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-OILMiddle East To Provide A Growing Share Of World Oil Exports

Anew annual report on the outlook for the world oil industry and its effect on tanker demand, "Oil Trades, Secondary Transportation Modes and Tanker Demand" concludes that the Middle East is set to become still more significant as a source of world oil trade.

The report looks at the prospects for oil transport from the perspective of an unusual period in the market: the historical pattern of trade has not recovered from the disruption caused by the Gulf war of 1990/91, and the economic recession in the OECD countries has severely curtailed demand growth. Furthermore, the collapse of the Communist bloc has led to a decline in both production and consumption of oil in the former Soviet Union, as well as leaving former satellites— such as Cuba — at the mercy of the oil market for their supplies.

The fall in oil production in the former Soviet Union, together with the slide in output in North America, and the likelihood that other oil provinces in consumer areas will begin to show declining production profiles from the middle of the decade onwards, is leading to a growing call on Opec oil. This could be compounded by the effects of the anticipated economic recovery in the developed world, to lead to a rapidly rising requirement for crude oil imports into North America, Europe and Japan.

The only regions which have the spare capacity to supply this demand are the Middle East and, to a lesser extent, North and West Africa. As well as being responsible for making up much of the global shortfall in crude supplies, the Middle East looks the most likely region to be called upon to fulfill additional requirements for refined products on the open market. While the rapid increase in refinery capacity in the Far East will change the nature of regional shipping requirements, in other areas the rationalization of the refinery sector, and increasing levels of investment by crude exporters in downstream facilities, looks set to boost demand for products Forecast Crude Oil Trades (Major Routes, 1991-97) (Million Tons) Forecast Main Products Trades (Major Routes, 1991-97) (Million Tons) '91 '92 '93 '94 '95 '96 '97 AG-/RS-S.E. Asia 18 17 18 16 12 10 7 AG/RS-Japan 12 14 17 19 21 22 25 AG/RS-lndian S.C. 13 14 15 15 18 20 23 AG/RS-USES 2 2 3 11 14 16 16 AG/RS-S. Europe 5 5 6 11 13 13 14 E. Europe-N. Europe 19 17 18 18 21 22 24 Caribs-USES 29 30 32 32 33 34 34 USGC-USEC 19 19 18 18 16 16 17 S.E. Asia-Japan 15 15 15 15 15 16 15 Source: Drewry Shipping Consultants Ltd. from the Middle East.

Between 1991 and 1997, the report forecasts a 16 percent rise in the volume of seaborne crude oil trade, and a massive 29 percent hike in movements of refined products by tanker. In both cases, this growth is expected to be concentrated in the post-1994 period, provided that some degree of economic recovery is forthcoming. This additional demand should see exports from the Middle East rise by almost 30 percent. On the basis of these forecasts, demand for oil tankers will rise by 13 percent between 1991 and 1997, again concentrated in the period after 1994. This is expected to impact primarily on vessels in the 90- 175,000 dwt range, but this is partly because demand for such tankers has been depressed while Iraqi exports into the eastern Mediterranean have been curtailed. However, assuming the Iraqi exports via Ceyhan resume within the next two years, additional throughput via the Sumed pipeline, the expansion of the Suez Canal, and additional exports from West Africa, will all put greater demands on the Suezmax fleet.

In the current d e p r e s s e d freight market, operating inefficiencies have increased significantly. With any increase in tanker demand, the first thing to happen will be a reduction in inefficiency, and thus there will be a lag before any demand for additional tonnage becomes apparent.

This could coincide with a fall in supply, caused by the aging fleet profile and increasingly stringent inspection and insurance criteria, but it could equally well be the case that the time lag before any recovery in demand will persist for so long that depressed freight rates will see some major operators depart the market.

For further information regarding "Oil Trades, Secondary Transportation Modes and Tanker Demand", or any inquiries regarding the report, please contact: Drewry Shipping Consultants Ltd., 11 Heron Quay, London E14 4JF.

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