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OSJ Asia: offshore market on a high, but areas of concern remain
Owners of offshore support vessels and drilling rigs are riding the tide of a market upcycle, but there are areas of concern
The global offshore market is experiencing stable oil prices, decade-high offshore spending on projects and maintenance, and high vessel utilisation, delegates heard at Riviera’s Offshore Support Journal Conference, Asia 2024, held 17-18 September in Singapore.
However, oil demand is sluggish, which could impact OSV and rig markets, said Westwood Global Energy Group head of offshore energy services Thom Payne. "Times are good right now, but where are the cracks?" he asked.
"There is a huge amount of work and we expect record high levels of spending on projects in the next five years." There is high vessel utilisation and a "return to the all-time highs" in the offshore rig markets and increasing rates, "but the rate of growth has slowed," said Mr Payne.
However, vessel owners need to be aware of the challenges ahead before investing in fleets. For example, recent falls in the oil price and rising oil production globally will test the resolve of OPEC producers to hold back output. "The sluggish outlook for oil demand will test OPEC’s resolve."
Inflation will impact exploration and production spending, with energy companies expected to review potential projects, which could delay investment. This has already impacted the jack-up rig markets, as Saudi Aramco has held back offshore investment and suspended contracts for more than 20 rigs so far.
Clarksons Singapore managing director for rigs, Morten Haugan, provided a summary of the market and forecast what owners can expect in the coming years.
He said Saudi Aramco has suspended contracts for 27 jack-up rigs and they were being absorbed into Middle East and Asia markets, temporarily reducing charter rates.
There has also been rising demand for semi-submersible rigs and drill ships worldwide, but growth has slowed and rates have plateaued at around US$500,000 per day for an ultra-deepwater drilling unit.
"We are in a long sustainable upcycle, the market is relatively strong, but there are some headwinds," said Mr Haugan. He expects the Asian market to remain tight for drilling rig availability and for day rates to remain high.
This will continue to positively impact OSV markets, with owners able to expect strong fleet utilisation and steady and rising charter rates.
But there are limited options for fleet renewal and growth. M3 Marine senior broker Mili Verma said there are few OSVs available for shipyard delivery, limited options for vessel purchases and a shortage of newbuild orders. However, she said there have been bank-driven sales, Chinese shipyards completing vessels ready for resale and stressed assets available for purchase.
Key challenges for owners in their investment decisions include financing costs, charter terms, a lack of bank guarantees and uncertainty as to which technologies and fuels to back for decarbonisation, said Ms Verma.
At the beginning of the conference, Bingrong Ng, director of decarbonisation planning and infrastructure for the Maritime and Port Authority of Singapore gave a keynote address. He described the trends driving global shipping towards decarbonisation, and how investors in Singapore are considering low-emissions harbour and offshore vessels. This includes investing in electric harbour craft, port quayside charging stations and infrastructure for bunkering with methanol and ammonia.
Riviera’s Offshore Support Journal Conference, Middle East will return to Dubai, UAE, 11-12 December 2024, bringing together the industry’s leading vessel owners, oil and gas companies, EPC contractors, technology and service providers to discuss opportunities, challenges and strategies to succeed in a booming offshore market. Get your tickets on early bird rates here. Offer ends 31 October 2024
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