Page 16: of Maritime Reporter Magazine (November 2015)

MARKET REPORT

The Rebound Scenarios

Three plausible forecast scenarios are pro? led in the report that capture a real- nate a ramp-down of global output.A • More supply has suddenly come istic range of underlying market conditions likely to prevail over the next ? ve huge oversupply of oil is in the market. into the oil and gas market years.

The result has been a plummeting of oil • Shale/tight oil and gas projects are prices over the past year --reducing cash competing for investment funds ? ow and prompting oil companies to se- • Local content constraints in the sup-

Low Scenario verely cut back on capital expenditures ply chain are creating delays and to conserve cash. overruns

Sluggish global economic growth, decelerating energy demand, strong com-

Add to this the implosion within Petro- • Petrobras, the major customer, is petition from shale oil, oil prices in the $50 to $60 range through 2020, local bras. The major player in the deepwater having serious ? nancial problems content policies pressure deepwater cost growth, Petrobras problems con- sector has been largely taken off the ? eld • Cost of capital for deepwater proj- tinue into 2017/beyond.

by a corruption scandal. More than a ects will rise over the next several third of expected FPSO orders over the years next ? ve years were to be generated by

Petrobras. But the company’s ? nancial In the unknown category are

High Scenario problems have caused a massive cut • Black swan events can (and have) back in planned project starts. In 2014 disrupt the sector

Strong economic growth, accelerating energy demand, oil prices in the $70

Petrobras was planning to acquire13 ad- to $80 range through 2020, constraints limit shale development, easing lo- ditionalFPSOs for project starts between Interaction of these drivers over the cal content policies reduce cost pressures in deepwater projects, Petrobras 2018/20. Now it is planning to acquire next few years will determine the num- regains investment grade in H1 2016. 5 FPSOs – and questions remain about ber and timing of future production ? oat- the ability to ? nance even this reduced er orders.

number of FPSOs.

Most Likely Scenario

Is a Rebound Likely? Forecast for Orders

Absolutely. Clearly there will be a re- In the most likely scenario, over the

Modest but sustained economic rebound, 1.5% energy demand growth, oil bound in the deepwater sector. It will be next ? ve years we expect orders for 64 prices in the $60 to $70 range through 2020, shale oil grows in North Amer- driven by increasing global oil demand oil/gas production units (FPSOs, Semis, ica – but not elsewhere, deepwater cost growth decelerates, Petrobras credit and need to ? nd new sources of oil to Spars and TLPs), 29 LNG processing junk rated through 2017.

replace depleting sources. Global oil units (FLNGs, FSRUs) and 25 storage/ demand has been growing at an average of? oading units (FSOs). Capex associ- rate of 1.4% annually over the past 20 ated with the building and conversion

In all scenarios the expected long term price of oil – on which major invest- years.With the exception of two years contracts will be in the vicinity of $106 ment decisions are based – falls within the EIA projected future crude price during the global ? nancial meltdown, billion. A breakdown of the forecast by range of $70 to $170/barrel in the late-2020s, $80 to $200+ in the late 2030s.

oil demand has increased year over year size unit, region, year order placed, new during this period. or modi? ed hull, etc. is provided in the

Looking forward, industry analysts new report.

differ on the rate of future oil demand In the high scenario we anticipate a supply losses as depleting oil ? elds come derlying business drivers that will in? u- growth, but not on whether growth will considerably stronger pace of orders. continue. For example, the IEA sees off line. Deepwater is among those new ence the timing and direction of future

Here we expect orders for 77 oil/gas world oil demand in 2040 growing to sources. deepwater project investment decisions. production ? oaters, 36 LNG processing

Here’s how we see these eleven drivers 104 mb/d, an increase of 10 mb/d over units and 30 storage/of? oading units. In current consumption. The EIA predicts What Will Drive the Rebound? at the moment. the low scenario the number of orders

We are tracking more than 240 offshore global oil/liquid fuel consumption will oil and gas projects in the planning stage In the positive category are is expected to be 45 oil/gas production grow to 119 mb/d by 2040, a 30% in- ? oaters, 22 LNG processing units and 20 creaseover the present. OPEC expects that likely require a ? oating production • Oil and gas demand keeps growing storage/of? oading units. system for development.Some of these • Supply disruption potential keeps oil demand to grow to 111 mb/d in 2040, The 2016/20 forecast is signi? cantly projects will require multiple systems. If up 18% from global oil consumption in the focus on ? nding new sources of lower than the ? ve year forecast last all projects proceed to development, up supply 2015. year. There we projected orders for 98

Among the oil majors, ExxonMo- to 275 new production ? oaters will be • Long term oil/gas prices will rise, oil/gas production units, 25 LNG pro- required over the next 10 to 15 years. A driven by demand/supply funda- bil expects an average growth of 1.2% cessing units and 30 storage/of? oading mentals units. . in oil demand through 2025, followed large backlog of eligible projects is sig- by a 0.5% growth between 2025 and ni? cant – but only part of the picture in

Details for the production ? oater fore- forecasting future production ? oater or-

In the negative category are 2040. BP calls for world oil demand to cast are provided in our new 186 page grow at an average rate of 0.8% annu- ders. Ultimately an investment decision • Near term oil and gas prices have report. Information about the report, in- fallen to levels that discourage in- ally through 2035. Ultimately new oil is needed to transform these deepwater cluding the table of contents and list of project opportunities into contracts for vestment sources will be needed to accommodate exhibits, is available at ? oating production facilities. In our • Major energy companies have been this demand growth – as well as replace forecast report we examine eleven un- cutting back on capital expenditures www.worldenergyreports.com 16 Maritime Reporter & Engineering News • NOVEMBER 2015

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