Offshore in 2022 – Splash247

Leaving behind an overall better year for the offshore sector, Splash explores whether growing optimism and market confidence can push the trend towards a more active market in 2022.

When it comes to offshore in 2021, it’s fair to say that owners have seen better fortunes than in 2020, with more and more players believing that the worst is behind the sector rather than ahead.

Starting from the key driver of offshore market growth, oil and gas investments are expected to increase by 7% from $145 billion in 2021 to $155 billion in 2022, while wind is approaching and expected to exceed them in several key markets by the end of the decade, suggests energy intelligence firm Rystad.

There is a sense of cautious optimism about further improvement in rates and usage

Seismic

The seismic industry, one of the first in offshore oil and gas exploration, made a comeback last year. Many seismic companies’ order books have grown to decent levels through 2021, giving them enough activity to sustain operations through 2022.

“We expect the performance of seismic players as a whole to improve, as global exploration spending is expected to increase at a modest pace in 2022 – at a time when many players are exiting the seismic industry and more people are leaving the seismic industry. “Others are repositioning their operations for the energy transition,” says Binny Bagga, vice president of energy services research at Rystad Energy.

Platforms

The offshore rig market also saw a resurgence in activity in 2021 due to high attrition (44 units retired in 2021), few new deliveries (seven units) and companies still cautious with reactivation cold stacked capacity. According to Rystad Energy analyst Eivind Drabløs, demand is expected to increase in both the deep and shallow water segments this year as the market looks to return to where it left off in 2019.

“Growth is driven by strong demand in several key floating markets, and particularly in the Middle East on the jackup side. We also expect rig rates to improve this year for most rig types, thanks to growing usage and the high oil prices we are currently seeing,” Drabløs said. Splash, adding: “The market needs longer contracts, even more consolidation and more scrapping to put the pricing power back in the contractor.”

Drabløs sees the start of a tight rig market over the next few years. “As operators continue to lock in units, drilling contractors have begun M&A activity and the resulting cost synergies are driving even more attrition across the global fleet.” As a reminder, the merger of Noble and Maersk Drilling will create this year the third player in offshore drilling.

Although the tide may be turning for the offshore rig market, Drabløs believes that there will not be too many cold reactivations or new builds delivered over the next few years as contractors who recently emerged from bankruptcy will likely be reluctant to add debt. a clean balance sheet.

FPSOs

There are approximately 80 offshore oil and gas projects worth a total of $85 billion in the global approval pipeline for 2022. Of these, 10 are floating production, storage and offloading units (FPSOs). ) that are expected to be awarded this year. The FPSO market had a strong end to 2021 and almost wiped out the effect of the pandemic, thanks to seven contract awards in Brazil, which should continue to drive the market in 2022, with three additional FPSOs.

VSO

The increase in activity is also driving demand for offshore support vessels and according to Oslo-based shipbroker Fearnley Offshore Supply’s latest report for the last quarter of 2021, the market has been quite tight. Fellow Seabrokers notes that OSV owners, particularly in the North Sea region, have become increasingly optimistic with their rate expectations in recent months, with average installments comfortably higher year over year. other, so they hope for further increases in 2022.

Mike Meade, Founder and CEO of M3 Marine Group, one of Asia’s largest independent offshore marine brokerage and advisory firms, believes the battered offshore sector has finally hit rock bottom with a post-pandemic recovery already seen. in the fourth quarter of 2020 and promising times ahead reflected by both the shrinking fleet and increasing volume of listings for new site developments.

“Further IDFs in 2022 and a resumption of drilling and maintenance will see these gains continue and with oversupply of vessels depleted by demolition, removals, sales into Chinese renewables and “scrapping de facto “older ships decommissioned, sees a healthy move towards higher utilization with rates following (up),” predicts Meade.

Good quality and newer tonnage will be harder to find

Arvind Mohan, managing director of Singapore-based offshore vessel manager Viridian Maritime, says all the telltale signs are certainly pointing to a market recovery, as there has been only a tiny injection of newbuild tonnage into the market. offshore sector for several years now.

“Utilization has increased, but it remains to be seen whether rates can improve enough for the sector to gain momentum. Vessels that have been decommissioned and cold stacked for years are no longer relevant and many are acquired at greatly reduced price levels, some either for scrap or to operate in regions where tariffs impose lower operating costs,” observes Mohan.

The Undersea Support Vessels market saw strong improvement in 2021, after overcoming Covid-19 induced weakness in 2020. The re-emergence of inspection, maintenance and repair (IMR) business and l Increases in walk-to-work requirements both supported multi-purpose support vessel (MPSV) demand last year, with the industry pricing in increasingly optimistic sentiment for 2022, according to Clarksons Research analyst Oran Creedon. .

The Clarksons Offshore Index, which covers rigs, OSV and submarine, reached 63.6 at the end of the year, up 24% year-on-year, this which is the highest since September 2015.

“Offshore markets made real progress in 2021, benefiting from improving oil prices, improving offshore activity and the fleet supply impacts of restructuring and consolidation. There is a cautious sense of optimism for further improvement in rates and utilization,” says Stephen Gordon, managing director of Clarksons Research.

Renewables and Ships for the Next Frontier

The renewable energy market is a rapidly growing sector within the industry. Rystad Energy analysts estimate that for offshore entrepreneurs, the energy transition could be beneficial as wind power development spending could reach $70 billion over the next three years. Looking further into the future, classification society DNV has calculated that around 90% of construction vessel capacity will provide services to offshore wind projects in 2050.

“With some operators shifting their fleet towards offshore renewables, there are more opportunities to explore,” observes Viridian’s Mohan.

M3 Marine’s Meade remains committed to traditional offshore, stressing that the world will need oil and gas for many years to come and that investments should be directed towards improving this sector.

“I really believe in climate change and I’m a proponent of energy transition by bringing renewables into the energy mix, but in my lifetime I can really see around 80% of energy demand coming from oil and gas at As we move forward, the sooner governments realize this fact and banks too, the easier it will be for energy service companies to secure financing and focus on what the oil and gas industries can do to make their energy supplies more carbon neutral.

Offshore support vessel owners are working on strategies to help them operate their current fleets more efficiently and differentiate themselves from their competitors. Equipping ships with battery technology appeared to be one of the most realistic choices in this circumstance. As a result, battery hybrid offshore support vessels are likely to hold tremendous potential for owners and operators of offshore support vessels in the years to come.

For Meade, the question that must be asked is when will the construction of replacement ships for a now aging fleet begin? In his opinion, this will not be the case until the industry understands what fuel it will consume. “Watch out for an increase in batteries (hybridization) and the use of LNG as a transition fuel in the short to medium term,” adds Meade.

Regarding new builds, Mohan says that while the offshore fleet is gradually aging, few owners are able to renew their fleets. A key challenge for him in 2022 and beyond will be sustainability and carbon neutrality.

“2021 has brought about a sea change in the overall offshore sector supply chain, efficiency within operations and in managing and reducing emissions, at least with the major international oil companies. This will remain central to the future, and we will have to see how it all plays out, while the adoption of green fuels or systems on a broader basis remains a challenge to overcome, although it brings an exciting time to come,” predicts Mohan.

Cautious optimism

There are reasons to be cautiously optimistic in 2022 and beyond, with the expected increase in investment spending in oil and gas as well as renewables, which Mohan says will have a knock-on effect. cascade training with increased demand for offshore support vessels.

“Oil prices have also seen a decent and robust recovery over the course of 2021, the key now would be for it to remain stable at these levels. This, combined with a tighter supply of active tonnage, suggests better optimism throughout. year round.This is further exacerbated as good quality and new tonnage will be harder to find, thus moving towards higher utilization of existing tonnage and hopefully healthier daily rates, as the negotiating leverage with customers increases,” concludes Viridian’s Mohan.

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