The shale boom will remain uniquely American for years to come, thanks to the combination of capital, talent, legal system, infrastructure and market that cannot be easily replicated, geopolitical strategist Peter Zeihan said. “This is not something that your average state-run thug can do.” He added.
I spent a full week attending the 2014 OTC Show (In Houston) early this month on behalf of a client distributing its offerings in the energy sectors. I have been quite impressed by the industry dynamics and how big is the boom. The past ten years has seen the global offshore industry bring on stream some of the largest and most complex projects ever attempted. (See more)
The International Energy Agency (IEA) and other expert sources expect oil to remain the fuel of choice up to at least 2035, with a 27% share (down from 33% today) whereas gas is expected be the only fossil fuel to increase its share. Global demand for natural gas is to grow by 64% by 2040. At the same time natural gas prices are to remain strong evidenced by a near term price increase, settling to $4.38/mmBtu in 2020, in the long term prices are expected to rise to $7.65 by 2040. Importantly, the US is projected to become a net exporter of LNG by 2016, spurring the development of new LNG terminals – currently 6 have been approved and 22 are under evaluation.
Whereas the market for Exploration and Production of fossil fuel is recognized to be very much an offshore operation, recent push towards both smaller and more remote fields have seen the growth of floating production systems: 154 new FPSO (Floating Production Storage and Offloading) ships have been identified as well as 5 FLNG (Floating Liquefied Natural Gas) projects that are fully financed.
Furthermore, LNG facilities that have been traditionally built onshore are moving offshore – under pressure of cost – with the increased use of Floating Storage and Regasification Units (FRSUs) located just offshore and connected by pipeline with the distribution facilities. This option is up to 50% cheaper than current onshore solutions.
It is important to note that the use of LNG has grown much faster outside of the US than it has domestically, therefore much of the research and development, design and testing activity has occurred in other countries. Consequently, the international standards applied to LNG operations – wherever they are located – have been heavily influenced by policies and regulations of countries such as Japan, South Korea and some European Nations. In the US LNG is regulated at a federal, state and local level, as well as by non-governmental regulators and standards organizations.
The market for the design and build of the FPSO and FLNG is dominated by a relatively small (but still …) number of players (KBR, TECHNIP, JGC, SBM Offshore, Modec, Bechtel, Teekay, Technip, Samsung, …) who are capable of delivering complex projects of this size, often operating as a consortium. Although often vertically integrated these FEED (Front End Engineering and Design) and EPIC (Engineering Procurement Installation Commissioning) capable companies rely on engineering specialist companies to actually deliver all the specific systems.
See you at OTC 2015!
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