The OSV market in the Middle East is not showing massive improvements, but there is cause for hope and it remains stronger than other regions, said Dubai-based consultancy Synergy Offshore’s chief executive Fazel A Fazelbhoy today.
“We’re treading water,” he told the 2019 Annual Offshore Support Journal Conference, explaining “We’re not taking water on board but we’re not doing great either.”
There are currently around 450 OSVs in the Middle East, he said, with around 100 of these having come from southeast Asia. While there was hope some of these would leave the region, this has not been realised, he said.
Vessel utilisation rates are generally around 60%-65%, although some leading companies are claiming rates of around 90%. However while utilisation seems to have stabilised and is edging upwards, Mr Fazelbhoy noted that rates are not expected to recover until at least late 2019-early 2020.
Mr Fazelbhoy went on to examine a few countries in the region in detail. Looking at the UAE and Abu Dhabi in particular, he highlighted the impact of the In-Country Value (ICV) programme. Under ICV, all ADNOC contractors have a 'number' based on the degree of local content. For each tender, the bidder with highest ICV number is given the opportunity to match the lowest bidder’s price. He noted that he has seen cases where non-industry players with high local content have won tenders, only to then retender out. Under the ICV programme, he foresees that ADNOC Logistics & Services, which is currently both client and competitor to ADNOC Offshore, could become a major provider of services and even its chartering arm.
Elsewhere, he highlighted that Saudi Arabia is increasing emphasis on its In-Kingdom Value Add programme, and that many projects there are expansions or enhancements intended to offset declining production that may not drastically increase production capacity. Looking at Qatar, he highlighted that the embargo imposed on that country has had an effect on most Middle East-focused operators and owners and that almost all UAE and Saudi-affiliated vessels have been terminated by Qatar Petroleum and left the country.
Overall, Mr Fazelbhoy said the Middle East is still seen as a “global bright spot” for OSVs, attributing this to the constancy of activity levels in the region. "Is the worst behind us for utilisation and day rates? Yes, but recovery will be slow," he said.
While the Middle East’s OSV industry may be still treading water, he concluded that “at least for the time being we seem to have a direction, and the direction is generally upwards.”