Approximately 90 new state-of-the-art offshore service vessels will enter the Gulf of Mexico between now and 2016. Is that too many for the market to handle?
Yesterday, I moderated the WorkBoat Professional Series webinar “Outlook for the OSV industry in 2014 and Beyond,” and I asked that very question to a panel that consisted of G. Allen Brooks, managing director for PPHB, an investment banking firm focused on the energy service industry; Richard Sanchez, senior marine specialist, IHS Petrodata MarineBase; and Mike Sano, global offshore support vessel market sector lead, American Bureau of Shipping.
Brooks said there is a lot of new rigs scheduled to come into the Gulf in the short term and that equipment will need OSVs to service it. “The question is how many rigs are going to be parked,” he said, “and how many old vessels are going to be parked or scrapped to make room for the new ones.”
He went on to say that the Gulf would probably be overbuilt, “but it works its way out because there are a lot of old vessels that can be eliminated from the fleet, plus there’s obviously geographic expansion opportunities.”
Sano said that though exploration and production budgets for many of the major oil companies are flat that the existing rigs are still out there with more scheduled to come online. He agreed with Brooks that some of the older equipment would find its way to other world markets. However, Sano cautioned, “When older vessels are scrapped or sidelined, the newer vessels coming online have greater capabilities and greater capacities.”
Sanchez said the term “overbuild” is relative. “If you’re on the operators side and you’re actually looking to charter vessels you want the kind of environment with competitive prices and a wide variety of equipment to choose from,” he said. “If you’re looking at it from the vessel owner’s side, you generally favor a tighter market with elevated day rates.”
He added that he sees a lot the excess supply going to Mexico, Brazil and what he calls “potential micro-markets of Latin America.”
So, will the Gulf become oversaturated with OSVs sometime in the next two years? Probably. But the excess will drain quickly to other parts of the world, minimizing the impact.
By the way, Brooks and Sanchez will be discussing this topic and more as part of WorkBoat's OSV Design & Technology Summit in Houston on Friday, April 4. Check out the brochure detailing the OSV summit. If yesterday’s discussion was any indication, the summit will provide you with a lot of information — information you can use.
