Sunday, 27 March 2016

Low oil price - Bubbles of Tankers, Liftboats and LNG carriers?

This post is in response to SMK comment in my previous article querying if Tanker market is overheating. Thank you SMK.  

Tankers

Indeed, the number of tankers has been increasing since oil price had headed in the opposite direction. The oil glut has led to on-land oil inventories rising to record levels. More and more ships are required not just to transport but also store oil. The rates are not fantastically high, but still one of the highest since year 2009. From the ground in which I met people in events, and also heard from friends, this fact has been ascertain. 2016 is expected to be a fantastic year for tanker industry, but is this sustainable?

Liftboats aka Self-Elevating Units (SEU)

Likewise, because of the oil price plunge resulting in lower Capital Expenditure (CAPEX) from oil companies in exploring green oilfields, many are betting that the money will be spent instead on existing fields especially in the area of maintenance. This is where the more optimal Liftboat will come into play. And according to statistics, the penetration rate of liftboats in Asia pacific is still relatively low compare to US, GoM and West Africa. Therefore since the stop of newbuilding projects for rigs, various types of offshore vessels etc, there has been a rise of new players building liftboats. For more about liftboats read:


Prior to oil price plunged

Ezion is one of the largest liftboat owners around in this region. Beside Ezion, there have been new players entering this market since few years ago. Triyards is also one of the largest builders of liftboats with units for US-based and South-East Asia-based operators. Swissco is one who is building liftboat in Triyards. Baker Tech also announced in late 2014 the construction of its first liftboat using in-housed design. China Tianjin-based De-sail also had several liftboats design in-house built in 2014. Malaysia-based Vahana Offshore also awarded the constructing of two liftboats to UAE-based Eversendai's yard in UAE, due for delivery in 2016. Another Singapore listed company Atlantic Navigation ordered in May 2014 a newbuild liftboat with a Chinese shipyard for US$46 mil.

After oil price plunged

Jun 15: China Mekers Machinery ordered two liftboats at Shanghai Bestway, a design company for US$58 mil each, with expected delivery in 2017-18.
Jun15: Tianjin Haiheng Ship Engineering ordered four liftboat with China Merchants Heavy
Industry in July 2015, with delivery for all units before September 2017.
Jul 15: Keppel FELS wins $85m liftboat contract from Crystal Heights (Crystal Heights is associated to Falcon Energy)

LNG Carriers

LNG  has definitely performed better compared to crude. But LNG has a lag behind crude. It is a matter of time where supply will be abundant to drag the prices down as many experts predicted. This is when there will be overheating in the shipbuilding of LNG vessels as well. In Korea, there are also many LNG vessels on order since 2014, followed by Japan and China. As of end Jun 2015, there are 119 units backlog for delivery till 2020.

Rolf’s Thoughts

So question is will tankers, liftboats or LNG carriers’ bubbles burst eventually, following the footsteps of drilling rigs and offshore support vessels?



11 comments:

  1. my uneducated guess is the tankers bubble unlikely to burst and it is inconsequential at best. real money was mostly from upstream capex and currently midstream pipelies and downstream distribution.

    with that in mind, I watch LNG with interest. the market is smaller and SG wanted to be a bigger part of its pricing (currently very fragmented).

    see http://www.bloomberg.com/news/articles/2016-01-25/sgx-seeks-to-break-lng-s-price-link-to-oil-with-singapore-sling

    http://www.straitstimes.com/opinion/the-geopolitics-of-a-world-awash-in-oil

    http://www.straitstimes.com/business/companies-markets/government-committed-to-develop-singapore-as-lng-trading-hub-teo-eng

    I only wonder if it is more politically/survival motivated - https://www.ema.gov.sg/Piped_Natural_Gas_and_Liquefied_Natural_Gas.aspx

    ReplyDelete
    Replies
    1. Hi SMK,
      Thanks for info links as usual. Very helpful.
      Do not get me wrong, I am positive about LNG. In fact a little less than two years ago, I had already written an article on LNG positive outlook and had been following this segment closely as well.
      http://www.rolfsuey.com/2014/07/why-singaporeans-should-know-more-about.html?m=1
      My biggest message here is perhaps just to highlight that the doom in one sector which can lead to the boom in another sector, can be exposed to the risk of overheating/oversupply which eventually crash. This we have probably seen many times before.


      Delete
  2. Berlian Laju... now attempting to resume trading in sg...

    John

    ReplyDelete
    Replies
    1. Hmm... know little about this company but it seems to be halt trading in Jakarta before?

      Delete
  3. Hi Rolf Suey,

    Thanks for your blog, have been very insightful to the O&G market. Would like to hear of your opinion on Ezion's recent rights issue.

    1. How is a windfarm liftboat different from the ordinary liftboat? I am struggling to understand why would so much capital be required to refurbish Ezion's liftboats to cater to windfarms. Aren't they all simply a platform on the sea with cranes and lodging facilities?

    2. How would you see Ausgroup's situation impacting Ezion? And if the situation is considered to be "dire"?

    3. And lastly i guess, Ezion as an investment opportunity now.

    Many many thanks!

    ReplyDelete
    Replies
    1. Hi YC,

      Thanks for dropping by.

      Yes I heard about Ezion right issues, but I have not dig too deep into it. Therefore not so good for me to give too much advice on it.

      Right issues now is definitely not a good sign and it probably shows the weakness of the company in a very tough O&G environment now. I suspect more O&G companies will be issuing rights soon as well.

      I m not a big expert on Windfarm.

      But basically a Liftboat means a boat that can be lifted by Jack up / down and is self-propelled. Whether it's for Windfarm or for normal maintenance of platform the main functions of jack up/dn & self-propelled is still there.

      The difference will have to be the kind of operation and where the Liftboat is operating.

      There it depends on harsher/calmer environment or shallow/deeper waters. Also depends on how big the wind turbine the vessel handles, the crane and deck space have to be sized accordingly. The Jack up legs load/speed and propulsion all varies. The tools needed for Windfarm installation and typical maintenance of platform is also different. Windfarm in further offshore is definitely harsher and likely specs is higher like bigger deck space and larger crane capacity, but not necessary means more number of cranes!

      You can check out my earlier article on liftboat

      http://www.rolfsuey.com/2014/06/liftboats-lifting-expectations-ezion.html?m=1

      I am not going to advise if it is an investment opportunity for Ezion or Ausgroup because oil and gas is cyclical and unpredictable and Ezion does have a significant high debt to take notice of too.

      Just need to be more prudent during the current environment!

      :-)

      Delete
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