Archives for posts with tag: development

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.

SIW1135

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OIMT_2013_09The South East Asia Oil Producing Area, consisting of Brunei, Myanmar, Indonesia, Malaysia, the Philippines, Thailand and Vietnam, accounted for 6.4% (1.6m bpd) and 16.8% (16.5 bcfpd) of global offshore oil and gas production respectively in 2012. Its 409 active offshore fields – 63.8% of those in the Asia Pacific – are mostly fixed platform developments. However, indicators suggest this historical tendency may be changing.

Shallow Water Bonanza

As the Graph of the Month shows, shallow water development types predominate within South East Asia. Together, fixed platforms, subsea tie-backs and extended reach drilling (ERD) accounts for 95% (388) of producing oil and gas fields in the area, reflecting the historical concentration of E&P activity in shallow Malaysian and Indonesian waters. The average water depth of producing fields is 70m and only nine are located in depths of more than 200m. SE Asia is thus comparable to the North Sea, where these development types also equate to 95% (614) of active fields and average field water depth is 91m.

Topsides Upside

Unlike in the North Sea though, active fields in South East Asia are heavily skewed towards fixed platforms: 77% (315) of active fields produce via fixed platforms in SE Asia. For the North Sea this figure is 40% (258). For every field exploited by subsea tie-back or ERD, there are 7.3 (for subsea) or 10.5 fields (for ERD) developed by fixed platforms in SE Asia. The equivalent global ratio is 2.9 or 9.0 fixed field developments per subsea or ERD field. SE Asia is also likely to remain a source of fabrication contracts for the foreseeable future: development by fixed platform accounts for 56% of fields under development in the area.

Subsea Rising

However, the Graph of the Month also shows a pronounced rise in subsea development: 11% of active fields are subsea tie-backs but 24% of fields under development are such. The average water depth of existing subsea fields in SE Asia is 150m whereas for fields under development by subsea tie-back, the average is 806m. The comparable figures for the North Sea are 129m and 168m. Rather than combining with existing platform infrastructure (as in the North Sea), subsea growth in Asia seems to be being driven by deepwater projects like Gehem, Gendalo and satellites like Gandang (off Indonesia).

MOPUs Multiplying

This suggestion is reinforced by the trend in Mobile Production Unit deployment in the region. While 5% of active fields in the OPA are MOPU developments, 15% of fields under development will employ MOPUs. In deep water, satellite fields with subsea producers are often tied to MOPUs, especially in later project phases. South East Asia accounts for 44% of global developments by MOPUs other than FPSOs (e.g. TLPs or jack-ups).

Fixed platforms will remain common in Asia, particularly given a push to develop many marginal Malaysian fields. Yet equipment and service suppliers will be encouraged by the growth in more complex development types, as more fields are developed and then start up in deeper waters.