Page 58 - Oil&Gas-AustralAsia-2015-Issue-2
P. 58
M ARITIME
Staying afloat amid choppy waters
The slide in oil prices from its historical the situation is certainly not conducive By Nazery KHALID C
highs of above US$100 per barrel in for charter rates to recover anytime M
2014 to the current US$60-something soon. This is a legacy of shipyards activities. Recovery of oil prices is at Y
levels has taken even the most astute speculatively building huge numbers of best tentative, and several oil majors CM
analysts by surprise. OSVs during the boom time in the oil have announced that unless oil prices MY
A combination of factors including and gas markets, a strategy that served gain up to above US$80 per barrel, they CY
technical, market-driven and geo-stra- them well then but has come back to would not find it attractive to pursue CMY
tegic has sent oil prices spiraling to such haunt them amid the headwinds in the new offshore frontier projects such K
low levels within a short period. This offshore shipping sector. as ultra deepwater exploration and
has prompted national oil companies Industry estimates put the drop in production and enhanced oil recovery.
and oil majors to cut back on explo- charter rates of certain types of OSV up This would mean players in the marine
ration and production (E&P). Some to 20%. In addition to overcapacity in industries will have to bite the bullet a
have even announced salary cuts and the OSV sector, players are competing while longer as oil prices have at best
voluntary separation schemes, which on pricing to win jobs from oil compa- shown only tentative and unconvincing
were almost unthinkable only a short nies, which causes charter rates to slide signs of staging a sustained and full
one year ago when oil prices were further. Rates are not expected to stage recovery.
riding high. Oil companies have started a prolong rebound and full recovery so
to show markedly inferior financial as long as oil prices remain low as oil Long term perspective
performances in the last three quarters companies would not find it economi-
compared to the boom time in the oil cally viable to undertake E&P activities. While it is a given that markets move
and gas sector a short while ago. Oil companies are aggressively rene- in cycle and the oil market especially
The slump in oil prices has triggered gotiating rate cuts with suppliers and is subject to so many complex factors
a chain of negative effects across the some have even terminated contractors that dictate this valuable commodity’s
entire oil and gas supply chain and with suppliers abruptly. demand, supply and price, players in
other economic sectors. Not spared This has caused OSV owners to suffer the marine industries must not lose
from the impact of the sharp decline are lower utilization rates of their fleet sight of the long term prospect of the
players involved in a host of activities which is affecting their bottom lines. oil and gas industry. Notwithstanding
that facilitate E&P and the marine The situation will continue to weigh the current blip in oil prices, demand
industries. These include companies heavily on OSG owners who are expect- for oil and gas will continue to remain
in the downstream sector, owners of ed to sail through choppy waters for at robust amid growing global population
ships used in energy transportation and least a year or two until oil prices are and growing demand for hydrocarbon
servicing E&P activities, and providers expected by many oil analysts to stage a energy especially from developing
of marine support services. convincing rally. economies. Prices will surely one day
Another industry which is reeling from go back to reasonable levels and oil
Hit hard the current low oil price situation is the companies will start cranking up their
marine support services industry. This E&P machines to full speed and opti-
The soft oil prices which has resulted industry includes manufacturing activi- mal capacity once again.
in the halt of new offshore projects ties such as shipbuilding/ship repairing But for now, it is time for them and
and scaling back of existing ones has (SBSR), offshore structure fabrication those dependent upon the oil and gas
affected owners offshore support vessels and equipment manufacturing, and industry to hunker down and navigate
(OSV). Demand for vessels in this cat- marine ancillary services such as ship the choppy waters of low oil price and
egory such as platform supply vessels, designing, classification, crewing, ship cutback in offshore activities. Against
anchor handling tugs (AHTS), seismic management, ship brokering, marine this backdrop, players in the Malaysian
vessels, pipe-laying barges and accom- surveying and the likes. Players in the marine industries should strive to offer
modation workboats has declined rath- marine industry facilitate and enable between products and services, reduce
er significantly since oil prices headed shipping and E&P activities to be car- cost, optimize existing assets, explore
south a year ago. ried out. unchartered export markets and
This has sent charter rates for OSV These are challenging times indeed for enhance efficiency and productivity to
to low levels not seen in many years. them amid slower demand for ship- ensure they remain in the black. These
Combined with the overcapacity of ping services and scaling back of E&P are crucial tasks for them to undertake
tonnage in several categories of vessels, at the time when demand for shipping
services and offshore assets is soft and
there is no clear sight of full recovery in
the world economy and oil prices.§
A A56 OIL & GAS ustral SIA MAY/JUNE 2015 www.oilandgasaustralasia.com
Staying afloat amid choppy waters
The slide in oil prices from its historical the situation is certainly not conducive By Nazery KHALID C
highs of above US$100 per barrel in for charter rates to recover anytime M
2014 to the current US$60-something soon. This is a legacy of shipyards activities. Recovery of oil prices is at Y
levels has taken even the most astute speculatively building huge numbers of best tentative, and several oil majors CM
analysts by surprise. OSVs during the boom time in the oil have announced that unless oil prices MY
A combination of factors including and gas markets, a strategy that served gain up to above US$80 per barrel, they CY
technical, market-driven and geo-stra- them well then but has come back to would not find it attractive to pursue CMY
tegic has sent oil prices spiraling to such haunt them amid the headwinds in the new offshore frontier projects such K
low levels within a short period. This offshore shipping sector. as ultra deepwater exploration and
has prompted national oil companies Industry estimates put the drop in production and enhanced oil recovery.
and oil majors to cut back on explo- charter rates of certain types of OSV up This would mean players in the marine
ration and production (E&P). Some to 20%. In addition to overcapacity in industries will have to bite the bullet a
have even announced salary cuts and the OSV sector, players are competing while longer as oil prices have at best
voluntary separation schemes, which on pricing to win jobs from oil compa- shown only tentative and unconvincing
were almost unthinkable only a short nies, which causes charter rates to slide signs of staging a sustained and full
one year ago when oil prices were further. Rates are not expected to stage recovery.
riding high. Oil companies have started a prolong rebound and full recovery so
to show markedly inferior financial as long as oil prices remain low as oil Long term perspective
performances in the last three quarters companies would not find it economi-
compared to the boom time in the oil cally viable to undertake E&P activities. While it is a given that markets move
and gas sector a short while ago. Oil companies are aggressively rene- in cycle and the oil market especially
The slump in oil prices has triggered gotiating rate cuts with suppliers and is subject to so many complex factors
a chain of negative effects across the some have even terminated contractors that dictate this valuable commodity’s
entire oil and gas supply chain and with suppliers abruptly. demand, supply and price, players in
other economic sectors. Not spared This has caused OSV owners to suffer the marine industries must not lose
from the impact of the sharp decline are lower utilization rates of their fleet sight of the long term prospect of the
players involved in a host of activities which is affecting their bottom lines. oil and gas industry. Notwithstanding
that facilitate E&P and the marine The situation will continue to weigh the current blip in oil prices, demand
industries. These include companies heavily on OSG owners who are expect- for oil and gas will continue to remain
in the downstream sector, owners of ed to sail through choppy waters for at robust amid growing global population
ships used in energy transportation and least a year or two until oil prices are and growing demand for hydrocarbon
servicing E&P activities, and providers expected by many oil analysts to stage a energy especially from developing
of marine support services. convincing rally. economies. Prices will surely one day
Another industry which is reeling from go back to reasonable levels and oil
Hit hard the current low oil price situation is the companies will start cranking up their
marine support services industry. This E&P machines to full speed and opti-
The soft oil prices which has resulted industry includes manufacturing activi- mal capacity once again.
in the halt of new offshore projects ties such as shipbuilding/ship repairing But for now, it is time for them and
and scaling back of existing ones has (SBSR), offshore structure fabrication those dependent upon the oil and gas
affected owners offshore support vessels and equipment manufacturing, and industry to hunker down and navigate
(OSV). Demand for vessels in this cat- marine ancillary services such as ship the choppy waters of low oil price and
egory such as platform supply vessels, designing, classification, crewing, ship cutback in offshore activities. Against
anchor handling tugs (AHTS), seismic management, ship brokering, marine this backdrop, players in the Malaysian
vessels, pipe-laying barges and accom- surveying and the likes. Players in the marine industries should strive to offer
modation workboats has declined rath- marine industry facilitate and enable between products and services, reduce
er significantly since oil prices headed shipping and E&P activities to be car- cost, optimize existing assets, explore
south a year ago. ried out. unchartered export markets and
This has sent charter rates for OSV These are challenging times indeed for enhance efficiency and productivity to
to low levels not seen in many years. them amid slower demand for ship- ensure they remain in the black. These
Combined with the overcapacity of ping services and scaling back of E&P are crucial tasks for them to undertake
tonnage in several categories of vessels, at the time when demand for shipping
services and offshore assets is soft and
there is no clear sight of full recovery in
the world economy and oil prices.§
A A56 OIL & GAS ustral SIA MAY/JUNE 2015 www.oilandgasaustralasia.com
