At the Annual Offshore Support Journal Conference, Awards and Exhibition in London in early February, the air was full of optimism ...
As the conference annually draws OSV owners from around the world, OSJ Week provides an excellent forum to gauge the mood of the market.
While presenters and delegates alike admitted the global overhang of OSVs was challenging and the burdensome debt carried by some of vessel owners was troublesome, they generally agreed that the worst was behind the offshore oil and gas market; after five long, hard years, a recovery was in sight.
Now, of course, the Covid-19 pandemic has changed every facet of our lives and industry, bringing heartache, hardship and global economic uncertainty. We have entered unchartered waters.
Responding to the pandemic and the fallout of the OPEC+ price wars, oil companies have tightened their belts, cutting spending by at least 20% and delaying FIDs on projects.
One oil major executive recently told me that all of the models he has examined suggest this latest downturn will last at least two years. His advice for OSV owners was simple: preserve cash, cut non-essential spending and structure contracts at break-even levels.
Is there any silver lining that might emerge for OSV owners from the Covid-19 pandemic?
One OSV owner and marine logistics company tells me: “Yes, for agile, progressive and financially strong businesses there is a silver lining. A crisis of this significance forces necessary structural changes that, while deeply painful in the near term, will ultimately be beneficial for the long-term health of our industry.
“For agile, progressive and financially strong businesses there is a silver lining”
“The businesses that are able to survive this year, have the opportunity to thrive through digital transformation and business model reinvention. They will operate in an industry context of growing demand, more consolidated competition and a lower number of vessels. It will take time, but our market will rebalance and present real opportunity for a small handful of winning companies.”
Another OSV owner says: “Our industry is going through another clear out and those entities that are the fittest and best able to provide service should survive. Essentially, it will be a another run of survival of the fittest. Those that do survive, will have to find ways to navigate through the new post-Covid wave.
“Though there has been much talk about technology, the small- to mid-sized companies have been laggards in this space. Companies will now be forced to turn to technology to facilitate remote operations for both onshore and offshore staff. This should include remote real-time inspections, S&P and day-to-day monitoring operations. Though this will come with its own challenges, companies that are able to attach the digital experience to the physical will prosper.”
In short: survive now, thrive near term and gain a sustainable competitive advantage for long-term prosperity.