Tanker sector to benefit from US offshore production moratorium

Saturday, 17 July 2010
The US offshore production moratorium, implemented on 13th July, could have a beneficial effect on the tanker market. This moratorium will expire on 30th November as it stands. It was pushed through in the wake of the ‘Deepwater Horizon’ spill despite several legal challenges. Deepwater production will be allowed to continue and new exploratory drilling suspensions could be modified if the oil industry can prove that the operations are safe. Shallow water drilling will also be allowed to continue if companies can meet new safety and environmental requirements. However, it could take some considerable time for companies to meet the new more stringent conditions. As a result of the production moratorium, the International Energy agency (IEA) recently identified between 100,000 and 300,000 barrels per day of new projects that could be delayed by 2015. Leading tanker consultancy McQuilling said that although 300,000 barrels per day only amounts to 1.5% of the total US liquid fuels consumption, the potential impact on tankers adds up to an additional five VLCC cargoes per month. If these cargoes were sourced from the Middle East Gulf, this would create an extra 17.3 bill tonne/miles of demand for tankers. Any delays to projects will hamper US domestic output in a period of increasing demand and the liquids will have to sourced from elsewhere. Despite the aim of the US administration to reduce its dependence on foreign oil, it is likely that the oil tanker sector will fill the void on the back of increased imports. McQuilling said that this situation was likely to continue while the moratorium persists and domestic production becomes more cumbersome to industry participants due to the increase in stringent regulations.

Source: Tanker Operator