regional issues
New opportunities have cost and risk issues
Offshore oil and gas production, and projects in deep water, are set to increase globally, and while this is good news for the industry, vessel owners and operators need to watch out for ‘wild cards’
developments and concerns session at this year’s Annual Offshore Support Journal Conference heard that market fundamentals through to 2020 are sound. But new energy sources, geopolitical factors and changes in the sources of global supply and demand, mean that capitalising on these opportunities is likely to be less straightforward. Perry Kennedy, managing director of Gulf Offshore, said activity in harsher environments and deepwater regions throughout the world is encouraging, especially against the backdrop of vessel oversupply and depleting reserves in more traditional areas. “But some of those opportunities will also bring with them incremental cost increases and, in some cases, increased risk,” he told delegates. According to John Westwood, group chairman at consultancy Douglas-Westwood, US$223 billion will be invested in developing deepwater prospects over the next five years, the majority destined for the golden triangle of the Gulf of Mexico, West Africa and Brazil. A poll taken at the conference revealed over 70 per cent of those present envisaged growing their business in Brazil over the next five years.
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“Especially interesting is the rise of Asia in terms of deepwater expenditure,” said Mr Westwood. “Three years ago Asia virtually didn’t feature on our charts. Two years ago it amounted to 7 per cent and now we are looking at 20 per cent over this next five years.”
“Europe in particular has seen quite a strong intermittent growth in activity,” said Mr Westwood. Germany is key here because it is really starting to ramp up activity, including in deeper waters in the Baltic rather than traditional North Sea activity. Development in the UK has stalled somewhat because of its electricity market reforms, and in particular the extent to which the government feels able to subsidise activity here. Asia is growing strongly and China has had a reasonable size offshore
elegates attending the regional
Børge Nakken of Farstad Shipping discusses Farstad's entry into the sub-sea sector
windfarm for about two-and-a-half years now. Korea, Taiwan and Japan are also moving into this sector. ‘Wild cards’ or unpredictable/unforeseen events which can adversely impact the outlook were discussed, especially geo-political factors as well as shifts in traditional supply and demand. Oil imports to the US, currently the world’s largest purchaser of crude, are declining as a result of both accelerating domestic production, which is running at its highest rate for 14 years, and the emergence of shale gas, which could see it become an exporter of gas fairly soon too. US gas prices are one third of Europe and one sixth of Japan, which is a game changer. Meanwhile, natural gas “will become more and more of an oil substitute”. Perhaps the biggest risk on the horizon, said
Mr Westwood, is oversupply. “Every time we see a market starting to go up, everybody piles in and starts ordering as much tonnage as they can possibly find. It is only a matter of time before we get oversupply and we have to wait until that tonnage is absorbed.” Børge Nakken, chief operating officer at Farstad Shipping, identified the cost of operations
14 I Annual Offshore Support Journal Conference and Awards 2013
and security as the primary challenges when working offshore in some parts of the world. Farstad has two vessels on a drilling campaign in Mozambique “and there are still reasons to pay attention to the security in Mozambique”. The local content requirements being made in emergent markets were another major talking point. While there was agreement that the relative lack of experience of local workforces can slow or even stymie projects, there was an acknowledgement that today’s mature markets also insisted on high levels of local content in the beginning.
A note of caution was sounded on the risks of being too committed to high levels of local content in workforces by the chairman of Damen Shipyards, Kommer Damen, in a comment from the floor. “I think [the industry at large] must learn lessons from the Jones Act in America,” he said. “The [extreme] protection of this maritime market means that today you get very old fashioned shipbuilding and minimal maritime shipping between coastal harbours. I would like to warn emergent markets against protecting their industries for too long – otherwise you are going to lose,” he concluded. OSJ
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