Pipelay market outlook

Audrey Leon

September 1, 2015

Audrey Leon spoke with Infield Systems’ analysts James Hall and Wei Liu to get the bigger picture.

According to Infield Systems, the offshore pipeline installation market over the next 12 months will be challenging. Infield has revised down its three-year forecast for pipeline installation capex by approximately 25% as the market downturn tightened. Spending for the period is now anticipated to be about 10% lower than the 2012-14 period, sitting at some US$45 billion.

The operators hurt the most during the downturn have been the tier two- and three vessel players, Infield says, while larger vessel operators have opted to make reductions in workers and business segments. Subsea 7 announced in May it would cut its global workforce by 2500, and cut 11 of 39 vessels from its global fleet. Technip followed in June saying it would reduce its global workforce by 6000 and sell two of its vessels. In July, Saipem followed suit implementing $1.4 million cost-cutting program that will downsize operations in Brazil and Canada, scrap five vessels, and reduce 8800 employees through 2017.

Hall and Liu say that Africa will drive pipelay demand growth, however, risks remain if low oil prices end up pushing back large scale projects in Angola, Egypt, and Nigeria. Additionally, Infield expects moderate growth in Latin America due to a few gas export projects in Brazil and Mexico. Although, by the end of the decade, Australasia demand will be led by expansion of the Darwin LNG projects, the pair say. North America, according to Hall and Liu, will likely see pipelay demand shrink in the coming years as shallow water activity in the Gulf of Mexico has been negatively affected by the onshore shale boom.

Due to high sanction costs and significant capex reductions, Infield sees European pipelay activity through 2015-17 will be moderate, with an annual installation of 1200km. The pair say this is a 50% drop from forecasts a year ago.

However, it’s not all bad news, Infield expects that some recovery will be felt in 2H 2017, although a 6-12 month lag will experienced by the pipelay fleet.

Hall and Liu say that during the coming two years (2015-16) global pipeline installation is anticipated to average 8035km per annum, 33% lower than forecast a year ago. Major delays or cancellations within the coming 12-18 months include the Russia-Bulgaria-Romania South Stream trunk line, the Algeria-Sardinia- Piombino pipeline project through Algeria to Italy. The Shah Deniz BW project in Azerbaijan and the Callantsoog (Balgzand) - Bacton (BBL) development in Netherlands.