Page 37: of Maritime Reporter Magazine (June 2015)

placed in Columbia, S.A., by Paci? c Ru- gas, it turns out, is one of the major rea- biales. A month away from completion sons for the economic turnaround in the and the company decided it didn’t want U.S., according to McCaul. “It’s just a the vessel any more. “They put it on hold phenomenal thing to have happen.” It’s two weeks ago because the economics of driving the demand for new factories the mix is just not working; in this new and new industry. “A lot of petrochemi- situation they probably will not break cal businesses that had been outside the even,” says McCaul, “so the question at U.S. – or were here and moved out – are this point is what might they do with it? I now coming back. German companies in don’t think they know either.” particular ? nd this a very attractive place

The drop in crude pricing is signi? cant- to put up a plant.” The U.S. has also be- ly impacting LNG pricing worldwide, but come extremely competitive for factories particularly in the U.S., where producers where gas is part of the production pro- seeking returns of up to $12 per mmbtu cess. And then, there is the worldwide were facing $8.40 per mmbtu once crude movement toward gas-powered power fell to $60, and even less when it hit the plants. lower depths of $50. Asian projects too As to when the industry might see a are undermined by LNG prices, which price recovery in oil and gas, and to what have dropped under $10 MMBTU there. levels, well, that’s anybody’s guess. “Ev-

A report from Cowen & Co. estimates eryone ponti? cates but no one knows that spending on exploration and produc- what and when the price of oil will be. tion has dropped by more than $116 bil- Eventually it will have to go back up.

Considering LNG?

lion during oil’s freefall. Indeed, explora- “In order to go ? nd and develop and

Contact : Gulf Coast Shipyard Group tion and drilling has been very hard hit. deliver crude oil, you have to have some

Projects worth funding at $100 a barrel price that gives you return on investment the only U.S. builder experienced are being shuttered and put on hold. In – otherwise you won’t do it – $55 is at with LNG technology the last two weeks of February alone, that level,” explains McCaul. “It will 177 U.S. oil rigs were idled, according constrict the supply and drive the price to Baker Hughes, bringing the total rig back up again – how much, and when, +$59(<(1(5*<³WKHÀUVW86EXLOWYHVVHOVXFFHVVIXOO\ count down 25% since October, its low- is another question, but it’s probably not

RSHUDWLQJRQ/1*³PDNHV*XOI&RDVW6KLS\DUG*URXSWKH est level since August 2011. too far off in the future.”

RQO\EXLOGHULQWKH86ZLWKWUDQVIHUUDEOH/1*WHFKQRORJ\ “The drilling business is horrible right While some point to a future market of now – no one wants to drill for low-cost $75, McCaul says he’s been using a price

IRUZRUNERDWVRIDOONLQGV:LWK$%6(QYLUR*UHHQ oil,” says McCaul. “There’s a lot of drill- range of $60 to $80 for his work. “It could 3DVVSRUWQRWDWLRQZKHQRSHUDWLQJRQRQO\/1*+$59(< ing on land that they aren’t completing, be next week or a year from now before (1(5*

R[LGHHPLVVLRQVUHJXODWLRQV ing away from it. Why take it out at $50/ the multi-billion dollar question. McCaul barrel when a year from now it could be says to watch for “imbalances.” As the

Gulf Coast Shipyard Group: meeting market, regulatory $100/barrel? They’ll just leave it in the surplus falls off and demand grows, “as and environmental demand with solutions for each.

ground [until then].” Drilling for shale soon as a slight imbalance occurs, we’ll faces a similar dilemma. see pricing changes. It’s just supply and demand. It [pricing] has nothing to do with OPEC or the impact of regulations.

Driving LNG Futures

The current situation of weak demand, Things just got out of whack.”

Longer term, the future is bright for oversupply and record low pricing meet- ing up with limited bunkering options gas, according to the International En- and stalled drilling and building projects ergy Agency. Its “World Energy Outlook for 2014’’ report projects that natural is going to bring change to the LNG mar- ket, starting with project planning and gas will continue to increase its share of the global energy mix, growing at 2.4% structures.

LNG projects have typically been per year until 2018, eventually growing tailor-made for a speci? c situation, and to represent a quarter of the global en- would encompass contracts to build the ergy mix – oil, gas, coal and low-carbon

LNG import terminal, build the LNG sources – by 2040. Oil and gas will con- liquefaction facility wherever the gas is tinue to make up about half of global and to build all the ships needed to carry supply in 25 years’ time.

With conventional supplies often tak- the stuff. Everyone involved would have to commit to a 30-year proposition. The ing years to bring online, and uncon-

Gulf Coast Shipyard Group, Inc.

trend is toward building facilities that ventional supplies requiring potentially are not tied to a long-term contract, nor lengthy changes in infrastructure or regu- 13085 Seaway Road lation, the industry must think about how a speci? c use.

Gulfport, Mississippi 39503

The use of gas as a fuel for ships is it must develop supply over the years to 0