Driven by robust offshore oil production, demand for shuttle tankers set to rise, Rystad says

An analysis of offshore oil production by the Norwegian energy intelligence firm, Rystad Energy, has shown that more shuttle tankers are needed as the volumes requiring transport are set to rise by 35 per cent in this decade.

Rystad Energy’s analysis shows that the demand for shuttle tankers in countries with robust offshore oil production and limited pipeline infrastructure is set to grow continuously in the coming years, as produced volumes in need of transport rise to 3.3 billion barrels per year before the end of the decade, jumping 35 per cent from 2.5 billion in 2021.

Oddmund Føre, senior vice president of energy service research at Rystad Energy, explained: “There is a need for a new influx of shuttle tankers to meet the increasing demand and replace some of the ageing capacity that will be taken out of service. Crude oil extraction will continue for many years to come and, given the robust economics and competitiveness of the offshore industry, new investments in offshore production are likely to continue building, ensuring a bright future lies ahead for the shuttle tanker industry.”

The data for the analysis was obtained by focusing on the five key shuttle tanker markets – Brazil, Canada, Norway, the UK and Russia – and apart from minor dips in total utilization across these countries in 2018 and 2021, shuttle tanker activity has increased year-on-year since 2013 and is set to grow further by a compound annual growth rate (CAGR) of 3.5 per cent between 2021 and 2030. The rise in demand is further compounded by the fact that shuttle tankers are crucial for moving liquids from wells to refineries and terminals in locations where subsea pipelines are unviable.

While the North Sea was once the pioneer region and largest market for shuttle tankers due to its harsh environmental conditions and fragmented field structure, the concept has been exported to other offshore areas with great success. Currently, the largest market for shuttle tankers is Brazil due to its ultra-deep-water oilfields. Therefore, the analysis predicts that it will account for more than half of the market demand for shuttle tankers from 2026.

Moreover, the surge in offshore production in Brazil has seen a significant rise in the utilization of shuttle tankers, with activity soaring by 55 per cent from 695 million barrels for 2013 to 1.07 billion in 2021. According to Rystad, a further increase of 72 per cent is forecast by the end of 2030 when total volumes handled by shuttle tankers in the country will hit 1.84 billion barrels. Brazil is expected to solidify its position as the global leader in shuttle tanker activity due to this meteoric rise, based on Rystad’s analysis.

However, Norway and the UK remain significant players in the shuttle tanker market even though they have been surpassed by Brazil. This is further confirmed by the latest data showing that Norwegian shuttle tankers handled 763 million barrels in 2021, while counterparts in the UK handled 312 million. On the other hand, Canadian shuttle tankers transported just 96 million barrels, and Russian shuttle tankers moved 213 million.

Rystad’s analysis further states that the Russian market is set to experience steady declines over the next few years, falling by almost half to 122 million barrels by 2030. This is in line with the data and analysis provided by the U.S. Energy Information Administration (EIA), explaining that Russia’s crude oil production will get a boost in the short term when the greenfield projects, which have been under development in the past few years, come online and reach their peak production levels.

However, the declining output from Russia’s more mature fields – primarily in Western Siberia, Russia’s largest oil-producing region – may offset the production growth coming from greenfield development, which may result in Russia’s crude oil production declining by the end of the 2020s decade, based on EIA’s data, which does not anticipate that brownfield development efforts in Russia will reverse the decline in production in the longer term.

Rystad’s data demonstrates that the shuttle tanker market remains one of the smallest and most surveyable shipping market segments with nearly 100 vessels now in operation and a handful on order. Although, it is worth noting that despite its small size, there are significant variations and differences across regional shuttle tanker markets.

The analysis shows that the North Sea and the Norwegian side of the Barents Sea have around 25 shuttle tankers in operation and comprise 25 per cent of the global market. Equinor and state-owned Petoro are responsible for over 35 per cent of the volumes shuttled off oilfields, even though the North Sea market provides more diversification than other markets. Other regions have observed and used the high standards and operational knowledge in the North Sea to adopt the same infrastructure.

An interesting facet of the Brazilian market is that despite it being the largest market with 40 vessels and three times the production of the North Sea, the Brazilian field operators have developed their form of regulation without authorities playing an active role, which is not the case with North Sea operators. Two of the main shuttle tanker owners helping to create continuity and efficient operations in Brazil’s deep waters are Knutsen NYK Offshore Tankers (KNOT) and Altera Infrastructure, which have amassed decades of experience operating vessels in the North Sea.

Furthermore, the Brazilian market is less diversified, with Petrobras handling 70 per cent of offshore shuttle tanker production with vessels that are either chartered by the Brazilian state giant itself or international operators. Petrobras can operate more efficiently with significantly more trips per vessel than its international competitors, which must leave Brazil every 90th day to meet local content regulations.

By contrast, the Russian shuttle tanker market is the same size as the North Sea but is divided into Arctic Russia and Far East Russia markets with the former focused on shuttling from Arctic oilfields to Murmansk and the latter shuttling crude and condensate from the Sakhalin fields to the Asian market. Although, there tends to be a higher vessel intensity per barrel produced in the region than in other markets, due to the relatively lightweight class of Russian shuttle tankers and the fact that they are ice-classed.

Rystad’s latest analysis further states that the North Sea will be a crucial driver for increased activity as a new investment spree follows the Norwegian government’s tax regime, introduced in mid-2020, which is aimed at incentivizing sanctioning activity to be filed by the end of 2022. The Norwegian Petroleum Directorate (NPD) also expects stable, high production to continue over the next few years.

Director general Ingrid Sølvberg believes that many new discoveries, as well as several new field developments in upcoming years, mean that production is expected to increase somewhat leading up to 2024 with 30-40 exploration wells planned to be drilled in 2022.

Since Brazil has also been vocal about its ambitions to become more energy independent, with many wells to be drilled by 2030, it has also set the stage to play a top-tier part in increasing the demand for shuttle tankers.

Due to a growing number of international players entering the stage in Brazil with their stake in crude oil production, this trend alone will drive shuttle tanker demand upwards as the vessel intensity per barrel produced is higher than local leader Petrobras.