one September 2022 | Issue nº 1 magazineenergy A Westhon company
TABLE10-136-94-5 CONTENTSOFenergytalksoffshorewind in Brazil Brazil and the OSV market 14-17 the Brazilian tonnage reign 18-21 the oil and gas debutants 22-23 tanker insight 24-25 events, quiz and recap
NOTEEDITOR’SImageswww.wsb-advisors.comteamDesignedandeditedbyOmarDarianfromrawpixel.comunsplash.comReviewedbyDanielBuckleyWSBAdvisors,aWestshoncompany
WSB.One is pleased to welcome all our readers to the first edition of our monthly magazine One.Energy. In addition to our WSB.One Weekly News with market up dates issued every Thursday, the maga zine will be available every first day of the month, and distributed to our selected list of readers and business partners. In this edition you will find the latest and most relevant discussions about the energy sector in Brazil. The magazine develops our “news updates” with opinionated articles based on the month previous to the is suance of the edition, aiming to stimulate deeper discussions on the most relevant aspects surrounding our work routines. We hope that you will have an enjoyable reading and look forward to receiving your reply on our monthly quiz and your feedback or questions on our opinions and information.Produced by the WSB Advisors
talksEnergy
After a D.Sc. thesis in electricity regulation and liberalization, I was looking for an opportunity to work in the energy sector. I was lucky to be invited to join EPE shortly after it beca me operational. EPE was created to techni cally support long-term energy policy in Brazil after a severe rationing episode at the begin ning of 2000. At first, there were doubts about the quality of the EPE’s technical studies but, as time passed, they proved their value and now they are used in Brazil to make vital decisions on the future of the energy sector.
I had several roles during my almost 15 years at EPE. Some works that I had the chance to contribute to were: the restructuring of the CDE (electricity surcharges), the energy in dustry contribution to the Brazilian NDC and the elaboration of the economic scenarios of the PNE 2030. I also became the coordinator of the PDE (Ten-year energy expansion plan) and PNE (national energy plan) 2050, the two main flagship reports of EPE. No doubt that my main challenge at EPE was to be the coordinator of the PNE 2050, the long-term horizon energy plan that sets out the government’s view of the energy indus try in Brazil. The PNE 2050 was published in 2020 with a different approach than the pre vious one, the PNE 2030. Many energy sour ces that were not shown in the PNE 2030, such as solar and wind energy sources, have become the most promising ones in the next decades. Another critical difference is that while the previous PNE 2030 dealt with a horizon of limited energy sources with increa sing marginal costs, the PNE 2050 revealed a distinct scenario of abundance and variety of very competitive energy sources, especially renewables, in the following decades. In this context, the PNE 2050 did not aim to set an energy mix goal; instead, it listed the major challenges for each energy source to reach its full potential.As a result, the PNE 2050 revealed the importance for the government to change its long-term approach to the Brazi lian energy sector, allowing the most compe titive energy sources to prevail while 4
WSB Advisors welcomed into its central office in Rio de Janeiro, Emilio Matsumura, BlueFloat Energy Country Manager for Brazil, for an informative conversation about his career and the direction off shore wind energy is taking in Brazil.
As an economist with a bachelor’s and D.Sc de grees from PUC-Rio, Emilio started his career in the energy industry at EPE (the Energy Research Office, in the Portuguese acronym) in 2006. He was part of the initial team responsible for building up the Brazilian federal agency in charge of long-term energy planning. In this interview, he talks about his experience in our industry.
What were your main functions in EPE?
How did you get into the energy sector?
considering its diversification as a strategy to address different scenarios, for example, a worsening of the climate change effects. Were any EPE studies important in Brazil´s decision regarding the Paris agreement?
I have high hopes for offshore wind energy in Brazil. First, the international perspective for this energy source is very promising, with a decreasing cost curve because of many ex pected technological advances in the com ing years. That’s why offshore wind is seen worldwide as one of the most important en ergy sources to support the decarbonization of the global energy mix. Regarding Brazil, we are very fortunate: we have a huge potential for this energy source, estimated at 700 GW by EPE, but it can be higher, up to 1,300 GW depending on the parameters used in the estimation. The wind resource is excellent and well dis tributed along the Brazilian coast. We have a sizeable continental platform, character ized by large areas with depths of less than 50 meters. So, in terms of potential, Brazil is very well-endowed. Right now, Brazil’s main challenge is setting up a regulatory framework for offshore wind. And this is a crucial point for us, as a country, to untap the off shore wind potential. A regulatory frame work that draws from the main lessons for international best practices can definitely put us at the forefront of this promising en ergy industry that, along with the low-carbon hydrogen, may help the world to decarbon ize its energy mix.
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Working for several years in the govern ment‘s energy sector, I could have a broader understanding of how the Brazilian govern ment sees the energy industry. After almost 15 years at EPE, I received an invitation to become the CEO of E+ Energy Transition Institute, a Brazilian think tank dedicated to promoting energy transition in Brazil. At E+ Institute, I had the chance to understand civil society’s role in the energy transition. Our main thesis there was that Brazil could become a decarbonizing powerhouse of the world, helping other countries to implement their energy transition in a more competitive way. This could be done by directly exporting renewable fuels (ethanol or e-fuels in the future) or indirectly through goods that intensively use renewable energy. After one and a half years ahead of the E+ Institute, I joined BlueFloat Energy, an in ternational offshore wind developer that is coming to Brazil. Now that you are fully focused on contributing to build Brazil´s offshore wind industry, what are your expectations for the future?
EPE carried out all the studies related to energy that supported Brazil’s position for the Paris Agreement in 2015. At that time, EPE showed that Brazil could reduce its to tal GHG emissions up to 37% by 2025 and 43% by 2050. It was an economywide target with an absolute reduction regarding 2005, the base year. I think Brazil took an impor tant step to show that emerging countries could also contribute to GHG emission reduction. After working at EPE, where did you go?
Somewhat a year later, in January 2022, President Bolsonaro executes Decree 10.946/2022, which disposes about the use under cession of offshore areas. Many believed and said, that this was a conclusive step, the regulatory frame work definition. This understanding boosted up events, seminars, speeches and a series of meetings and commercial efforts with companies announcing investments and applications for projects in the country, including some heavy names from the energy industry. In reality, the Decree although an extreme ly important step, was really focused at setting up the rules of engagement amongst those public authorities of the executive power involved in government bodies, the interactions between all government stakeholders to develop a new industry in country. Blunt reality: the Decree went very little into the rules that would impact the private sector, the investments, the criteria for selection, com petition, supply, contributions, etc. And that was only natural at this early stage
By Alexandre Vilela
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Offshore wind in Brazil: too much fuss? least for now.
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The surge of requests peaked up in early 2021, right after the authority issued the Reference Term (“TR” or Termo de Referencia) with the directives and technical criteria to guide the environmental application for interested parties. Without delay, the market reacted and the sudden news of a new regulatory framework appeared every where. Naturally, with the world economy attempting to recover from a suffered pandemic global recession (at least technically) and the green-appeal that wind-pow er carries, much attention started to be devoted to the topic. Some started to claim that with the IBAMA guid ance, the regulatory framework was set. Well, not nearly n the second quarter of this year of 2022, fifty-five applications for envi ronmental licenses of offshore wind-power projects had been presented to the Brazilian environmental authority (IBAMA) accounting for approx 130 GW production
At
imately
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Secondly, it also pacifies that any former au thorizations granted will only remain valid if those were awarded under a tender method. So, back to the drawing board.
Next, the Law Project is firm on the demand for social and economic benefits to the society to be generated under those offshore energy investments. It will be the burden of the applicant to demonstrate and correctly address the harmonization of the project with the mar itime use of the space, the acqua-culture, any and all other resources of the country in the region as well as the environment. Don’t jump to conclusions thinking that it will just be a co py-paste of the oil industry offshore projects: it is much more sensitive and closer to shore. Lots of hard work ahead.
Notwithstanding, the Law Project carries through some procedures and regulations in herited from the offshore oil and gas explora tion activites, as for instance the concession of areas entitling a certain charge for its
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Just a few days ago, on 17 August of 2022, the Senate approves via its infrastructure commission the PL (Law Project, or Projeto de Lei) 576/2021 which sets the rules for offshore energy-related projects. Note: “en ergy-related”, not only wind-power. Without intending to reduce the stamina on the com mercial possibilities here, let’s start by stating that this is yet just another (though important) step towards a complete regulatory frame work. It is not “the” regulatory framework. However, it does set the tone and throughs certain-certainties on the subject matter. And they are worth digging further. Or question. First and foremost, it confirms Decree 10.946 intent that a concession regime shall apply to offshore concessions and not some firstcome-first-served or similar type of proce dure. It further pacifies that applications can be made voluntarily in what is named Permanent Offer – when the applicant suggests (under certain rules) the area and the authority seeks for conflicting interests and may con cede; or the Planned Offer – when either as a result of conflicting interests under the Per manent Offer or as a pre-planned concession effort, the authority bids out for interested parties to compete and then concede.
and reservation, or even a heavier weighted fee until the project is installed in the concession area and lower thereafter (which is part of the approved text at Senate) to stimulate the earliest deployment of the complex. However, it also inherits a signature bonus, a governmental participation (royalties) and the cost (or value) of the energy to be sup plied to the consumer / system as an objec tive criteria for the auctions / bids. Nothing against objective criteria, we all like that, but signature bonus and government participa tion… on wind? It’s not like the country is giv ing away finite resources such as oil and gas, or iron ore, is it? The fact being, the Law Project is just an other step in the discussions that are yet to come. For example, the other day there were discussions about the substation on a given project. Many were alarmed when it was said that the substation would also be located off shore. Avoiding other more technical affairs and sticking to the regulatory framework, not many people have started to debate the in centives, criteria, tax regimen and exemptions for the assets to be installed offshore. How would those vessels, steel, jackets, towers, generators, cabling, and all other non-consumables be fiscally treated for a sustainable cost to the end consumer, which is part of the criteria for the concession? Or is there anyone believing that a sustain able offshore project can be achieved and compete with onshore wind-power cost with out a customs framework that addresses the matters of competitiveness? Yet so many questions. 9
Strongly impacted by the cri sis in the oil and gas sector from 2013 onwards, the mar itime sector kept its doors practi cally closed to hiring. From 2014, the segment experienced the wake of the “car wash” crisis, the dras tic reduction of the ANP bidding rounds, the volatility in the price of oil barrels of oil and the pandemic, causing one of the most serious re cessions, especially in the offshore support sector. The offshore support vessels market in Brazil is now looking very dynamic and promissing. This be cause in addition to the country be ing amongst the world’s ten largest producers of oil and natural gas (P&G), it can reach the fifth posi tion in the medium term and pro duction predominantly in deep wa ters, largely supported by FPSOs and other production units which is highly vessel demanding. As from December 2021, average O&G production at sea represents 97% of total national production. The resumption of the offshore sup port market and the latest Petro bras tenders have given a better horizon for companies in the segment. Petrobras launched bidding processes of which we can high light just for 2022: PLSV, AHTS TS/ TO, OTSV, PSV 4500, SDSV, Line Handler, OSRV among others, for the chartering of vessels for its op erational divisions: logistics, contin gency and subsea operations. It is also worth noting the significant growth in wind power generation and the prospect of advancing this energy matrix to offshore installa tions. Major players have already announced their interest in explor ing the generation of wind energy at sea, which will require the hiring of new specialized vessels towards the end of this decade. The dynamism of the OSVs sec tor in Brazil relies on three main aspects: the level of oil prices, the pace of bidding rounds by the Na tional Agency for Petroleum, Nat ural Gas and Biofuels (ANP) and the interest of investors in buying exploratory blocks at sea in Brazil. The offshore navigation activities in support to the offshore explora tion and production (E&P) began in 1968 when Petrobras decided to drill in the area that would become the Guaricema field in the Sergipe/ Alagoas basin. However, the start of production in the Garoupa field, in the Campos basin in 1974, was what actually gave impetus to mari time support activities in Brazil.
By Wilson Nobre 10
BRAZIL AND THE PICKING UP OSV MARKET
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The reduction in the fleet since its peak in 2014 was 107 vessels. The decrease in the fleet was essentially due to the reduction in the number of rigs in operation from 2014 onwards, as a result of the drop in oil prices and the greater rationalization in charter services, with a smaller number of OSVs supporting more platforms and providing various services.
A new phase of expansion of the fleet of offshore support vessels in Brazil, driven by increasing investments in E&P, supported by a regulatory framework and adequate financing conditions, took place between 2000 and 2014, a period during which the price of oil gradual and consistently increased with the exception of the 2008 world crisis, which implied a strong but brief retraction only resuming the following year. As from 2000 when there were 143 support vessels in operation until 2008 when there were 229, an average annual growth of 7% in the fleet has been recorded. From 2008 until mid-2014, the average annual growth rate rose to the level of 15% when the peak of five hundred offshore support vessels in operation in Brazil was reached. Since then, with the sharp drop in oil prices combined with the decline of bidding rounds for exploratory blocks, the trend has reversed and the number of vessels in operation, at the end of 2021, was reduced to 393 (Graph 1).
Graph 1 shows that the average number of rigs in operation in the country has dropped 73% since 2013. However, in the same period the fleet of Brazilian flag OSVs grew 61.7% while the number of foreign flag vessels decreased 83%. That means more than two hundred foreign vessels stopped operating in Brazil, attesting the priority of the national flag over foreign as shown in Graph 2. This notorious displacement of foreign vessels replaced by Brazilian flag vessels was only possible thanks to the preference mechanism, which guarantees Brazilians priority in contracting vis-à-vis foreign-flagged vessels. When analyzing the outlook for the Brazilian OSV sector, it is necessary to assess the trends of the main drivers that determine the demand for vessels. It can be seen that oil prices, the frequency of ANP’s bidding rounds as well as the interest and investment capacity of the main clients are preponderant to boost the offshore segment. In the current conjuncture, the first two factors seem to be favourable. However, it is important to highlight that the offshore support vessels are only contracted after a period of two years from the bidding rounds, when all the licenses are granted to start the preliminary seismic activities. The assessment of when shipping companies will need to build or charter new support vessels depends on a balance between supply and demand. Petrobras still represents more than 90% of contracts in the Brazilian offshore sector and basically the only oil company to consistently grant contracts of up to four years firm for OSVs in the world. Brazil remains one of the world’s most dynamic offshore markets with a wealth of opportunities as we continue down the path towards energy transition. However, without the right knowledge, network and partners, it can be a challenge to navigate the optimal way forward… both for Brazil itself and for the many industry leaders that can utilize their assets and expertise to accelerate developments. 12
441 473 500 445 405 375 366 363 374 393 408 92 86 72 45 30 15 17 10 9 23 23 10090807060504030201006005004003002001000 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 OSVs Drilling Rigs Graph 1 143 146 148 161 179 187 206 210 229 286 312 435 441 473 500 445 405 375 366 363 374 393 408 44 53 58 71 86 93 109 118 135 148 169 183 207 227 245 257 297 310 325 327 336 357 367 99 93 90 90 93 94 97 92 94 138 143 252 234 246 255 188 108 65 41 39 38 32 416005004003002001000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Total OSVs Operating in Brazil Brazilian Flag Foreign Flag Graph 2 13 Source: WSB.One Source: WSB.One
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xpanding on this issue’s previous article about the Offshore Support Vessels (OSV) market picking up in Bra zil, there is one other very interesting and peculiar aspect, lying just behind the euphoria of a recently heated offshore market, coming from long years of cri sis and a depreciated scenario: the Brazilian tonnage protection.
The Brazilian tonnage reign: How long will it
Throughout the years, what started as a challenge faced only by sim pler vessels considered the core of our market (AHTS and PSVs), eventually grew into a threat for other more specialized vessels as well. To quote a few, just in the past 2 years, we watched close ly as the necessity of the REB process was extended to PLSV, SESV and MPSV amongst the key types of high spec vessels hired by Operators, mainly Petrobras.
There has been a significant re duction of foreign flag activity in recent years, starting with the relevant exodus of foreign OSVs and their respective owners from Bra zil, as a result of the large amount of unemployed Brazilian tonnage available at the time and their abil ity to “block” existing contracts.
Bylast?RaphaelMontes
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E
With time, Brazilian tonnage or the ability to “REB” foreign flagged vessels became an imperative need to almost anyone attempting to secure employment in the coun try. Bareboat charters, second hand vessel purchases, tonnage agreements, full importation (nationalization) of long unfinished or recently delivered newbuilds, were some of the tools used by local owners to meet with REB tonnage, all chartering demands of the Oil Companies operating in Brazil. But without new buildings on the list and, just like most other resources in this world, Brazilian tonnage is also finite, and ages. So, how this impacts the future of our market?
In parallel, Operators have become more and more diligent with their hirings, expanding the scope of work, increasing the technical requirements for vessels in their tendering processes and sometimes being overly strict regarding the age and/or operational parameters for these vessels. Across the years this has led to the modern Brazilian tonnage becoming highly desired and consequently reducing, in a very noticeable way, the availability of such vessels with most of them being committed to future contracts even before their current one has ended.
The world has not been mass building ves sels on pure speculation like times before and, with recent shift of focus abroad to greener energies like offshore wind and solar, foreign vessel owners have been tempted to order newbuilds designed to support these segments instead of standard O&G activity. Meanwhile in Brazil, with way higher building costs when com pared to international yards, the newbuild ing scenario is of a constant decline with the amount of units diminishing with each passing year since 2016, although still managing to deliver a decent number of vessels until 2018,mainly driven by Petrobras’ fleet renewal program (PROREFAM). However, we must note the gap of 3 whole years (2019-2022) without a single Brazil ian built unit being delivered. As it stands, this outlook is not set to change any time soon.
As well pointed by the previous article in this magazine and being one of the oldest rules in the book for trading and commerce, it all comes down to supply and demand. With the amount of viable vessel options shrinking down, opportunities arising left and right from Petrobras, other NOCs and IOCs and the slow recovery of oil prices after the 2014 crisis, the offshore market in Brazil had a gradual positive evolution, including affording higher and higher rates. The sum of all factors resulted in the rise of foreign tonnage being offered and fixed under “REB flag” in tenders of basically all vessel categories: PSV, AHTS, OSRV, RSV, SDSV, DSV, MPSV, SESV, PLSV. This, associated with the fine tuning of the “REB tonnage” regulation by ANTAQ along the years, drastically re duced the available tonnage dedicated to converting vessels to Brazilian flag. Logically, when associated with the low availability of ves sels in Brazil, this combination allowed for a yet tiny and shy return of foreign flags to our market. Petrobras began to issue 2 versions of every tender, one “national” dedicated to Brazilian built or REB vessels and another “international” aiming to hire foreign flagged, if and only if, the demand could not be met with a Brazilian flag vessel. Besides that, in the past year or so, we have observed as some vessels were converted back to their original flags during the charter period, chartered directly by Operators via the Chartering Authorization Certificate (CAA) either on long term char ters or specific integrated projects as part16
of the turnkey services and taken on bareboat or time-charter agreements by Brazilian Shipping Companies (EBNs). With the boom of daily rates this year in Bra zil, the attractiveness and interest in our mar ket should nothing but grow amongst foreign owners; after all, where else in the world can you offer a plain 18.000 BHP AHTS for a se cure nearly 4-year long contract at almost USD 60.000/day? In the current shape of the Brazilian offshore market, with high utilization of national tonnage, increase or at least maintenance of the level of demands, reduced capac ity for flag conversion and little to no incentive in newbuildings, we would not be surprised at all if the foreign flags get their moment to shine once again, even if only for a while.
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By Omar Darian
It can be noticed since late 2020 the arrival the market largely because of Petrobras’ serves. We are talking mostly about mature A number of players have already taken helicopter services, etc, while others are Companies such as Petronas, Trident Energy, status for some of them and what can we 18
The Oil and DebutantsGas
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arrival of several newcomers in the Brazilian oil and gas industry. These debutants entered Petrobras’ divestment program as the Brazilian oil major decided to focus on large deepwater re mature offshore fields located in diverse basins, water depths and diverse types of reservoir. taken over as operator and advanced to book their offshore support vessels, supply bases, are preparing to receive their operational licenses and to hit the market with their tenders. Energy, Perenco, BW Energy and 3R Petroleum are part of this list. So what is the current we expect for the future in terms of demand?
In July 2020 Petrobras concluded the sale of Pampo and Enchova clusters to Trident Ener gy. The areas are located in the Campos basin with water depths ranging from 85m to 780m compriwing 4 fixed platforms of which 3 are located in Enchova and the remaining in Pampo which all together produced 20.784 barrels of oil per day. Based on previous experience with offshore assets located in Equatorial Guin ea, Trident has an ambitious plan to increase production in Pampo-Enchova to over 40.000 barrels of oil per day. Trident has already con tracted a couple of offshore support vessels to operate in their fields, namely the PSV Ilha de São Sebastião from owners Oceanpact which besides the supply duties also acts as an oil spill emergency response vessel and another PSV from Wilson Sons Ultratug Offshore, the Mandrião which has a ROV from Oceaneering mobilized. Earlier this year the company char tered the WSSV Siem Helix in partnership with Schlumberger to provide a fully integrated plug and abandonment well services. In late 2020 Perenco took over from Petrobras the operation of Pargo, Carapeba and Vermel ho fields located in shallow waters of Campos basin. The three fields have in total 5 satellite platforms and one wellhead platform which is located in Carapeba field. The conglomerate currently produces approximately 10.000 bar rels of oil per day. It is planned that Perenco shall deploy a FSO (Floating Storage and Off loading) between December and January 2023 at the Pargo field for which a preliminary instal lation license from the Brazilian environmental regulatory agency (IBAMA) has already been granted. With regards to its offshore support fleet, they recently chartered a large PSV that came from abroad - Cobeia - which took over the position from Vega Chaser as she is mo bilizing for an OSRV Petrobras contract. Fur thermore, Perenco recently issued a tender to hire a vessel to perform oil spill response duties and most importantly walk-to-work du ties which is required and will be positively considered when of the technical evaluation. Currently, Mar Limpo III from owners Bravante performs the walk-to-work scope for Perenco.20
BW Energy acquired the Maromba field in 2019 for a total of USD 115 million, of which USD 85 million remains to be paid to the sellers at predefined milestones. Maromba is located in Campos Basin in approximately 160 metres of water depth. Nine wells were drilled in the license between 1980 and 2006 and oil was found in eight of these, across various reser voirs. Earlier this year the company signed an agreement with BW Offshore for the purchase of FPSO Polvo. The field´s development plan is based on an initial drilling campaign of three wells with planned first oil in 2025 and a sec ond campaign with further three wells in 2027. The Brazilian regulatory agency (ANP) has approved the development plan and the Company expects to receive the applicable IBAMA environmental approval in due course.
The acquisition of Golfinho and Camarupim clusters by BW Energy was the latest an nounced in the market. The Golfinho cluster is located at water depths between 1.300 and 2.200 meters in the Espírito Santo Basin. The Camarupim Cluster is adjacent and located in water depths between 100 and 1.050 meters. In connection with the acquisition of the two clusters from Petrobras, BW Energy acquired the FPSO Cidade de Vitoria from Saipem for a price of USD 73 million. The company hopes that the transition of the field operation is com pleted together with the FPSO management by February 2023. The FPSO Cidade de Vitoria is a flexible unit with 1.6 million barrels of storage capacity, can produce more than 100k barrels per day of oil and has additional capacity for gas production and compression.As of writing, the company has not issued a tender to hire support vessels as the deal is yet to be closed. In the beginning of last year, 3R Petroleum announced the acquisition of the Peroa clus ter located in Espirito Santo basin. Earlier this month the company disclosed that the produc tion contract transfer of Peroá, Cangoá and Malombe had been approved by ANP. The Peroá cluster is managed through an unmanned platform and its production is flowing through the Cacimbas Gas Treatment Unit, located in the municipality of Linhares in Espírito Santo. Also in 2021, the company announced the ac quisition of Petrobras’ interest in the Papa-Ter ra field, located in deep-waters of Campos ba sin. The field is operated using the TLP P-61 and the FPSO P-63 units with 6 production wells and 3 injection wells. In connection to the required resources to operate in the field and offload oil production from P-63, 3R issued a tender for the contracting of one AHTS to sup port their field. The vessel will be hired for a period of 3 years firm plus options and will be engaged in various scopes of work such as tanker offloading, oil spill contingency and ROV support. The tender has not been awarded as the proposals are still being evaluated. 21
VLCCs enjoy the most impressive summer rally on record
By Daniel Buckley The VLCC earnings climb since June has been christened the most impressive summer rally in the sector on record. From early June until the middle of Au gust, results for non-eco tonnage rose substantially, finally dragging the sector out of its loss-making habits, which had been impossible to shrug off throughout the first half of the year. Even non-scrub ber VLCCs are now earning more with a remarkable, unseasonal turnaround.
Although lower bunker prices contrib uted for such improvement, the most important contributor driving the rally has been an unprecedented increase in vessel demand. Since the middle of June, cargo vol umes have risen 27.1% with vessel de mand up 24.4% but most remarkably, during the same period US Gulf exports almost doubled. Gains were recorded in almost every single export and import regions but two import regions stand out; Europe and China. The large increase in European imports is the direct consequence of the Ukrainian war but the even bigger rise in Chinese imports was because of a rebuild of inventories, not an improving economy.
Looking ahead, firm Chinese crude de mand and low US oil prices are expected to remain attractive to international buy ers whilst Europe will have to substitute even greater volumes of Russian crude as the year progresses, before ceasing all seaborne imports by December 5.
Never has so much crude oil been im ported by Europe on VLCC tonnage and for the first time since the 1990s, European imports are now a significant part of VLCC global demand. This has caused a geographic fragmentation of the fleet and much tighter position lists east of Suez, a development that has driven charterers’ concerns higher.
VLCCs have seen their trading patterns shift and have been increasingly em ployed on voyages from the Americas and Africa to Europe as charterers seek to optimise their $/ton freight costs.
It is reported that owner sentiment has firmed, pushing the VLCC market to levels not seen since the first half of 2020.
Looking at supply, further progress was being made on the nuclear deal with Iran with discussions starting to move in the right direction, pending a response from Iran to an EU-backed draft agreement and a compromise seems to be nearing a compromise.
If so, a large daily production as well as large volume of stored barrels will be re leased back to market that could trigger a renewed drop in prices. The tanker industry will need to keep an eye out on the developments in the oil markets. The outlook is very uncertain but, at the moment, that does not seem to have a negative impact on freight rates.
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On the other hand, recession fears remain elevated for key markets including the U.S. and EU, raising concerns over the strength of future oil demand.
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26-29RioInEventsUpcomingSeptemberOilandGasSeptember Quiz of the Month SPE Brazil 29SymposiumFPSOSeptember 24 In our current PSV fleet in operation, what is the ratio (rounding up) between diesel-electric and conventional propulsion, respectively? A) 70% - 30% B) 85% - 15% C) 55% - 45% D) 60% - 40% E) 50% - 50% Please submit your answer to our comercial@wsb-advisors.come-mail:Thefirstcorrectreplyre-ceivedwillentitlethewin-nertoreceiveaninvitationtoourinvitation-onlysemi-nartobeheldinNovember2022.
Petrobras received offers for their PSV 4500 bid, a vessel that will be deployed in the Roncador field (75% Petrobras, 25% Equinor), in what was a very peculiar tendering process. The opportunity, initially released as a public tender, was later cancelled and re-opened as a “SEP” (an invitational tendering process with a pre-approved bidders list). The intention is to replicate the pattern the Bra zilian oil major had adopted for contracting processes in other assets owned by a Consortium (JV) and not just Petrobras, such as the PSV tender for Mero from 2 years ago. Interestingly enough, this time and for the first time, Petrobras opted to have their well-known reverse auction from public tenders implemented into a SEP, although no informa¬tion was revealed at its closure. Petrobras aims to hire one PSV 4500 Multipurpose (Lot 1), which means any other lot will only be entertained should Petrobras fail to award a suitable candidate from Lot 1. The reverse auction itself was not different from other recent ones, where low vessel availability and a heated market dro¬ve daily rates to higher levels, or rather, stopped bidders from lowering too much... four undisclosed Bidders offered 1 vessel each, with the first placed at USD 34.282,00. Ten long months after its initial release to the market, Petrobras held the re¬verse auction of the multiple AHTS 18.000 tender. The opportunity was split into 3 lots and, whilst the size of vessels in all categories was the same (BHP 18.000 w/ 180Ton BP), each lot had a different scope intended for the anchor handlers: Lot A aimed to hire purely an AHTS, with no additional services and was the one with most offers received, a total of 7. Galaxia Navegação finished first with Theseus Z, a former Havila vessel built in 2007 with a day rate of USD 57.000,00. Lot B, seeking to hire AHTS with ROV services (AHTS-R) had only 2 offers with Apollo Z from Galaxia Navegação placed in first at USD 90.000,00/day. Last but not least, Lot C intended to hire a Multipurpose AHTS (AHTS-MP) which included diving and ROV services in the scope; two offers were made from Oceanica, with Oceanicasub VII in first place with a day rate of USD 89.243,00. As expected, daily rates in all lots showed signs of a recovery, a heated offshore market and also hinting at the extremely low availa bility of vessels in our market, considering that more than half of the can¬didates in this opportunity are foreign vessels currently not in Brazil. Positive news aside, this tender must be watched closely given that it has taken so long to be concluded, the contracting budget Petrobras considered for the hirings might be far outrated. Will Petrobras’ needs overcome the strong budget policy the Oil Major has been following so thoroughly in the recent past or, will this be 10 months of waiting for nothing? Time will tell… 25
A recap from August Sponsored by our Weekly Market Update
Petrobras has concluded the sale of the producing fields Peroá, Cangoá and the BM-ES-21 con cession (Malombe discovery) which are jointly called Peroá cluster to 3R Petroleum Offshore S.A. The Peroá and Cangoá fields are located In shallow waters and have had from January 2022 to June 2022 an average daily production of 572 thousand m3 of non-associated gas. It Is said that the other exploratory block in deep waters where the Malombe discovery is located, shall be con nected to the other two gas fields in the future. Earlier this year, 3R Petroleum issued a tender to hire a 150ton bollard pull anchor handler for the period of 5 years to provide supply duties, tanker offloading support, oil spill contingency and ROV services. The tender is still open and no vessel has been awarded.
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