Better times ahead for OSV market

After seven long years of depressed conditions, marked by too many vessels chasing too few jobs at too low rates, the mood of the market is upbeat; globally, there are fewer OSVs in layup, rates are rising and utilisation is up, too. By all accounts, the offshore oil and gas market is on the rise.

Oil’s resurgence was at the centre of many of the discussions and presentations at the Annual Offshore Support Journal Conference, Awards & Exhibition in London in June. There, many of the key players in the OSV community met to network with old friends and new, discuss the strong recovery in the offshore oil and gas sector, discover new technologies, and fete the year’s best.

While clearly enthused by the positive developments in offshore oil and gas and the expanding offshore wind market, OSJ Industry Leader award winners past and present noted several challenges posed by this rapid growth.

After years of capital discipline during the prolonged market downturn, OSV owners must now reactivate OSVs and hire and train new crew, said Seacor Marine chief executive John Gellert, the 2019 recipient of the OSJ Industry Leader Award.

Mr Gellert said during the past seven to eight years OSV owners have been managing contraction, managing costs and “trying to do the most with the least amount of cost and resources, and we are now entering a period where things are really growing.”

Bringing vessels out of layup and hiring new crew in a tight market is difficult. Like everyone else, OSV owners are being hit by inflation, necessitating higher costs at the shipyard for maintenance and reactivation, elevated fuel costs and rising crew wages. Finding financing isn’t easy either, he noted.

“The overall challenge is how we manage growth using current assets”

To address shortages in the labour market and the difficulty in finding new crew, training and certifying them, Seacor Marine has been keeping its fleet fully utilised and raised seafarers’ wages.

“The overall challenge is how we manage growth using current assets,” said Mr Gellert.”

Inflation and supply chain challenges were slowing offshore oil and gas project sanctioning, pointed out Westwood Global Energy, noting that some operators had to remodel project economics due to supply chain inflationary pressures that could range between 10% to 15% for subsea equipment and production platforms.

But on the positive note, Tidewater chief executive Quintin Kneen, OSJ’s Industry Leader award winner for 2022, sees the pendulum swinging back into the OSV owners’ favour and positive market fundamentals for 2023 and 2024. “The worst downturn the industry has ever seen is largely behind us and all of the factors point to even better times ahead,” said Mr Kneen.

Indeed, better times are ahead according to Westwood Global Energy’s five-year market forecast. Spending on engineering, procurement and construction for offshore oil and gas will hit US$276Bn between 2022-2026 —71% higher than the previous five-year forecast period.