Page 8: of Maritime Reporter Magazine (August 1996)

MARKET REPORT

Hie Outlook for Oil Shipping to MOO

Rising oil production, increased use ofFPSOs drive shuttle tanker demand

A combination of new discoveries, cost reductions, improved technol- ogy and fast track development solutions such as Floating

Production Storage and Offloading (FPSO) have extended the com- mercial life of the North Sea as an oil producing area.

The North Sea, consequently, continues to defy expectations with spectacular growth in oil produc- tion, and predictions forecast a boom to the end of the decade.

In its latest report, The North

Sea Tanker Market: The Outlook for Oil Shipping to 2000, Drewry

Shipping Consultants looks at how higher North Sea output has affected oil shipping, and examines the implications for the tanker market.

Drewry expects that shuttle tankers will be carrying 64 percent more North Sea crude in 2000 as compared with 1995 levels, which equates to an extra 1.5 million bar- rels per day.

The growing demand for shuttle tankers from offshore loading oil- fields in the North Sea is a result not only of the rising level of oil production, but also of the increas- ing use of FPSO developments, the growing significance of heavy crudes in the North Sea and the close proximity of much of Europe's refining capacity.

The main growth areas for off- shore loading will be in the

Norwegian Sea, West of Shetland, and the central area of the North

Sea. The increased demand in these areas will more than make up for the decline in demand for shuttle tankers from the older, more established fields. To accom- modate the projected increases in demand, the North Sea shuttle tanker fleet will need to expand.

Effect On Conventional

Tanker Trading Patterns

All sectors in the North Sea tanker market have registered spectacular growth in the 1990s in terms of the volume of crude cargo traded.

However, the switching of employment of some VLCCs, from long-haul trades out of the Arabian

Gulf, to work in the North Sea, has meant that growth in North Sea oil production has not always been translated into significantly higher freight rates for the North Sea's traditional aframax and suezmax tankers.

The rising level of oil production has resulted in a commensurate growth in tanker demand in

Northwest Europe that has had a knock on the effect of tanker trad- ing patterns worldwide. The previ- ously highly international tanker market is breaking down into a series of regional markets.

In particular, North Sea output, coupled with other non-OPEC pro- duction advances, has helped limit the long expected increase in the reliance on OPEC oil.

Short and medium haul supplies from the North Sea (along with

West Africa and Latin America) have increasingly displaced long haul cargoes from the Arabian Gulf in the European and American markets. Crude cargoes from the

Arabian Gulf increasingly go east to Southeast Asia and the Far

East, rather than worldwide.

This cuts import demand for

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