Looking at the facts and figures, there is no real downturn on the demand side of the oil as a source of energy. Neither there has been any drop in production rate of OPEC since Year2014 to 1Q2016. It is only the lower than expected economic growth of major economies, which has caused the Oil & Gas exploration activities to be curtailed. The immediate impact is felt on long term investment decisions which have suppressed the demand of support service providers. The OSVs and Offshore Supply Bases are not some ordinary support services but the backbones of the offshore & marine industry. Reduction in speculative demand does not mean real breakdown of the industry. It is true that heavily geared OSV owners with large fleet are facing severe storms and some headwinds, but latest indicators do provide a level of confidence in better times ahead.

On 31st March 1986 the spot WTI Crude Oil price was US$10/barrel and 30 years later on 31st March 2016 it was US$38/barrel. Not taking into consideration for an instance all other factors like population, economic growth, wars and natural disasters over the last three decades, certainly there is no going back to US$10/barrel anytime soon or in foreseeable future. .

Some of the headlines over the last one week may help to provide a peek into the future ahead for OSVs operators!

Vallianz bags OSV charter contracts worth up to US$210m

May 17, 2016, By Tan Hwee Hwee BT Singapore

“VALLIANZ Holdings has won contracts worth up to US$210 million for the supply of 13 offshore support vessels (OSVs) to an undisclosed national oil company (NOC) in the Middle East.

The OSVs will be chartered to the NOC for up to seven years and progressively deployed in the NOC’s oilfields from the second half of 2016, according to a company’s announcement on Monday.

The latest contract wins will boost the group’s chartering services order book to US$1.2 billion, which comprises mainly long-term contracts that stretch up to 2025.

BT understands the latest contract wins are for utility boats to be supplied for operations in Saudi Arabia.

Vallianz has been active in Saudi Arabia through a joint venture, Rawabi Vallianz. The joint venture is understood to be the main driver behind Vallianz’s new contract wins. In its first-quarter results, Vallianz has attributed its success in securing long-term charters against a protracted industry downturn to a “strong market reputation in the Middle East where there is still high levels of offshore oil production activity“.”

May 13, 2016, By Tan Hwee Hwee BT Singapore

Atlantic Navigation bags US$236m vessel charters

MIDDLE East-focused marine logistics services provider Atlantic Navigation Holdings (Singapore) has won long-term charters totaling US$236 million for 10 offshore supply vessels.

The charters are for five maintenance/work/utility vessels and five anchor-handling tug, supply and safety standby vessels. Seven of these vessels will be new-builds.

The 10 vessels will go on a firm five-year charter with a two-year extension option to support a Middle Eastern national oil company’s operations in the Arabian Gulf.

The charters will commence progressively, with three vessels to be handed to the national oil company starting from May 2016 and the remaining seven new-builds to be deployed in 2017.

May 12, 2016, BT Singapore

Pacific Richfield Marine floats scheme to revamp debt of over US$400m

OFFSHORE support vessel (OSV) owner-operator Pacific Richfield Marine Pte Ltd (PRM) and its four primary bankers are seeking support from unsecured creditors towards a proposed scheme of arrangement (SA) for the restructuring of debt estimated in excess of US$400 million.

May 13, 2016, By Tan Hwee Hwee, BT Singapore

Pacific Radiance slips into the red in Q1

OFFSHORE and marine player Pacific Radiance slipped into the red with a first-quarter loss of US$6.76 million, reversing from a profit of US$2.53 million last year, on a sharp decline in revenue.

Observations:

  1. In one week there are both positive and negative news of significant importance. The news about Vallianz and Atlantic Navigation are sufficient for boosting the morale of OSV operators.
  2. The investment commitments for E & P projects of Middle East NOCs are unfazed and are likely to continue.

Conclusion

  1. The OSV operators with efficiently managed fleet and tightly controlled budgets, should be able to withstand the headwinds and achieve sustainable growth in short to medium terms.
  2. The fluctuations and sharp swings in oil prices is nothing new for experienced and veteran ship owners.

The readers are welcome to send an email enquiry for further details or consultancy services for development of OSV fleet and business process enhancement services from Tiberias MC, your innovative management consultancy services providers.