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Maritime CEO 400: Offshore overcapacity concerns

Singapore: As Maritime CEO celebrates passing the 400-interview mark, all week we are diving into our archives to see what leading shipowners have said about the markets in the past few months. Today, we focus on offshore, a market set for a deluge of new rigs, according to Mike Meade, the boss of brokers M3 Marine, writing in our latest magazine.
Meade has also just teamed up with a famous name in OSVs to create a new shipowning entity, Tasik Subsea.
John Giddens, who built Hallin Marine into a global subsea services player after starting it from a container in his back garden, has re-entered the industry with the announcement of the build of a 105 m subsea operations, diving and ROV support vessel.
The contract for the construction of the vessel, tentatively named Tasik Toba, wassigned with Fujian Mawei Shipyard in China last month.
“I think commodity boats  – PSVs and AHTSs – are basically in oversupply,” Giddens told Maritime CEO, “but nevertheless people that know what they are doing seem to be making money in the right sub-sectors.
High-end DSVs are potentially in oversupply also, he said, with a number of newbuilds underway including Tasik Toba, but, here, he stressed: “I think, as I always have, that the key is building smart and getting the best quality and highest specification at the lowest price.”
Adam Clayton, the corporate finance and group commercial head for Singapore’s Miclyn Express Offshore touched on the overcapacity issue facing the sector when we interviewed him this June.
“We are seeing some oversupply in certain segments such as mid-size PSVs,” said Clayton, “but we also believe that continued demand will provide opportunities for growth for the stronger service providers in the market.”
While some OSV sectors are indeed risking overcapacity, Swire Pacific Offshore’s managing director Neil Glenn was adamant his fleet is well placed. “The orderbook particularly for PSVs remains very finely balanced,” he said when interviewed six months back.
Darren Yeo, ceo of OSV operator Vallianz, said that while there has been some concern voiced by industry experts that day rates for rigs have been falling this year, Yeo was adamant when we met up last month that there are no overcapacity issues for the shallow water offshore support vessels as global demand continues to be firm.
Yes, there are a lot of drilling rigs entering the market, but rates should bounce back, reckoned Dynamic Drilling director Manav Kumar.
“A short term drop in rates is likely next year,” he said, “as a lot of newbuilds come onstream, but the long term forecast remains good for serious drilling contractors.”
Still, while many in traditional commercial shipping have looked at offshore as some sort of industry paved in gold, there have been many who have come into the market and been burnt.
Take India’s Varun Shipping, for example, a company in acute financial difficulties. Its managing director, Yudhishthir Khatau, told Maritime CEO last month that Varun has taken a conscious decision to eventually exit offshore.
“The critical mass regarding the number of vessels required to make money in this segment is large, and beyond our capabilities,” Khatau admitted.
Tomorrow, in our final shipowner roundup, we assess the fortunes of the tanker trades. [04/09/14]

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