Speaking at the Annual Offshore Support Journal Conference in London today, Sjurseth started by outlining the positives, “I joined this market 34 years ago… I can’t think of any period where the conditions prevailing in the offshore market have been better than we see today."
"We have stable oil price, we have slightly lower but still significant E&P spend, there’s ample liquidity in the market, interest rates have never been lower and the shipyards are on their knees to get your orders,” but not all is as perfect as it might seem on the surface.
Sjurseth went on to explain that two particular parts of the market are open to speculation, PSVs and jack-ups are at risk of saturation, with too many projects receiving funding.
To reinforce the point, he showed the current PSV orderbook, which stands at 57.5% of the existing fleet, the highest it has ever been. The growth has been driven by both sound speculation from existing players and less responsible speculation from new entrants to the market. Similar speculation can be seen in the jack-up sector, where start up companies are also funnelling speculatory investment into the market.
He said that oil prices are also not high enough to sustain current levels of E&P, that budgets are being tightened and where money is being spent the returns for the oil companies are dropping. Sjurseth believes that this may lead to a downward pressure on charter rates and equipment costs as oil majors look to strengthen their margins, leaving a combination of reduced oil company spending alongside a growing offshore services sector.
“It’s time to consolidate, along with the oil majors, your clients. They are consolidating, why shouldn't you?”
“There are ample financial opportunities in the market and this is a threat, there is too much money in the market, causing too many projects to get funded and this will impact the established players negatively through earnings and rates."
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