Speaking at the opening session of the Offshore Support Journal Subsea Conference in London, Strategic Offshore Research director Ian McIntosh said the subsea market is ’in some pain’
Prevailing winds of oversupply and under-utilisation of vessels in the subsea market are leaving rates flat, and it is a rate environment that is likely to be tricky to escape.
In an overview of the subsea market, Mr McIntosh explained that the market is out of balance, leaving subsea vessels and contractors struggling.
"Where are we right now? We are in some pain," he said.
While demand began to increase throughout 2019, and Mr McIntosh even said the subsea sector "turned a corner", he said the cyclical, seasonal nature of various segments foreshadow a lengthy recovery period.
In particular, Mr McIntosh noted that deepwater was "reaching the bottom of its process" and would take longer to recover than some other segments.
There is work to be found elsewhere, he said, but oversupply and intense competition meant the work would not necessarily reach the break-even point for vessels involved.
"With all this oversupply, you’ve had to have lots of high-spec subsea support vessels in other parts of the market – so sometimes, you have had boats making less in service than they would while laid up," he said.
"Some boats are being used effectively – but at very low rates – by oil companies to house their workers," he added, noting the rates for that type of work could go up if utilisation increased because the vessels represent an attractive option for oil companies, being cheaper than using larger vessels.
Mr McIntosh noted there is construction support work to be had on new field developments but it was largely seen as a fall-back for contractors aiming for more consistent, better paying work in other segments.
Overall, he described a chicken-and-egg recovery hampered by persistent oversupply and under-utilisation.
"Pricing in the subsea market is all about utilisation. It has started a very modest recovery, but rates are going to take a lot more time to move again, to get the momentum back," he said.
"Even as demand starts to improve, there is a lot of inertia to overcome for boats and for contractors because utilisation is not going to immediately jump to 90% – utilisation is still going to be in the doldrums."