FOR IMMEDIATE RELEASE
Stavanger , 23 August 2006
Offshore Northern Seas, Hall J Stand 930/23

Pipelines market to be lifted
by Asian Gas Demand


Global Pipeline Expenditure (US $m) by Region 2002-2011
Source: Global Perspectives Offshore Pipelines & Control Lines Market Update To 2007 - 2011

"Natural Gas, clean, green and energy efficient is increasingly in demand to fuel Asia’s growing economies. To supply this demand we expect to see a major growth in pipelay over the next five years. This will take place within the Asian region itself, and also in Australasia. The objective is to feed the huge and growing demand for raw gas and LNG exports to South and East Asia" say Howard Wright, Senior Analyst and Dr. Roger Knight, Data Manager of London based Infield Systems in the all new Global Perspectives Pipeline and Control Lines Report 2007-2011.

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 74,500 km of lines to be laid over the forecast period.

Whilst 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.

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.

Whilst 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 becoming 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.

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 2008/2009 are expected to put an increasing demand on construction and pipelay vessels in the lower size range, whilst 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 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.

- ends-

(notes to the editor)

Infield Systems Limited is a privately owned independent limited company providing database, publications and analytical services to the offshore oil and gas industry.

The Infield Worldwide Offshore Energy Database provides global data on over 7,600 operational and future developments, detailing platforms, floating production systems, subsea developments, pipelines, umbilicals, spm's, operators, field ownership, terminals, LNG and GTL facilities.

The Infield OFFPEX™ Market Modelling & Forecasting System is a highly developed proprietary system that includes macro-economic, techno-economic and business processes in the production of key industry statistics. The OFFPEX system incorporates Infield’s global Offshore Energy Database to produce detailed financial and business models, including capital expenditure and supply/demand assessments. Fully scalable and adaptable, from individual elements through to national, regional, global or company forecasts and scenarios with timelines from 1908 to 2092, outputs from the OFFPEX™ Market Modelling & Forecasting System are used by key operators, offshore contractors & suppliers and the financial community.

Infield’s service capabilities include; customised databases; executive market forecast reports covering the deepwater, floating production, fixed platform, subsea, pipelines and umbilical sectors; market analysis and benchmarking, competitor analysis, scenario development and planning, tailored research, market due diligence, energy databases, business strategy, quantitative and qualitative surveys.

Contact :
Quentin D’A Whitfield
Director
M: +44 (0)7768 570 850
E: quentin@infield.com

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