As I take over the reins of the editorship of Offshore Support Journal, the signs for 2019 point to fair winds and following seas. I have been around the marine market covering everything from tugs to tankers for the better part of three decades as a marine journalist, often crawling in and out of vessels from Bahrain to the bayous of Louisiana.
Over that time, I have witnessed the cyclical nature of the oil and gas business firsthand.
The past four years have been one of the most severe downcycles that I have ever seen for offshore oilfield service contractors. Just in the last 12 months, oil price volatility driven by geopolitical factors has sent the price of crude oil plunging from a high of US$86.74 on 3 October to current levels in the low US$60s.
The clouds, however, may be slowly parting. In December 2018, OPEC inked a deal with Russia and nine other countries to slash oil production by 1.2m barrels per day starting this month.
While it is easy to be cynical about OPEC agreements, this deal might be real. Last month ahead of the start of the agreement, OPEC countries slashed their output by 751,000m barrels per day, signaling their intention to keep their promise.
On top of that, the good news is that oil companies finally appear ready to spend. An estimated US$208Bn will be spent on offshore oilfield services globally this year, according to Norway’s Rystad Energy. Rystad Energy said the 6% increase in spending in 2019 over last year will be followed by a 14% jump in 2020.
So perhaps momentum is building in the market, albeit gradually. A particularly apt comparison from Rystad Energy’s head of oilfield service research Audun Martinsen likened the offshore service market to a super tanker that takes its time to accelerate.
If the market does accelerate, the first to benefit will most likely be subsea equipment suppliers, as many projects are located in deeper waters.
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