“We have been through such ups and downs before but I feel this is probably the worst as the downturn goes very deep structurally,” Chia told delegates at the Offshore Marine Forum of the Sea Asia 2017 conference held on Thursday in Singapore.
“The US shale investment has increased but offshore investment especially in drilling has been cut by more than 30% in 2015/16, presenting a very difficult situation for suppliers like ourselves,” Chia said.
On a global basis, the utilisation rate of rigs is at around 56% and day rates have been halved while about 120 offshore drilling contracts worth $19bn have been cancelled, according to figures cited by Chia.
The situation has also been exacerbated by around 150 new rigs either ordered or under construction, with 80 of those from Chinese shipyards. “With the low utilisation rate and overhang of newbuildings, the situation doesn’t look very good,” Chia lamented.
In the sphere of offshore vessels, Coco Vroon, managing director of Vroon BV, cited figures that around 600 completely new OSVs are being cold-stacked and these ships are unlikely ever going to enter the market.
“We are talking about highly sophisticated, highly complex ships that have not been properly commissioned,” Vroon said. He blamed the oversupply of easy money into the sector that has fuelled an unnecessary vast build up of offshore assets now struggling to find work.
Shipowning firm Vroon, which has a sizable fleet of offshore vessels, has taken steps to combat the downturn with rightsizing efforts and costs control. “We have been able to make a 30% reduction in our daily operating costs and most of that is simply being more efficient,” Vroon said.
Matthew Tremblay, corporate vice president global maritime, ABS, said that for shipyards to land new orders is definitely not one that he can foresee, given the huge number of new units waiting to get delivered or already cold-stacked.
Tremblay also pointed out that while there are some activities in the offshore windfarm market and niche technology like wave-based energy, the demand level of those – even if completely utilised – is not enough to counteract the steep drop in the core offshore oil exploration and production activity.
Amid the depressing market, an area that Keppel O&M sees opportunity is the gas business, according to Chia.
“Gas in the form of LNG is driving new demand for power consumers, transportation, small scale LNG, breakbulk LNG and LNG bunkering – we are beginning to see more and more of these,” Chia said, adding that the gas business can help to generate part of the business volume lost in offshore marine.