Offshore vessel operators must remain flexible and nimble
Editor’s note: Each month, we will feature analysis from one of our editorial advisors.
In recent years, the offshore vessel industry has hit an inflection point that has forced providers to find more cost-effective, realistic means to operate during a frustratingly slow recovery process. Amidst a challenging market, many offshore service providers have scrambled to find the best ways to provide lower-cost alternatives while creating new ways to keep their businesses sustainable. Many of our industry competitors have undergone considerable financial restructurings to stay afloat, but it is hard to do so without disrupting how we operate.
A major question facing this sector is whether the current activity level is sustainable. While we have seen some improved business, I wouldn’t categorize this as a true sign of a full-pace recovery. Overall utilization has improved recently, although day rates remain stubbornly low. Increasing exploration in the Gulf of Mexico, and offshore West Africa and Brazil, is promising and should stimulate vessel demand. However, the recent slump in commodity prices will likely be a drag on activity.
Adaptable strategies. Nonetheless, I remain cautiously optimistic about a recovery. While we must be patient, I do think, eventually, we will see improvement and a pickup in market rates. It will be important to remain flexible and adaptable to evolving conditions. Rigid strategies, aggressive pricing and an overreliance on leverage do not work. A lack of creative solutions to answer market conditions does little to sustain a business.
In my tenure as CEO of SEACOR Marine and Chairman of NOIA, I’ve found that remaining a market leader requires staying flexible and open to new ideas. Creativity and adaptability have driven our sector’s continued development, as we’ve pushed through this difficult period. As offshore vessel companies look to better position themselves, the focus should be on capitalizing on new opportunities in different markets, both home and abroad, and enhancing technology to promote efficiency, improve safety and meet customers’ evolving needs.
To cope with challenging market conditions, many vessel operators must focus increasingly on international operations while also adapting to local market dynamics. The offshore vessel sector is not a “one size fits all” industry. Offshore service providers also will look at pursuing opportunities in offshore wind, a non-traditional market that provides stable, re-occurring business. Offshore wind capacity has increased significantly in recent years. That growth should continue, with an estimated total capacity of almost 20 GW by 2023.
The European market is expanding, and new projects are coming online in China, Taiwan and the U.S. It will be important to adapt fleets to go where the market moves and to align them with the development of new windfarms that consist of larger turbines built farther offshore.
Utilizing technology. Additionally, the need for highly durable, sustainable and faster transport vessels will stimulate R&D initiatives to optimize fuel efficiency and safety. Like SEACOR Marine, many vessel operators have worked toward adding hybrid vessels into their fleets. This helps to trim fuel consumption by reducing engine usage, maximizing savings for the end-customer on fuel costs, and savings for vessel operators on maintenance costs.
As autonomous technologies gain a stronger foothold in our business, the move toward automation is inevitable, which ties to two major challenges: labor and safety. Due to the sector’s decreased productivity, employee recruitment and training have lagged historical norms. This, coupled with a shrinking workforce, has resulted in a disconnect, as regards maintaining the highest safety levels with less-experienced crews. Finding autonomous solutions that complement qualified crew members will promote and enhance safety, and ultimately benefit the customer.
Looking forward, global energy needs will only increase. The U.S. Energy Information Agency predicts that by 2040, global energy demand will grow more than 28%. By 2050, even with continued growth of renewable energy sources, about 70% of U.S. energy demand will still be met by oil and gas.
This is the 47th year that NOIA has promoted an all-of-the-above energy stance. In 2019, NOIA will continue to advocate for policies, regulations and laws that promote all forms of offshore energy. As I approach the end of my term as NOIA chairman, it has been my privilege to be a part of the process and an honor to represent the service companies that will continue to be a key element in supplying energy and jobs in 2019 and beyond.
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