Thursday, July 26, 2018

Shipping: "Tankers—Is There Hope from Brazil"

From Hellenic Shipping News, July 24:
A potential recovery of Brazil’s crude exports could soon offer newfound hope for tanker owners. In its latest weekly report, shipbroker Gibson said that “for some time now, Brazil has been a major source of demand for the tanker markets, both from a crude export perspective and as an outlet for refined products (notably from the US). It’s fair to say that Latin America’s largest economy has had a pretty tough ride in recent years, having to contend with the oil price collapse and ‘car wash’ scandal. Things are, however, now looking better. Upstream, the nation has a continuous pipeline of new offshore oil projects scheduled to come online, whilst downstream, Petrobras is edging closer to achieving the foreign investment necessary to finish its stalled refining projects”.
According to the London-based shipbroker, “both upstream and downstream developments will have far reaching implications for the tanker sector. On the crude side, the main positive demand driver is that the growth in crude production is projected to accelerate, at least in the short term. However, so far in 2018, production growth has failed to meet expectations. Accelerating declines in mature fields have seen production in the Campos basin fall to a 17 year low according to a recent Reuters report. These declines have, to a certain extent, masked output increases from new projects, primarily in the Santos basin. Overall, slower production growth, field maintenance and mature field declines have seen crude exports running 300-350,000 b/d below 2017 levels over the first six months of year. Nevertheless, new project start-ups are expected to offset declines from mature fields in the coming years, with higher growth expected over the second half of 2018 and beyond. Recent IEA data suggests that Brazilian crude production will grow by nearly 900,000 b/d between 2018-2023. On the face of it, positive for crude exports from the country”.

Gibson said that “in recent months, utilisation of existing refining capacity also appears to be on the up. These higher refining runs have restricted crude exports, whilst at the same time negatively impacting product trades. Petrobras reported refined products output of 1.679 million b/d in Q1 2018, the lowest level since at least 2007. However, unofficial data suggests runs may have risen by 200,000 b/d since then, assuming a utilisation rate of 85%. Higher oil prices have forced the government to introduce fuel subsidies, making it more difficult for traders to import refined products, such as gasoline and diesel, into the country. This has of course negatively impacted the product tanker market, most notably those vessels loading in the US Gulf. The lack of export demand has been accentuated by similar developments in Mexico. Despite this,future downstream capacity additions in Brazil remain uncertain. Most newrefining projects in Brazil have failed to materialise. Petrobras has halted work at its 150,000 b/d Comperj plant, whilst the 130,000 b/d expansion at Abreu e Lima has also stalled. The company has been courting investors to assist in the commissioning of these plants, but even so, it is likely to be a number of years before any major capacity additions come online in the country”....