I’ll be honest – this column was lucky to see the light of day, given how frantically busy the M3 team and I have been of late. It is a fact that everyone in offshore these days is having to work harder for our coin. The dollar we earn today is twice as hard as before.
There’s plenty of OSV statistics that make for grim reading in this altered offshore universe. Utilisation rates are, of course, down, with a 40% drop off in Asia and greater still in the North Sea. There’s been a 20% drop in rates across the board, while asset prices have fallen somewhere between 15 to 20%. There is an interesting dichotomy in terms of the falling asset prices — older AHTSs are falling faster, where as newer PSVs are falling faster than older ones. This is down to the fact there are simply too many PSVs being built. By my reckoning there are somewhere between 70 to 80 PSVs being built in China with no place to go to work.
So that’s the bad news out the way. The following is reason to be more cheerful.
We are in a state of change at the moment. Six months ago when oil was at $50 a barrel, people were saying could go to $40 – the reality is it is in the high $60s now, so you are only 35% off what you were at last year. My take, however, is that we are unlikely to see a return to the $100 a barrel scenario for a long, long time. Why? Because shale oil will flood the market once the price of oil creeps in the $70 territory.
The huge cost savings program by oil companies is working. Moreover, I am seeing more positive sentiment – more tenders, smiles returning to people’s faces.
The cost containment drive was needed. It will be benefit to the industry. There is clearly a different offshore world coming where outlays are fit for purpose, cheaper and more realistic.
Nowhere will this drive for lower costs be felt greater than in Norway. The country is the world’s top destination for research and development in offshore support, especially around Møre, the so-called ‘Silicon Valley of offshore shipping’.
Norway has suffered in the oil shock from having too many ships, the vast majority of which are also just too expensive. There has been and will continue to be a lot of pain in the Norwegian offshore sector, ships being laid up and people being laid off by the thousands. However, the industry will come out of this painful transition as a leaner and smarter entity.
This article first appeared in the most recent issue of Maritime CEO magazine which readers can access for free by clicking here.