Rig builders may be in for a tough few years as oil producers slow the growth of their offshore operations.
Spending on offshore exploration and production by the majors grew by 10 per cent last year compared to 17 per cent in 2012, said DNB, a German transport finance bank. This year, growth is projected to slow to 4 per cent.
“It’s because the oil majors have a significantly reduced profitability for their business,” said Geir Sjurseth, the managing director and head of offshore finance at DVB Group Merchant Bank Asia, the bank’s Singapore-based unit. “They are reining in spending because the oil price is not high enough. They need the oil price to go to US$130 or $140.”
Global vessel suppliers have continued to expand their fleets faster than the growth of oil production, which will eventually lead to a glut of supply, said Mr. Sjurseth at a ship finance conference in Dubai yesterday. Since 2005, the world’s offshore rig fleet has grown by 53 per cent but offshore oil production has actually declined from 24 million barrels per day to 22.5 million today.
Although companies such as Lamprell can boast full order books, day rates are being pushed down and the next few years will bring a “massive oversupply in jackup rigs”, said Mr. Sjurseth.
The rise of shale in the United States has also drawn resources from offshore to onshore exploration and taken away some of the lustre of technically challenging Arctic exploration.
ayee@thenational.ae
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