Archives for posts with tag: field development

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.

OIMT201409

OIMT201405Russia is forecast to account for 13% of world crude oil production and 18% of world natural gas production in 2014. While its prodigious Siberian flows tend to receive most of the credit for this feat, fields located off the country’s 16 million km of coastline are nonetheless projected to produce 390,000 bpd oil and 2.64 bcfd gas in 2014. So where exactly is Russian offshore production to be found? And what is the outlook?

Mastering the Arctic

As the Graph of the Month shows, offshore oil and gas production in Baltic & Arctic Russia stagnated after the break-up of the USSR, declining to 0.03m boepd in 2013, when it accounted for 4% of Russian offshore production. This trend was thrown into reverse when the Prirazlomnoye field came onstream in December 2013. Located 23km from shore in the Pechora Sea, the field is exploited via a ice-class platform and production is scheduled to reach 120,000 bpd by 2019. New technologies and robust oil prices are thus unlocking reserves hitherto stranded, and by 2023 Arctic oil and gas is forecast to constitute 11% of Russia’s offshore production.

Caspian and Crimean Conquests

Russia’s southern offshore fields, mainly in the Caspian, accounted for 9% of Russian offshore production in 2013. In the Caspian, as in the Arctic, harsh conditions have limited field development and disincentivised efforts to halt production decline. However, as in the Arctic, decline is now forecast to be arrested. Lukoil, for example, are planning substantial investment over the next four years at fields like Khvalynskoye and Yuri S. Kuvykin, where ice-class jack-up production units are likely to make development feasible. By 2023, the area is forecast to account for 24% of Russian offshore oil and gas production (excluding gas produced by fields off the Crimea, over which Russia now has de facto control, and which produced 410m cfd in 2013).

Expanding Eastwards

The Russian Far East is a relatively new area of offshore E&P. The Sakhalin-2 project started up in 1996 but offshore activity is still geographically limited, even if production volumes, at 0.78m boepd, are significant. The area accounted for 88% of Russian offshore production in 2013. Moreover, the Far East is Russia’s window on the developing economies of the Asia Pacific region, so companies are seeking to increase activity there, particularly with regards to LNG. In October 2013, the first Sakhalin-3 field, Kirinskoye, a subsea-to-shore development, began ramping up to 580m cfd. Further such field developments are planned out to 2023, when the area is projected to produce 0.95m boepd, its share falling to 65% despite new Capex due to faster Arctic and Caspian growth.

Thus production is forecast to grow in each of Russia’s offshore areas, driven largely by investment in high-spec jack-up, fixed platform and subsea field solutions. Total offshore oil production is projected to grow with a CAGR of 8.9% from 2014 to reach 890,000 bpd in 2023, and gas production likewise at 2.5% to reach 3.36 bcfd. Offshore would then account for 6.7% of the country’s oil and gas production, a far cry from the 2% nadir of post-Soviet decay.