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I Insight 1 -OIL- Middle East To Provide A Growing Share Of World Oil Exports '91 '92 '93 '94 '95 '96 '97 AG-Japan 140 142 150 153 156 159 166 AG-S.E. Asia 94 100 114 117 123 131 141 AG-USES 94 94 94 91 82 83 90 AG-N. Europe 73 83 80 82 77 83 87 AG-S. Europe 45 51 50 20 20 25 25 E. Med.-S. Europe 36 36 36 66 72 72 76 Caribs-USES 100 101 98 98 98 100 100 W. Africa-USES 59 60 66 69 71 72 71 W. Africa-S. Europe 36 36 40 44 46 47 45 N. Africa-S. Europe 79 78 78 80 82 82 84 S.E. Asia-Japan 34 38 38 38 39 40 35 Source: Drewry Shipping Consultants Ltd. 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 signifi- cant as a source of world oil trade. The report looks at the prospects for oil trans- port 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 se- verely 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 satel- lites—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 prov- inces in con- sumer areas will begin to show de- clining produc- tion profiles from the middle of the decade onwards, is leading to a growing call on Opec oil. This could be com- pounded by the effects of the an- ticipated eco- nomic recovery in the developed world, to lead to a rapidly rising requirement for crude oil im- ports 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 concen- trated in the post-1994 period, provided that some degree of economic recovery is forthcom- ing. 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 be- tween 1991 and 1997, again con- centrated in the period after 1994. This is ex- pected to impact primarily on ves- sels 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 Med- iterranean have been curtailed. However, assum- ing the Iraqi ex- ports via Ceyhan resume within the next two years, additional throughput via the Sumed pipe- line, the expan- sion of the Suez Canal, and addi- tional exports from West Africa, will all put greater demands on the Suezmax fleet. In the current depressed freight market, operating ineffi- ciencies have in- creased signifi- cantly. 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 strin- gent 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. 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