In his keynote speech for the Singapore Maritime Lecture on Monday Siem, the chairman of Siem Industries, said that he did not see oil companies boardrooms continuing to remain quiet and simply paying dividends for too much longer. “They will see the cost of field developments has come down that they can start developing economically and therefore there will be a shift, its only my guess, a shift in the thinking in the boardrooms leading to more activity in 2018,” he said.
On the cost side he commented: “The cost is coming down – we’ve had a dramatic fall in the oil price but we’ve already had a dramatic fall in the cost.
“The cost reduction comes from the fall in rig and vessels rates and support services that is part of it. The other part of it is efficiencies and the whole industry is now searching for efficiencies.”
However, the picture for offshore vessel and rig owners is set to remain tough due to oversupply.
Asked how he saw the current downcycle compared to previous cycles Siem commented: “I think this is a somewhat abnormal cycle because it will be deep and long and this is caused by a dramatic fall in the oil price at a time we had got used to a very high oil price.
“We got into it with an exceptional balance of supply the industry had built too many rigs and vessels.”
Looking at the demand and supply side Siem noted the OSV sector was highly fragmented and the fleet was very young having increased from 1,000 in they year 2000 to 3,900 vessels at the end of 2015. “It will be 2040 before they are old, so it will take a long time,” he said.
For drilling rigs – jack-up rigs and floaters – the number has increased from 529 in 2000 to 829 at the end of last year.
But it was the deepwater drilling rig sector where Siem sees the most serious overcapacity.
“For deepwater rigs its even worse there has been a revolution of building deepwater rigs because the thinking was that was where the activity will be, that’s where the big fields are.
“That is right, there will be a lot of activity in the future but the number of newbuildings in the deepwater rigs has been staring us in the eyes for three years before the downturn but nobody did anything so I cannot see a balance in that space before way into the next decade,” he warned.
While overcapacity will dog the sector long-term Siem remained optimistic. “What is the future? It is a great industry, there will be more activity but we have to suffer from an imbalance of supply and demand in supply chain due to overbuilding. We shall steer through this dark tunnel and find light at the end of it,” he concluded.
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