Archives for posts with tag: oil sector

In the first film in the Bridget Jones series, 32 year old single Bridget soon ends up in the middle of a love triangle with the sensible Mark Darcy and charming Daniel Cleaver. The second sequel, released last year, sees Bridget finding herself unexpectedly expecting a baby. But Bridget Jones hasn’t been the only one battling tricky relationships and a rising headcount, as tanker owners will attest.

Happy Couple

The tanker market has certainly had some tumultuous times of late. Crude tanker earnings picked up in 2014, averaging nearly $27,000/day, and surged to an annual average of around $50,000/day in 2015. Things started to cool off into 2016, but in the full year average earnings were still fairly healthy at just under $30,000/day. They say two’s company; and these positive conditions did seem to have been brought about by the fortuitous lining up of two key factors.

Firstly, limited tanker ordering in the years after the global economic recession led to a spell of very muted growth in the tanker fleet. By the start of 2015, tanker fleet capacity was just 3% larger than at the start of 2013 (in the same period, the bulkcarrier fleet grew 10%). Secondly, the oil price crash in mid-2014 kick-started a period of unusually firm growth in seaborne oil trade. The ensuing low oil price environment supported healthy refinery margins and a build-up in oil inventories in key regions, whilst price pressures also dampened US oil production and boosted US crude imports. Overall, seaborne crude oil trade grew on average by a healthy 3.5% p.a. in 2015-16.

Delivery Record

However, a resurgence in contracting (1,278 tankers were ordered in 2013-15, up from 577 in 2010-12) has seen tanker fleet growth accelerate, to around 6% in 2016. The tanker supply surge has continued, with deliveries in January 2017 reaching an all-time monthly record of 6.7m dwt. With these new additions, tanker fleet capacity has already grown by 1.1% since the start of 2017, a similar rate of growth to that seen in full year 2014, with more tonnage delivered last month than in some whole years in the 1980s. In full year 2017, tanker fleet growth looks set to reach around 5%.

Troubling Trio

Another tricky element could also now be materialising on the demand side. Compliance by major oil exporters with agreed production cuts seems to have been high so far. The wider impact of these cuts on the tanker market is certainly far from clear, but there is the potential for improved oil price levels to support US oil output and undermine crude imports. At the same time, oil inventory drawdowns in some regions remain a key risk

Finding Mr Right

So, they say three’s a crowd, and the tanker market could be facing up to some real tests if the three factors of fast supply growth, changes in oil production and inventory drawdowns come together. Bridget Jones would be the first to tell you that finding the right way forward when the future’s uncertain and numbers are multiplying is tricky at the best of times, but rarely have shipowners not been up for a challenge. Have a nice day.

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The offshore industry is heavily dependent on the well-being of the oil and gas sector, and with oil prices remaining below $50/bbl, the offshore market is largely full of doom and gloom. However, there is one sector for which headlines in November have been positive: offshore wind. Could this renewable energy source provide some owners with an alternative market and an opportunity for specialisation?

Something In The Wind

As the Graph of the Month illustrates, historically offshore wind farms have been located close to shore in shallow waters of less than 50m. Today, the industry appears to offer potential for the offshore market as both approved and proposed projects are getting increasingly deeper and further from shore. Following a slowdown in investment due to regulatory instability in key markets such as UK and Germany, future final investment decisions (FIDs) have been looking less certain. Indeed, in 2014 the number of turbine installations in the UK fell by 35% during the first six months of the year in comparison to 2013. Yet, November’s headlines might indicate a wind of change. Statoil has reached a FID for a pilot floating wind farm, Hywind, moored to the sea floor offshore Scotland. The departure from traditional fixed turbines opens up the opportunity for more ambitious, deepwater projects. DONG also made a FID regarding the Walney Extension in the Irish Sea, which will become the largest fixed offshore wind farm yet.

Vessel Requirements

The installation of offshore wind farms requires the use of number of construction vessels, particularly cablelay and heavylift units. Estimates suggest that around 100km of cabling is required per wind farm. However, self-elevating designs currently dominate the installation phase due to their stability. Although most existing self-elevating platforms can be used, an increasing number of units are specifically designed for operation within the wind sector: the wind turbine installation (WTI) fleet grew at a CAGR of 11% over 2005-2014. A peak in WTI vessel orders in 2010 following a third licensing round in the UK resulted in a record number of 10 units entering the fleet in 2012. As of November 2015, 31 WTI vessels were active globally. As wind farms move further from shore into rougher waters, requirement for larger WTI vessels is likely to increase.

An Alternative Market?

On the other hand, the maintenance phase of offshore wind farms has the ability to absorb more traditional vessels in the North Sea. A handful of PSVs and MSVs have been converted into accommodation vessels for maintenance personnel. However, in reality the main demand is for small crew transfer vessels, usually with a LOA of <25m. The crew transfer fleet has grown substantially from approximately 40 units in 2010 to over 200 in 2015.

For now, offshore wind remains a niche market rather than a viable alternative for the mainstream fleet. Future growth is largely dependent on how attitudes of governments and private companies will evolve. However, technological advances, such as Statoil’s floating wind farm, at least push the industry in a helpful direction for offshore as a whole.

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