owners because of the oversupply of tonnage, which limited day rates and fleet utilisation. He said more promise would come in 2014 when the orderbook should be smaller and demand is likely to increase. He urged owners to consider scrapping older vessels to improve rates for more modern ships.
Alan Pirie: 2013 will be challenging because of oversupply
managing director, Jonathan Parkes. Another session included an update on the latest vessel requirements for offshore wind energy. Delegates heard that there was oversupply in tonnage in the short-term, but in the long-term, offshore construction vessels will need to be upgraded to meet industry requirements. The final session of the conference was focused on LNG-fuelled shipping. During this session, John Shock, Caterpillar’s offshore segment manager explained how the company will be introducing dual-fuel engines for OSVs in the next two years. In the opening session, Malcolm Webb, chief
executive of Oil & Gas UK, described some of the challenges facing companies in the offshore sector. These include fiscal uncertainty and unpredictability, post-Macondo conservatism, and access to capital. In his presentation, Mr Shock also highlighted the importance of the financial worldwide economic environment and the oil price. Expenditure on offshore oil exploration and production continues to grow, Mr Shock noted, and exploration is taking place in deepwater and ultra-deepwater areas. New areas for development are being opened up, such as Arctic waters, but new regulations are being introduced which could act as a brake on development. GL Group’s Pekka Paasivaara talked about a ‘seismic shift’ happening in the OSV market as the industry tackles the increasing challenges of increasing hydrocarbon recovery in deeper waters and more remote locations. Another scene setting presentation was by Alan Pirie, marine editor of IHS Petrodata. He explained how 2013 would be a challenging year for
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Geir Sjurseth, managing director, DVB Group Merchant Bank (Asia) Ltd and managing director offshore support group, took a more cautious view of the market than several commentators at the event. He entitled his presentation ‘Offshore – Next bubble to burst? Unsustainable Disconnects & Access to Capital.’ Whilst noting that there was what he described as “unparalleled optimism” in the sector, with new finds in shallow and deep water, and a record jack-up/drillship orderbook, there are reasons to be concerned about the offshore vessel sector. This despite E&P spending in 2013 reaching a level of US$367 billion (excluding US spending which, he said, was growing at a slower pace due to low gas prices in the US). The oil price remains high, said Mr Sjurseth, but the market for anchor handling tug supply vessels (AHTS), subsea and construction vessels, and that for seismic vessels, is, he said, moving towards a fine market equilibrium, and the market for larger types of platform supply vessels (PSVs) is facing oversupply. Part of the problem, he implied, is that shipyard newbuild prices are softer now, and very good payment terms are luring owners into ordering too many new vessels. The background to this situation is, he said, one in which there seems to be no near-
term solution to the sovereign debt crisis and shipping as a whole is in crisis: there is too much supply, too little cargo, and the crisis seems set to continue with more defaults and bankruptcies. Mr Sjurseth said he believes that the banking crisis will get worse rather than better, with Basle III coming and less capacity available. There was oil in abundance, he explained, which could adversely affect the oil price and E&P, and shale oil and shale gas were only adding to this problem. At the same time, worldwide economic growth remains sluggish and extremely fragile. In Brazil, he noted, the market is cooling off, units are being redelivered, vessels are spending more time off hire and charter payments are being delayed. Tellef Tellefsen, head of shipping at Export Credit Norway (Eksportkreditt), noted that the organisation he works for has been supporting the Norwegian export industry for decades, and has stepped in to do so to an even greater extent since the worldwide economic crisis and the credit crunch, which has led to the withdrawal from the shipping sector of many well-known lenders. As he noted, the low order intake for merchant vessels has caused shipbuilders in the countries such as Turkey, Japan, China, Korea and India to turn their attention to the OSV market and look for new orders there. Mr Tellefsen said he thought strong fundamentals would prevent a market shock but highlighted the importance of a stable oil price. “Financial constraints will limit new orders,” said Mr Tellefsen, noting that, in his view, new, more stringent regulations are likely to force old tonnage out of the market. OSJ
Geir Sjurseth of DVB Bank on where the OSV sector's main opportunities and challenges lie Annual Offshore Support Journal Conference and Awards 2013 I 9
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