A glut of hydrocarbons has the industry tanking,  but the longer-term outlook is still optimistic. Plummeting oil prices have become the new normal over the last year. The flooding of the market with new North American sources of petroleum have increased supply while economic slowdowns in some parts of the world, most notably China, have trimmed demand. Middle Eastern oil producers show no signs of cutting back on pumping; if anything, they are increasing output. Recent volatile trading saw the price of oil climb for a few days only to fall again below $50 per barrel at the end of August, marking the fourth consecutive monthly fall in prices. Global Cut Backs All of this has been good news for U.S. drivers, who have seen pump prices fall over the last year. But the same supply-and-demand picture has motivated some of the biggest global oil and gas companies to cut back on investments and that, in turn, has meant slower business for carriers of project cargo.  Earlier this year, BP, the world’s third-largest oil and gas company, announced investment reductions of $6 billion in 2015. Exxon Mobil, ConocoPhillips, and Occidental Petroleum all announced they are suspending new oil and gas projects while Shell is cutting spending by $15 billion over the next three years, impacting 40 of its global projects.  Breakbulk and project carriers have been squeezed as a result. While the global economy has largely moved past the 2009 financial crisis, project carriers are still operating in the shadow of that meltdown. The drop in oil prices hasn’t helped, nor has the stronger U.S. dollar which has depressed exports. “The global, financial crisis that started in 2009 affected the project market,” said Waldemar Poulsen, president and CEO of Rickmers-Linie (America), Inc., a breakbulk and project carrier based in Houston. “Lately the strengthening of the U.S. dollar has hit U.S. exports badly. This coincided with the sharp drop in the price of oil, which has forced oil companies to reduce production and investments. The overall market is weak, which is putting pressure on freight rates.” BNSF Logistics Canada, successor to Albacor Shipping, a major project forwarder, has seen project cargo drop in 2015. “We haven’t seen much project cargo exports even with a low Canadian dollar,” he said. “But these things often take a while to mature.” BNSF Logistics still handles project imports destined for oil sands projects in Alberta. “That equipment was ordered long ago,” said Hess, “and those projects aren’t getting cancelled. Those people are looking long term.” Still, Hess said, “2015 looks like it’s not quite as exciting as 2014.” Within Rickmers-Linie’s trade lanes, the market from Asia to the U.S. is holding up fairly well. “But exports to Asia and Europe in particular have declined considerably,” said Poulsen. “This makes it very difficult to run a profitable service.” Large liquefied natural gas projects in the U.S. Gulf, particularly in Texas and Louisiana, are driving most of the project imports that Rickmers handles. Shipments of import commodities like iron and steel from countries like China and South Korea are also still fairly strong.  Exports of bulk minerals are down. But exports of mineral concentrates in bulk out of New Orleans are down together with most other export commodities. “Most project/break-bulk carriers participate in these exports in competition with pure bulk carriers,” said Poulsen. “We used to count on oil well and mining equipment, which has reduced considerably in volume.” Project carriers like Rickmers also face competition from container and ro-ro carriers. “These carriers are ordering more specialized equipment to expand within the segment of heavy-lift and oversized cargo,” said Poulsen. “Combined with the fact that container carriers offer weekly service and often better transit times, this is making the competitive environment fierce for the project carriers.” Rickmers is coping with the situation by implementing cost reductions. “Our organization has been right-sized,” said Poulsen. “Expensive charter vessels have been redelivered to their owners. The service speed of our vessels was reduced to a more economical speed.” Despite these measures, Poulsen added, “it continues being a challenge to operate profitably.” The picture is brighter over the longer run. BP, in a recently-released report “Energy Outlook 2035,” projects energy demand to grow by almost 40% over the next 20 years, with most of the growth coming from developing economies like India and China.  “Fossil fuels will continue to supply the lion’s share of demand,” said Spencer Dale, BP’s chief economist, “particularly gas which we expect to be the strongest growing fossil fuel.” BP sees strong growth in the supply of natural gas, with U.S. shale gas continuing to grow rapidly. “The other interesting feature is the increasing supply of liquid natural gas [LNG],” said Dale. “The importance of LNG is that it’s mobile. In the past, regions that are heavily dependent on imported gas have had to rely on pipeline imports. LNG opens up new sources of supply. This has major implications in terms of how gas prices are likely to be set across the world, with gas prices in different markets moving in greater unison.” Perhaps the most interesting finding of the BP report involves how energy trade patterns will shift over the coming decades. Instead of predominant flows from the Middle East the U.S. and Europe, trade flows will start to reverse. “That reflects the increasing supply of gas and oil in the U.S. and declining demands for energy are declining in the U.S. and Europe,” said Dale. “We also expect to see rapid growth in GDP and energy demand in much of Asia.” BP’s central message is that the factors giving rise to the current weakness in oil prices will fade over time. “Growth in U.S. oil production is likely to slow, world demand for oil will gradually pick up,” said Dale, “and over a period of time this current weakness gradually dissipates, but that may take several years to happen.” All of which may eventually help project carriers like Rickmers, but the turnaround will not happen tomorrow.