Regional gas demand puts pipelayers under pressure
  from: Asian Oil & Gas
  Friday, October 27, 2006

Burgeoning Asian gas demand is set to fuel 'major growth' in the region's pipelay sector over the next five years, but will the industry be up to the challenge, ask the authors of a new report* published by London-based energy data analysts Infield Systems.

Even beyond Asia-Australasia, the global pipeline and control line market is forecast to maintain steady growth in all regions outside of the shallow water Gulf of Mexico. Expenditure on offshore lines, which includes major transportation routes, infrastructure networks, and control lines is forecast to be approximately $15.7 billion per annum from 2007 to 2011, with a combined total of approximately 74,500km of lines to be laid over the forecast period.

While deepwater activity in the 'Golden Triangle' is expected to continue as the dominant, driving element of market activity, the forecast growth in Asia and Australasia is likely to have a major material impact right across the industry, says the report.

'Increased demand, driven by the massive construction and industrialisation of China and India, when combined with political uncertainties within important oil producing regions have produced record high oil prices. These in turn have brought energy policies into sharp focus for nearly every nation. As a consequence of this the need to secure diverse energy supplies through gas transportation trunklines and export lines fed by domestic LNG regasification terminals are essential items in every country's long term energy plans. This has been particularly prevalent in East Asia and Western Europe as countries jostle one another for pole position to secure the necessary supplies.

'While the strength of market demand is not in question, the currently available fleet of pipelay vessels to lay all of the prospective pipelines has become crucial as the realities of a supply-constrained market are coming to be realised and starting to bite. Our investigations show that the industry's view of the capacity of the installation fleet to install all of the lines it wants is a very subjective view and changes depending on whom one is talking to,' say Wright and Knight.

'As the number of projects and prospects has grown the contracting community has added deepwater capability and capacity to take advantage of this growth. However, our research would suggest that there may be some areas of concern within the market dynamics that may lead to supply, and ultimately pricing and scheduling, issues. Both 2006 and the period 2008/09 are expected to put an increasing demand on construction and pipelay vessels in the lower size range, while 2007 and 2009 are likely to put pressure on vessels within the larger capability range particularly on wide-ranging projects in the southern hemisphere.

'The key aspect of this imbalance is that the rate of additions to the deepwater lay fleet is less than the rate of increase expected in activity. Whilst increases in utilisation and flexibility will account for closing some of the "gap" in supply and demand we expect this increasing tightness to be reflected in increased costs. In blunt terms those who do not secure vessels early may find themselves subject to increased costs through higher day-rates and significant mobilisation and demobilisation costs, or through inflexibility in vessel scheduling that may delay on-stream dates. Our expectation is that outside of the "Golden Triangle" those projects requiring one of the 20 or so specialist vessels will be paying a significant premium.

'Ultimately, with just so many large schemes announced from North Africa to Europe, Russia to Europe, Russia to Japan and the many various possibilities within the Asian pipeline network, it seems unlikely that they will all gain sufficient backing or access to the requisite installation capability. Thus there seems to be a question mark over whether all of the schemes will be installed within this forecast. In fact with the growing importance of the LNG trade some may become redundant and be cancelled completely,' conclude the authors. AOG

* Global perspectives offshore pipelines & control lines market update to 2007-2011, Infield Systems, London (www.infield.com)

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