Demand for Energy Shall Keep Asian Shipyards Occupied for Next Five Years

The high level of volatility in oil prices to some extent can be attributed to geo-political events around the globe but this influence is limited to ripple effects only. The root cause lies in balancing demand and supply equation. The Offshore exploration fleet size has been stagnant since the last recorded peak production during early 1980’s. The fall in oil prices, worldwide recession and Iran-Iraq war had their toll on the offshore fleet resulting in large number of laid up rigs and drill ships.

 But since 2004, the unprecedented increase of Oil prices to US$70/barrel and growing economies of Asia, like China, India, Indonesia and Vietnam has encouraged not only traditional oil majors but also state-governments, institutional and other industrial & energy investors to take the lead role.

TMC has recently conducted the analyses of the demand and capacity of the major shipbuilding yards driven by upcoming energy exploration and transportation requirements to meet the rising demand for energy. The two main sources of energy from offshore fields are Oil and Gas. The exploration and production is largely dependent on availability of Drill Ships, Drilling Rigs, and Pipe layers, followed by Production Platforms, FPSO, FSO and Multi Purpose Support Vessels (MPSV). This flotilla is now in scarce supply, partly due to old age (>80% of current fleet is 20 to 25 years old) and mainly due to change in operating conditions from shallow waters to deep-sea exploration.

As the oilfields near shore and at depths less than 5000 feet are at the end of their useful life, the quest for energy is leading the explorers to deeper waters beyond the depths of 2000 meters (At least 6000 feet) and above. The future is for custom built Jackups, Semi-submersibles and FPS (Floating Production Systems). Increase in demand for Gas as alternative source has firmed the current LNG prices to their base level with high probability of 20-30% rise in five years. Thus it is anticipated that orphan fields (previously discarded as un-economical), will be used as potential source of energy, thereby encouraging the need for FSRU’s and FSU’s as a quick-fix option.

 All this flurry of activities propels towards only one direction; and that is high demand for shipbuilding yards with competent and fast delivery track records. At this moment when most of the rig builders have closed shop in the eighties and nineties, so largest beneficiaries are only Korean and Asian yards to meet the increased demand.

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