Hitting the Reset Button in the Offshore Industry

In 2013, Keppel Offshore & Marine was in the process of breaking the world record for most the number of offshore rigs ever delivered in a single year… they built 21.

Fast forward two years, the landscape at Keppel FELS (pictured below) now features far fewer jackups yet perhaps more diversity when it comes to newbuild projects such as an ice-classed multi-purpose vessel for New Orient Marine Pte Ltd and at least two Floating LNG liquefaction vessels for Golar LNG.

Douglas Westwood estimates that roughly 100 jack-up rigs are currently out of work in Asia as low oil prices have led to lower exploration and production capital expenditures by energy majors worldwide.

Conversations I have had this week at OTC have, in many cases been very positive, however on the faces of a few OEMs I’ve met this week while at the Offshore Technology Conference, and last month in Singapore, are signs that things are not exactly business as usual.

“Things are going to get worse toward the end of this year and 2016 will be terrible,” commented an offshore shipbroking executive last night. “It won’t start to pick back up until 2017,” he added.

When I asked about a rumor going around about a 5th generation, dynamically-positioned semi-submersible drilling rig set to be scrapped this year, he had heard the same.  Multiple sources tell gCaptain this morning that it might be Seadrill’s West Sirius, although the company tells us she lost her contract about a month ago and is now stacked.  This is the nature of the oil and gas industry however, and guys like him had been through 4 or 5 of these cycles before.

A year ago when oil prices were peaking, finding more oil did not necessarily mean more profits for E&P companies as costs to produce that oil had inflated to such high levels. The writing was on the wall perhaps that the gravy train was about to come to a stop.

For companies such as Keppel Offshore & Marine, instead of being absolute kings of their domain as they were in 2013, they admittedly are forced to compete now with everyone else and dedicate a strong focus to cost reductions, marketing efforts and efficiency initiatives.

The reset button has been hit.

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