Middle East National Oil Company (NOC) commitments to increase oil production, reiterated during recent oil price declines as a way of protecting market share, have led to an inflection point in regional OSV-market utilisation rates, said David Manuel, marine specialist, energy technical at IHS Petrodata.
“The Middle East is a very aggressive market,” he said, speaking at the Middle East Offshore Support Journal Conference in Dubai. “The programmes of Abu Dhabi National Oil Company (ADNOC), Abu Dhabi Marine Operating Company (ADMA-OPCO), Zakum Development Company (ZADCO) and Saudi Aramco could lead to a market pick-up.”
In April, ADNOC announced its intention to increase daily production from 2.5m barrels per day (mbpd) to 3.7mbpd by 2024 via subsidiaries ADMA-OPCO and ZADCO. Saudi Arabia’s tactic of flushing out US shale players also implies higher than normal production levels.
The global OSV market is expected to remain challenging for the next two-three years as international oil markets remain weak, with prices unlikely to recover to around $70 a barrel until 2017. Oversupply will continue to act as a break on utilisation, with more newbuilds entering the market.
“Day-rates started to move down last year,” said Manuel. “We are seeing that distressed players are going to be acquired. We are seeing 4,000 vessels internationally. There is competition in the spot market for small jobs. Chinese, Indian and European yards are contributing to oversupply.”
IHS data show spikes in the order book in three distinct classes: the 4,000-plus dwt platform supply vessel (PSV) class, with over 160 vessels, the 3,000-3,999 dwt PSV class at around 140 vessels, and the 6,000-9,999 bhp anchor handling tug supply (AHTS) class, with over 100 craft on order.
In the period January 2014 to April 2015, day rates for PSV firmed from just over $13,000 to $16,000, while AHTS 6,000-9,999 bhp rose from over $11,000 to $12,000.
According to IHS data, the global AHTS and PSV fleets total 3,900 vessels, 866 or 27% of them in Asia Pacific, 537 or 17% in Europe, 477 or 15% in West Africa, 452 or 14% in the Middle East, 395 or 12% in Central and Southern Africa, 368 or 11% in the US, Gulf of Mexico, and 134 or 4% in Mexico.
Day rates are under pressure for significant discounts, making it a buyer’s market. Newbuilds continue to enter service, despite the slowdown, driving spot-market activity. “We can see more idle tonnage. On our database, idle tonnage doubled compared to the previous year,” he said.
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