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Global Offshore Market Review and Prospect

Global Offshore Market Review and Prospect

  • Categories:Industry news
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  • Time of issue:2017-04-20 09:59
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(Summary description)The China Shipbuilding Industry Economic and Market Research Center recently released a market analysis report that the major oil-producing countries reached an agreement to reduce production in 2016 to push up oil prices. Affected by this, in 2016, the rental level of the vast majority of offshore engineering equipment was close to or even lower than the operating cost

Global Offshore Market Review and Prospect

(Summary description)The China Shipbuilding Industry Economic and Market Research Center recently released a market analysis report that the major oil-producing countries reached an agreement to reduce production in 2016 to push up oil prices. Affected by this, in 2016, the rental level of the vast majority of offshore engineering equipment was close to or even lower than the operating cost

  • Categories:Industry news
  • Author:
  • Origin:
  • Time of issue:2017-04-20 09:59
  • Views:
Information

Data source: Barclays

The trend of global oil and gas exploration and development investment since 2005

Source: Clarksons

The trend of idle, storage and dismantling of drilling rigs since 2011

Source: Clarksons

Drilling platform and offshore support vessel utilization and daily rates

The picture comes from the Internet, please contact the author to get paid

Source: Clarksons

The price trend of new drilling rigs

Data source: CSIRC

Figure 9. Changes in the share of global offshore engineering orders

Editor's note

The China Shipbuilding Industry Economic and Market Research Center recently released a market analysis report that the major oil-producing countries reached an agreement to reduce production in 2016 to push up oil prices. Affected by this, in 2016, the rental level of the vast majority of offshore engineering equipment was close to or even lower than the operating cost; a large number of equipment were idle, and the dismantling speed was much lower than market expectations; the market pattern of the third world has changed, and the total market share has dropped to 59%; China occupies half of the construction market, and the global market share has increased by 20 percentage points to 48%. Domestic demand has become an important support for my country's offshore equipment market demand. In 2017, the drilling platform market was unable to recover, and the production platform market is expected to recover to a certain extent. In order to interpret the report in detail and thoroughly, this edition divides the report into two parts, the upper and lower parts.

□ Tu Jiaying Zhang Jing

  1.

Oil prices rise as major producers reach deal to cut output

After falling below US$30/barrel at the beginning of 2016, the international crude oil price showed a fluctuating upward trend as a whole in 2016, and the spot price of Brent crude oil rose by 49% throughout the year. In the first half of the year, the upward trend of oil prices was particularly evident, almost doubling from the lowest point of US$26/barrel to US$51/barrel in the middle of the year. During the period, the rise in oil prices was mainly driven by the shortage of regional crude oil supply, while the U.S. shale oil Factors such as the continuous decline in production, the rising expectations of OPEC’s production freeze, and the falling U.S. dollar index also played an important role in promoting oil prices; The number of drilling rigs rebounded, and international crude oil prices stopped rising and continued to fluctuate in the range of 40-50 US dollars per barrel; in December, OPEC and non-OPEC major oil producing countries unexpectedly reached an agreement to reduce production, and oil prices rose to 50-55 US dollars / bucket.

  2.

Investment in oil and gas exploration and development has shrunk sharply

Due to the long-term low price of international crude oil, the global oil and gas industry continued to reduce expenditures in 2016. Large-scale offshore oil and gas companies such as Statoil, Petrobras, Pemex, BP, ConocoPhillips and other large offshore oil and gas companies increased their annual capital expenditures compared with 2015. Shrinking, and the contraction rate is higher than expected at the beginning of the year. According to a survey of 200 oil and gas companies around the world by Barclays, the global investment in oil and gas exploration and development in 2016 was about US$383 billion, down about 22% from 2015. Atrophy occurs.

3.

The oversupply of equipment operation market has not been effectively alleviated

Oil and gas companies have reduced investment in oil and gas exploration and development, offshore oil and gas exploration and development activities are still weak, and the demand for various types of marine engineering equipment continues to decline, resulting in a serious oversupply in the global marine engineering equipment operation market, and a large number of equipment is idle.

In terms of drilling rigs, as of the end of 2016, the number of drilling rigs in idle state in the world reached 223, and the number of rigs in storage was 117, an increase of about 80 per rig compared with the end of 2015, and an increase from the end of 2014. Nearly 190 rigs/vessel; in terms of dismantling, in 2016, about 40 rigs/rigs were dismantled in the world. Although the dismantling speed was significantly faster than before the drop in oil prices, it was basically the same as that in 2015, still far lower than that of 2015. The market expects that, especially the jack-up drilling rigs, none of them will be dismantled in the second half of the year.

In terms of offshore support vessels, as of the end of 2016, there were a total of 1,798 PSVs and AHTSs that were idle in the world, an increase of about 25% compared with the end of 2015, and quadrupled compared with that before the decline in oil prices. The dismantling value of support vessels is relatively small, and the cost of moving ships to ship recycling yards is relatively high, and ship owners are more inclined to idle ships, resulting in only 37 dismantling in 2016, which is the same as before the decline in oil prices. At the same level, it is only a drop in the bucket for alleviating excess supply and demand in the market. In addition, the idle age of offshore support vessels also tends to be younger. At the end of 2016, the average ages of idle AHTS and PSV were 26 years and 21 years, respectively, 8 years and 11 years less than before the decline in oil prices.

4.

The utilization rate of offshore equipment and daily rent continue to decline

Under the background of weak demand in the operation market and severe oversupply, the number of new lease contracts has been significantly reduced, and the early termination of existing leases has become the norm. Under this background, the utilization rate of offshore engineering equipment has further declined, and the competition in the operation market has become intensified. Most offshore equipment rental levels are close to or even lower than operating costs.

In terms of drilling platforms, the global average utilization rates of jack-up drilling platforms and floating drilling platforms in December 2016 were 65% and 63%, respectively, down 10 and 14 percentage points from the end of last year. The average daily rent of drilling rigs was US$78,670/day and US$135,740/day, down about 9.0% and 31.0% respectively from the end of last year.

In terms of offshore support vessels, the average utilization rates of AHTS and PSV in December 2016 were 69% and 66%, respectively, down 7 and 4 percentage points from the end of last year; 80-ton bollard pull AHTS and 3,200-dwt PSV average time charter The daily rent was US$4,800/day and US$8,900/day, respectively, down 33.8% and 31.5% from the end of last year.

5.

Shipowners' operating risks remain high

Due to the continued slump in the oil and gas market, most shipowners' operations were very bleak. In 2016, some shipowners could not continue to bear huge debts and losses and had to be delisted or restructured. Following the debt restructuring of US drilling contractors Hercules Offshore and Vantage Drilling, a group of Under the impact of two years of low oil prices, the shipowners of offshore ships have been struggling to support their operations. Norwegian offshore shipowners Havila Shipping, Boa Offshore, Farstad Shipping, etc. are all implementing or planning debt restructuring; Swedish shipowner Viking Supply Ships is implementing debt restructuring; Singapore-listed offshore shipowner Otto Marine is delisted from the Singapore Stock Exchange ; Singapore operator Swiber is already in judicial custody. For shipowners, debt restructuring can alleviate the urgent need to a certain extent, but the market trend is the key factor that determines the development prospects of the company. Given the current sluggish market environment, bankruptcy and liquidation will become the final destination of some shipowners.

6.

The new market turnover shrinks by 50% again

Under the environment of low oil prices for more than two years, the global offshore oil and gas development activities continued to be weak, the demand for offshore engineering equipment was sluggish, and the offshore engineering equipment construction market was getting worse. In 2016, a total of 81 ships of various types of marine engineering equipment were sold globally, worth US$5.2 billion, down 56% and 53% year-on-year respectively. On the basis of a 70% contraction in 2015, the turnover fell again. monthly average.

In terms of drilling rigs, due to the severe oversupply in the market, the demand for new construction basically disappeared. However, under the support of orders for 5 jack-up drilling rigs in Iran, the turnover in 2016 reached 1 billion US dollars, which was basically the same as that in 2015. The proportion is 19%. It is worth noting that the ordering of the above-mentioned 5 jack-up drilling rigs by Iran in the Russian shipyard contains a certain color of political cooperation, which does not mean that the market has bottomed out or improved; on the contrary, it chooses to order new platforms instead of renting in-service platforms. To a certain extent, it is not conducive to the relief of excess supply in the drilling platform market.

In terms of production platforms, due to the postponement of offshore oil and gas development projects in the context of low oil prices, there are very few bidding projects for the construction of floating production platforms. Although some floating production projects that have undergone multiple rounds of cost reduction completed the bidding work in the second half of the year, due to the failure to sign relevant construction contracts within the year, the annual turnover of floating production platforms was only US$600 million, a year-on-year decrease of about 78%, accounting for The proportion of the total turnover is only 12%. In addition, FSRU remained relatively active, with 2 units sold during the year, accounting for 74% of the total transaction value of floating production platforms. A number of other FSRU projects have been tendered or signed letters of intent.

In terms of offshore engineering vessels, under the support of orders for offshore work vessels and offshore survey vessels, the annual turnover reached 3.6 billion US dollars, a year-on-year decrease of 50%, but the proportion of the total turnover was as high as 69%. Among them, the turnover of offshore work vessels reached 2.9 billion US dollars, and its market driving factors were converted to the decommissioning of offshore oil and gas facilities and the construction and maintenance of offshore wind farms to a certain extent; orders for offshore work support vessels almost disappeared under the background of severe oversupply in the market. Only US$120 million was traded throughout the year, a sharp drop of 92% year-on-year; thanks to the demand for scientific research by government agencies in various countries, the marine survey ship traded at US$640 million, a year-on-year decline of only 22%.

7.

The new price of offshore equipment has basically bottomed out

Although the market demand for marine engineering equipment has been shrinking, the price of new equipment has basically touched or even fallen below the construction cost of enterprises after two years of decline. In addition, construction enterprises are short of funds and difficult to operate, which poses risks such as low prices, unprofitability and low down payment. The desire to undertake larger equipment orders is not strong, and the new construction price of offshore engineering equipment basically bottomed out in mid-2016.

In terms of drilling platforms, as of December 2016, the new construction prices of semi-submersible drilling platforms and ultra-deepwater drilling vessels suitable for severe sea conditions were both US$450 million, down 11.8% and 6.9% respectively from the beginning of the year, but have remained basically stable since June; 350 The price of ft. jack-up drilling rigs rose 6.9% to US$155 million for the year due to the impact of five high-priced orders from Iran.

In terms of offshore engineering vessels, the signs of bottoming out are more obvious. The prices of 3,200 dwt and 4,500 dwt PSV at the end of the year were US$19.01 million and US$32.08 million, respectively, and the prices of 80-ton bollard pull and 120-ton bollard pull AHTS were 12 million. The US dollar and 20 million US dollars were basically the same as at the beginning of the year, and even slightly increased.

  8.

China occupies half of the construction market

Due to the severe shrinkage of the overall market and the differences in the product structure of various countries, the market structure of China, South Korea and Singapore has changed. South Korea and Singapore saw sharp declines in orders received in 2016.

In South Korea, due to its monopolized deepwater drilling ship market, the large-scale floating production platform project that participated in the bidding failed to formally sign the contract during the year, and only 2 FSRUs were undertaken throughout the year, totaling US$440 million, a sharp drop of 65% year-on-year. The share is only 8%, far below the 26% in 2011-2015.

In Singapore, due to the oversupply in the market, its advantageous jack-up drilling rig construction business failed to achieve success. In the whole year, only one FPSO topside module assembly construction contract was awarded, with a contract value of US$140 million, a sharp drop of about 95% year-on-year. , the market share has shrunk to 3%, a far cry from the 15% in 2011-2015.

In China, although orders for jack-up drilling rigs and offshore support vessels have been blocked, orders for offshore work vessels are still relatively considerable. In 2016, a total of 32 offshore work vessels were undertaken, worth US$2.3 billion, including China Merchants Heavy Industry Large equipment such as two large semi-submersible crane ships of CIMC Raffles and three semi-submersible ships of CIMC Raffles. At the same time, Chinese shipyards have acquired 11 jack-up platforms including Liftboat, wind power installation vessel, jack-up production platform, etc., with a value of US$440 million, using their experience in the design and construction of jack-up drilling platforms. Supported by this, China's total orders in 2016 reached 2.48 billion US dollars. Although it fell by about 35% year-on-year, its global market share increased by 20 percentage points to 48% compared with 2011-2015. But it is worth noting that 70%-80% of China's orders come from domestic customers, or domestic capital is involved, indicating that domestic demand has become an important support for my country's offshore equipment market demand.

In addition to China and South Korea, European countries such as Norway, the Netherlands, and Spain have won a batch of orders by virtue of their technical advantages, customer relationships, and accumulated experience in high-end offshore work vessels and scientific research vessels. Russia is also developing its own offshore oil and gas independent development capabilities. At the same time, it seized the favorable opportunity of lifting the embargo in Iran and took orders for 5 jack-up drilling rigs. On the whole, in 2016, offshore construction countries other than China and South Korea received a total of 2.2 billion US dollars of orders, and their market share increased by about 10 percentage points to 41% compared with 2011-2015.

Opportunities are always reserved for those who are prepared

□ Cheng Lu

Due to the depletion of available resources in the land area, the world's oil and gas development is aimed at the vast ocean, which once stimulated the offshore engineering market to become the "blue ocean" in various market segments of the shipbuilding industry. However, since the second half of 2014, with oil prices falling off a cliff and hovering at a low level for a long time, a large number of equipment released in the early stage has faced a crisis of excess, and the mainstream offshore equipment market has been in trouble. How to find spring in difficult situations?

First of all, no matter where you are in the "blue ocean" or "red ocean", opportunities always exist. Because the vast sea always has ups and downs, and the market economy is like the waves of the sea, with peaks and valleys. With oil prices hovering at a low level for a long time, the mainstream offshore engineering equipment market has indeed fallen to the bottom, and some offshore engineering segments are riding the waves. It is reported that in 2016, the installed capacity of wind power generation in Europe grew faster than any other power generation method, which also increased the demand for related offshore equipment such as wind power installation ships. In December last year, Zhenhua Heavy Industry Co., Ltd. Won a large order and signed the world's largest lifting capacity wind power installation ship. In addition, combustible ice has been discovered in 132 places around the world. It is foreseeable that in the near future, the development of green new energy such as combustible ice will gradually enter into industrialization, which is also very likely to become a potential market for offshore engineering equipment manufacturers.

On the other hand, opportunities are always reserved for those who are prepared. At the bottom of the valley, pessimistic people may be stunned, while optimistic people choose to accumulate strength and prepare for the next "surfing". This is especially true in the highly competitive offshore market with high added value. Today, marine engineering equipment has been included in one of the ten key development areas of "Made in China 2025", bringing new opportunities for the development of the industry. Only by insisting on independent innovation and improving core competitiveness can enterprises take on the historical responsibility for the implementation of the national strategy.

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