The fundamentals of the offshore market have fundamentally changed; it is now up to the industry as a whole to adopt sensible plans to maximise opportunities
Big changes and big opportunities - that was the message at the heart of Topaz Energy & Marine chief executive René Kofod-Olsen’s keynote address on the opening day of the Offshore Support Journal Conference, Awards in London.
“As an industry … we cannot rationally expect to ever revert to the days where oil companies have the freedom to spend without proper control of costs,” Mr Kofod-Olsen said.
“Hence, our sector will not again see the lavish return on investments and paybacks on individual assets we have seen in previous cycles.”
The current downturn has changed the industry fundamentally, according to Mr Kofod-Olsen, but, with energy demand on the rise and with a projected increase in offshore exploration and investment ahead, there are now tremendous opportunities after a period of cost rationalisations.
However, he noted certain steps OSV owners must take to position themselves for profitability in the new, more circumspect energy market landscape.
The first order of business in Mr Kofod-Olsen’s action plan for a newer, leaner OSV sector would be for owners to sell off their laid-up vessels. “If owners truly take a non-emotional view of their fleet, the vast majority will remain out of service … permanently,” he said.
Topaz sold five vessels for scrap in 2018 based on the simple calculation that the activation costs exceeded the earning potential of the vessel. This, said Mr Kofod-Olsen, was despite the vessels only being 10-12 years of age.
“It is critical that none of us go on spending sprees or reactivate vessels without thought. The costs to the individual operator and the industry as a whole are simply too high,” he said, adding “May I plead here today with the audience to listen to your CFOs and not our sailors’ heart.”