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Thursday, December 14, 2017

Shale Oil & Gas: Evolution of Revolution?

Posted to Offshore Oil & Gas (by on April 2, 2014

While the offshore oil and gas market remains active, signs suggest that the proliferation of shale oil and gas finds in the U.S. could dramatically impact the higher cost, deeper water offshore industry long term.

Energy is ubiquitous, and as any reader of these pages knows all too well is a prime driver of this and any transport market, whether as a cargo or a fuel.

Several recent interviews and discussions with those in the know, including Joe Pyne of Kirby Corp., Tom Crowley of Crowley Maritime, and Jim McCaul of IMAstudies indicate that the combination of hydraulic fracturing and directional drilling will power the shale oil and gas market for many years to come, with profound impact on the maritime and offshore markets as we know it.

Both Pyne and Crowley, in separate interviews for the pages of Maritime Reporter & Engineering News and Maritime Professional magazine, respectively, freely admitted that while the production of gas from shale formations was clear, the quantity of oil coming from these projects was a surprise, and a pleasant one at that. The shale oil and gas business has almost single-handedly reenergized the U.S. maritime and shipbuilding infrastructure, with a renewed demand for ATBs and tankers capable of carrying everything from crude to finished product.

Just as enlightening are recent discussions and articles from McCaul, who has intimately studied the evolution of the Offshore Floating Production System market for nearly two decades, and in the April 2014 edition of Maritime Reporter & Engineering News presents a sweeping view of the market with this conclusion:

“Over the next five years we expect orders for 104 to 150 production floaters. Our most likely forecast is 126 orders … But our forecast is significantly lower than the forecast made last year. There we forecast orders for 124 to 190 production floaters over the five year period 2013/2017, with the best estimate being 160 units.  Now we are forecasting 104 to 150 orders, with a best estimate of 126 units.  Why the big drop?
Over the past year it has become clear that supply chain and other constraints are much stronger than previously thought. Deepwater project start opportunities keep growing – evidenced by the growing backlog of projects in the planning stage. But capability limitations in the supply chain, increasing project complexity, escalating costs, access to financing and bottlenecks created by local content targets appear to have worsened. These factors have been constraining – and will continue to constrain – deepwater project starts. 
Perhaps more ominous, alternative opportunities to invest in shale oil/gas development appear to be eroding investment in deepwater development. There have been indications that better investment opportunities have been squeezing deepwater projects from oil company capex budgets. Several deepwater project starts have been delayed or cancelled within the past year.  Different reasons have been given for each decision – but ultimately management decided there were better uses of available funds.
For full details, pick up a print or electronic copy of the April 2014 edition of Maritime Reporter & Engineering News. Or shoot me an email at trauthwein@marinelink.com and I’ll share them with you in advance.

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