ‘above the line’. But in the face of hefty supply side growth it wasn’t to last and during Phase 2 (2012 and 1H 2013) the gains ebbed away and the quarterly index remained resolutely between $8,623 and $10,767/day, averaging 20% ‘below the line’.

Great Expectations?

Phase 3 in 2H 2013 was relatively short-lived. Big bulkers and tankers staged a rally in late 2013, a year in which investors seemed to have started to scent the bottom of the market (leading to 2,818 new ship orders in all, up from 1,506 in 2012). In Q4 13 and Q1 14 the quarterly index values were ‘above the line’ by $1,089/day (9%) on average.

Still At Square One (Or Not?)

But in Q2 and Q3 14 the index averaged 12% ‘below the line’, and has now moved within a $4,650/day range for the last 15 quarters. On 22 August the index stood at $11,249/day, more or less where it was in Q1 2009. Analysts point to improving fundamentals, and some sectors are seeing traction, but in overall terms we’re still waiting for take off from market conditions too close to subsistence for many. Despite resilient asset prices, helped by itchy investors and low interest rates, industry cash flow has remained within a narrow band for the last six years. Here’s hoping for a lucky number 7!


The global AHTS and AHT fleet varies in power output greatly from a diminutive 850 bhp to a substantial 35,024 bhp. The range in size may be over 34,000 bhp, but 93% of the fleet falls between 2,500 and 16,500 bhp. Throughout this publication we divide the AHTS and AHT fleet into six subsectors based on power and supply capability. August’s Graph of the Month splits the fleet down into 16 categories revealing a more detailed profile of the AHTS and AHT fleet.

Shack To Chateau

When the fleet is broken down into 1,000 bhp sectors one of the trends visible is the dominance of vessels with between 4,500 and 5,499 bhp in the current fleet. These vessels account for 24% of the current fleet (703 units) of 2,895 vessels. Some of this peak can be attributed to a few AHTS designs. For example, there are 398 vessels with between 5,150 and 5,250 bhp. All but 90 of these are Chinese built and the majority in yards within China’s Fujian province, in particular Fujian Southeast. The vessels are primarily Conan Wu and Khiam Chuan’s 59m designs. Most are powered by two Caterpillar 3516B engines, providing c.5,200 bhp.

Location, Location, Location

The AHTS fleet is skewed in its deployment as well as its size. NW Europe is a key area for AHTS deployment. However, in overall number terms, the region accounts for only 6.3% of the world’s AHTS fleet deployment, mostly the largest sized vessels. The Asia Pacific region and the Middle East/Indian Sub Continent account for 32% and 22% of deployment respectively, totalling 1,597 vessels. These regions are the primary areas of deployment for Asian built and designed small AHTSs, such as those c.5,200 bhp, reflecting the benign environments in these regions.

AHTS Under The Hammer

The current orderbook stands at 188 vessels as of the 1st of August (6.5% of the fleet), 101 of which are slated for delivery within the rest of this year. Significantly, 89% of the orderbook is to be built at Asian yards, including many of the largest units. The remaining vessels are built at yards in Europe, South America, India and the United States. The >16,500 bhp category contains 17 units on the orderbook, nine of which are to be built in Asia. This category contains the largest share of orders at non-Asian yards (67%).

The shape of the orderbook profile indicates the trend in demand for larger AHTSs, not only in the very largest vessels but also in the small to medium sized vessels. The 4,500 to 5,500 bhp size range remains the largest in the orderbook; however the curve has shifted along the axis indicating a newer preference for larger vessels c.6,500 bhp. For example, 85% of the existing AHTS fleet built at Fujian Southeast is 6,000 bhp.

Splitting the AHTS fleet to a greater extent reveals the key trends affecting the fleet today. Though the largest units get much of the limelight, units suited to benign environments in Asia are far more numerous. Meanwhile, upsizing is occurring across many parts of the fleet, both amongst the largest units and the smaller ‘commodity’ AHTS vessels.


While the expanding role of Asia (especially China, see SIW 1132) in seaborne trade has grabbed headlines in recent years, developments in the US, still the world’s largest economy, have also had a significant impact. In a short space of time, changes in the US energy sector have dramatically altered global trading patterns in a number of commodities, significantly impacting the pattern of volume growth.

Putting On A Spurt Of Energy

For much of the last three decades, US oil production has been in decline, falling on average by 1% a year since 1980 to a low of 6.8m bpd in 2008. Yet technological advances have since led to huge gains in exploitation of ‘unconventional’ oil and gas shale reserves. In the space of just six years, the US managed to raise oil output alone by an astonishing 60% to almost 11m bpd, a new record.

Making An Oil Change

This has led to huge changes in US energy usage and import requirements. Crude oil imports have almost halved since 2005, and since 2010 have fallen on average by 11% p.a. to 260mt last year. Exports of crude oil from West Africa in particular have had to find a home elsewhere (unsurprisingly, many shipments now go East). Since US crude exports are still banned, US refiners have taken advantage of greater domestic crude supply to produce high volumes of oil products, especially for shipment to Latin America and Europe. Lower US oil demand since the economic downturn has also contributed, and seaborne product exports reached 120mt in 2013, up from 70mt in 2009. Alongside global shifts in the location of refinery capacity and oil demand growth, these trends have transformed seaborne oil trade patterns.

The impact could be similarly profound in the gas sector. As US imports of gas, mostly LNG, have dropped (on average by 34% per year since 2010), plans to add up to nearly 100mtpa of liquefaction capacity by 2020 could mean the US eventually emerges as a major LNG exporter, potentially accounting for 15% of global capacity (from 0.5% currently). Meanwhile, LPG shipments are continuing to accelerate strongly, rising by more than 60% y-o-y so far in 2014 to 6mt.

Miners Under Pressure

There has also been an impact in the dry bulk sector. Lower domestic gas prices have pushed the share of coal in US energy use to below 20%, leaving miners with excess coal supplies. US steam coal exports jumped to 48mt in 2012 from 11mt in 2009, contributing to lower global coal prices (cutting mining margins) and higher Asian import demand.

So What Next?

So the effects of the changing balance in the US energy sector have been far-reaching, and there remains scope for more shifts to occur as trade patterns continue to adjust to changes in commodity supply and prices. While the firm pace of expansion in US oil and gas output may start to slow, any change to existing export policies could have further impact. What is clear already, in terms of seaborne trade growth, is that the focus has shifted away from US imports, for decades a key driver of the expansion of global volumes, towards the country’s developing role as an energy exporter.


Currently, the news seems full of warnings about the health of the Chinese economy. If it’s not worries over the extent of lending by the so-called “shadow banking” system, pessimists would have us believe that China is on the brink of a catastrophic housing bubble, or point to the impact of pollution reaching new highs in major Chinese cities. How should the shipping industry evaluate these issues?

What’s At Stake?

Of course, anything which harms the Chinese economy will generally be bad news. As the Graph of the Week shows, the Chinese economic miracle has been built on an import/export boom some distance in excess of the rest of the world’s efforts at trade growth, with Chinese trade growth accounting for over 90% of global expansion in some commodities.

The two drivers of the Chinese economic miracle which has transformed the shipping industries have been consumer exports, fuelled by cheap labour, and infrastructure investment in construction in China. These two factors are mutually interdependent: the share of the Chinese population living in cities has increased from 35% to 50% since 2000. All these new urbanites need housing, boosting construction. And what does this require? Steel, of course. Construction of housing for urban migrants, along with factories to employ them and services from shopping malls to roads and railways, has spurred Chinese seaborne iron ore imports to nearly 900mt p.a. The effect on the Capesize fleet needs no repeating.

If You Build It They Might Come

The real problem is not all of the construction is where it is needed: there are several virtually uninhabited brand new cities in Inner Mongolia, and a replica of central Paris (with Eiffel Tower!) in Zhejiang province. Signs of a slowdown in these sorts of construction projects have contributed to iron ore prices at the lowest levels in nearly 2 years.

Much of the construction effort of the last few years has been fuelled by fairly easy access to credit, with less conventional “shadow” credit a worry for some. Consumers have also taken on debt to increase their spending power. As more citizens begin to drive cars, oil import demand is stimulated. As they gain disposable income, demand is also generated for goods which drive expanded intra-Asian container trade and a greater need for imported manufacturing materials.

Pollution is another problem China now seems to be taking seriously. This is a bearish sign for areas of heavy industry including iron ore and crude oil importers, particularly the large number of steel mills in Hebei province, near Beijing.

Bad News? Or Not?

So, negative talk about the Chinese economy abounds. But time and again in the last decade, China has surprised (sometimes with the help of a little fiscal stimulus, admittedly), and a controlled deceleration remains the most likely outcome. Reports suggest that GDP growth will struggle to meet Beijing’s target of 7.5% this year. But a near miss would still be a growth rate that most other economies would love to be faced with. Moreover, industrial production in June was up 9.2% year-on-year, the fastest rate this year: maybe China still has the ability to surpass expectations. Have a nice day.


‘Pre-salt’ is usually a term associated with Brazil, where giant offshore field discoveries in the Santos and Campos basins have been grabbing headlines since 2007. Now oil companies are looking across the ocean for their pre-salt game. Conjugate basins offshore Gabon, Congo and Angola could be as juicy as the Santos and Campos pre-salt plays have proved. Following a number of recent scores by Cobalt, Eni, Harvest, Maersk and Total, the hunt is on.

Gearing Up

As the Graph of the Month shows, 16 wells targeting West African pre-salt reservoirs have been drilled since start 2011 with a success rate of 75%: 9 offshore Angola, 6 off Gabon and one off Congo. Oil from West African pre-salt was in fact first found in 1968. Its prospective yield was not appreciated though, as only recently did seismic imaging become able to give an accurate picture of the pre-salt. The ultra-deepwater of Angola’s Kwanza Basin also inhibited pre-salt exploration before sixth generation floaters. But, as Brazil has shown, operators now have all the technology they need to pursue the pre-salt.

Hunting Elephants

Some 27 future pre-salt wells are reportedly planned by oil companies or are anticipated through to end 2015, as the Graph of the Month shows. Four of these wells have been spudded. Often smaller E&P companies play a vital role in opening up new frontiers. In West Africa though, supermajors and other large players are already loading up. Conoco has 4 planned wells; Repsol, 3; Eni, 2; Shell, 2; and Total, 2. Of the 27 wells, 70% are offshore Angola and will therefore be in water depths ranging from 800-2,000m. The remainder are to be spudded off Gabon, likely in water depths up to 300m. In either case, companies will be hoping to hit world-class finds, like Cobalt’s Cameia discovery, which is expected to be brought onstream at 80-120,000 bpd in 2017.


So, the West African pre-salt play is still in the early stages of exploration and appraisal. If it proves prolific though, and if operators can bring it to fruition, a pre-salt bonanza would more than offset production decline from West Africa’s mature fields. With less stringent local content requirements and more international oil company control, development may be less fraught than in Brazil. Cobalt have already announced plans for 3 multi-field pre-salt hubs centred around the Cameia, Lontra and Orca fields offshore Angola. Given that the average water depth of Angolan pre-salt wells is 1,274m, MOPU solutions are likely to be favoured. The previous caveats noted, the FPSO ordering boom in Brazil could be replicated in Angola, which already accounts for 23% of world FPSO deployment (second to Brazil). In the shallower waters off Gabon, fixed platform solutions are probable, if finds reach the development stage.

In the near term then, the pre-salt safari offshore Africa looks to be an exciting campaign, with potential to generate even more interest in the region and hence opportunities for survey vessel and rig owners. Out towards the end of the decade, Angola could be the new Brazil, with pre-salt development contracts abounding.


Who would have thought it? Nowadays a surprising number of people around the world seem to know about shipbuilding. Even taxi drivers can sometimes tell you there’s been a shipbuilding boom, and they’re right. For two decades the maritime industry watched in awe as shipyard output grew eightfold from 19m dwt in the early 1990s to 166m dwt in 2011.

Nice Steady Investment Story

Then came the crash. Deliveries dropped to 109m dwt in 2013, a big fall, but not the disaster many expected. Somehow the industry bailed itself out, and while lower deliveries grabbed the limelight, the yards were running flat out to keep up with the new investment profile which was throwing them a lifeline. In the run-up to the boom, 42% of estimated investment was in the tanker and container sectors; 50% in bulk and specialised, and 7% in gas. This pattern was largely maintained during the boom. All nice and steady, but then everything changed.

All Change for the Recession

Since 2008, there has been a major re-alignment in market shares, as structural changes in these segments have altered investment patterns. Tankers and containerships have suffered, falling to 22% (the tanker share fell from 24% in the boom years to 12%, and containers from 18% to 10%). Meanwhile, the bulk and specialised share jumped to almost 70%.

Time for Transition

On the tanker side, high oil prices, sluggish OECD growth and greater US energy self-sufficiency have all nibbled at demand. Meanwhile container trade growth has slowed since the boom and the sector is still struggling to absorb overcapacity. No wonder investors are easing back.

Luckily for the shipyards, bulkers and specialised vessels have stepped up to fill the gap. Bulkers have accounted for 25% of investment since 2008, similar to their share during the booming 2000s. This has been helpful for Japan and China, who dominate bulker building. And they have achieved it without taking too much of a cut on prices, which have been edging up in 2013 and 2014.

A Specialised Focus

But the real star is the specialised sector, which has accounted for 43% of estimated investment since 2008, up from 27% in 2003-2008. Cruise did pretty well, but the super-star, especially for the Korean yards, was the boom in offshore investment, including alternative energy like offshore wind farms. Offshore investment jumped from $34bn in 2008 to $47bn in 2012. Really quite exciting, but challenging for the yards.

Where Next?

So there you have it. For the time being the shipyards have struggled through, thanks to this switch in product range. Although tricky, the bulkers are keeping Japan and China busy and specialised was a nice bonus, especially for the big Korean yards. But switching product range is always difficult, and that really is the issue for the future. The first rule of shipbuilding recessions is “you never know what they’ll order next” but it’s often completely different. Have a nice day.


Natural gas demand and onshore and offshore production data is now available in Offshore Intelligence Monthly, split out by region and country on pages 3, 6-7 and 20-25. Analysing this data, it is apparent that the offshore hydrocarbons cake just keeps on getting bigger.

Since 1993, world combined offshore oil and gas production has increased by 58%, to 43.7m boepd in 2013; and between 2013 and 2023, it is forecast to increase by a further 35%, to 58.9m barrels oil equivalent per day (boepd). While oil is playing its part in this, gas is proving an even more potent rising agent in the offshore mix, of which it is taking an increasing share.

Measuring the Ingredients

As the Graph of the Month shows, growth rates for offshore oil and gas production have moved more or less in line y-o-y, with gas consistently ahead of oil as hitherto undeveloped historical offshore gas discoveries are brought onstream. While offshore gas production grew with a 3.8% CAGR from 1993 to 2013, oil exhibited a 1.4% CAGR. The spread between gas and oil production is forecast to continue 2013-23, with gas and oil production CAGRs of 4.2% and 2.0% respectively. It is thus expected that offshore gas production will almost achieve parity in volume terms with offshore oil by 2023, accounting for over 49% of offshore hydrocarbons output (versus 32% in 1993).

Energy Hunger

The strength of gas in the offshore production mix in part reflects faster historical and anticipated growth in gas demand. Since 2009, oil demand growth has stagnated in OECD countries whereas gas demand growth has remained firm, averaging 3.0% p.a. 2010-13 with a rate of 2.1% projected for 2014. In non-OECD countries, gas demand growth averaged 4.7% over the 2010-13 period, compared to 3.9% for oil demand. Similarly, 2014 demand growth is forecast at 3.7% for gas and 2.7% for oil. As non-OECD countries continue to industrialise, demand growth for natural gas is likely to remain firm.

Let Them Eat Cake

Given this scenario, it is likely shale gas will meet only a portion of future demand. Conventional gas will still have a role in feeding world energy hunger, and the offshore gas element of this increasingly so. In 2013, 30% of world natural gas production was offshore; in 2023 this is forecast to reach 36%. Accordingly, the offshore gas field investment outlook is positive. Offshore field operators are initiating schemes to utilise associated gas at mature oilfields. Moreover, development of offshore gas fields is increasingly perceived as economic. Gas fields account for 51% of fields under development and 48% of undeveloped offshore discoveries.

More so than oil, offshore gas growth is driven by mega-projects. Current examples include nine South Pars phases off Iran, Leviathan off Israel and Shah Deniz II in the Caspian, due onstream in 2015-17, 2017 and 2019. Major LNG projects planned offshore East Africa and Australia, entailing extensive subsea production systems and deployment of the world’s first floating liquefied natural gas (FLNG) vessels (like Shell’s “Prelude”), are also responsible much of the forecast growth in offshore gas. All in all then, gas looks to be quite a tasty slice of the offshore cake. Bon appétit!