Page 18: of Marine News Magazine (December 2015)

17 19

OP/ED

The Health of the Marine Contracting Industry –

The IMCA View

By Allan Leatt, Chief Executive, IMCA

Just three weeks after taking up my lar workovers, but productivity improvements have been

IMCA role I delivered a keynote ad- impressive and new technologies will only make it more dress at our Annual Seminar. Held in successful. The offshore industry will need to be even more

Abu Dhabi, with the theme ‘A health competitive to compete with shale. check for the marine contracting indus-

HE EXT ART OF THE YCLE try,’ it attracted over 350 people from T N P C 30 countries, no mean feat in these No one knows what the next part of the cycle will look challenging times. It also provided the like. At $50/bbl many ? elds may be in negative equity. We,

Leatt ideal opportunity to deliver a message as an industry, have no in? uence on the macro-economic to our members, and, importantly, events – it’s the market at work. The only aspect we can their clients, which affects the whole of the marine con- address is the economic one as it affects our members. The tracting supply chain. Central to the message is the need cost base must be addressed by all on both sides of the cli- for offshore oil and gas operators, regulators and marine ent: contractor fence. contractors to work together for the bene? t of the industry. The global economic crash had limited impact on our industry because of our momentum and backlog. Our eco-

UR EALTH HECK

O H C nomic crash has come later. However the signals of prob-

We all know the current state of health of the industry lems ahead were clear in 2013, but for different reasons. and the causes - geopolitical and macro-economic issues. Large projects were not getting sanctioned even at $100

We have no control over either. Every 10 years or so, the oil; the economics were not working for successful ? nal offshore oil and gas industry has a shock. It’s cyclical, and investment decisions. The accumulated cost in? ation over we steer our way through it, we work with and for, a resil- the previous six years was working against us. The supply ient industry. Recovery should normally come with eco- chain had become too over-heated and both quality and nomic growth, and should bring oil supply and demand schedule suffered. The industry had probably become less back into balance – after all the developing world wants to ef? cient than at $20 oil, when you had to be very ef? cient develop, and needs energy to do so. and disciplined or you were out of business.

The last two oil shocks in 1998 and 2009 displayed a short V-shaped oil price recovery pro? le. Let’s hope today’s A C B

DJUSTING THE OST ASE situation will be similar, but most commentators foresee To preserve liquidity, oil companies have signi? cantly cut a longer and lower pricing pro? le. Looking further back new CAPEX; dividends are king. Some estimate there are to the 1986 downturn, it was somewhat analogous to to- over $1 trillion of project delays (not all are offshore, but day’s situation, with an oversupply driven by new oil in the there is a knock-on effect). It’s going to take time for new market – then, from the North Sea. For roughly the next projects to be sanctioned. I ? rmly believe it will happen. 15 years, oil stayed in the $15-20/bbl range and took until However, if ever there was a time when clients should be 2000 before it got back to pre-1986 levels. I hope we won’t receptive and work with IMCA and our members it is now.

see a repeat, but you never know. Many in the industry can I have no doubt the marine contracting industry will recall where they were working during that period. I was re-set its cost base. It will also shoulder the operational and working in New Orleans and saw within a few days people performance risks that go with it, but it would be impru- receiving their pink slips – it was brutal but, as always, we dent to readily accept some of the massively disproportion- managed our way through the crisis. ate contractual terms, and a re-writing of the offshore risk

Today’s new-oil is from US shale, which has been high- landscape that some oil companies are pushing in a some- ly successful in developing reserves to produce around what opportunistic manner.

4MMbd, from almost a standing start ? ve years ago. Shale, It’s a dif? cult time. We’ve had them before, we’ll have or tight oil, will be with us for years to come; yes the wells them again, but IMCA can, and will help in terms of en- may be less productive than offshore and may require regu- gagement with regulatory bodies, oil companies and other

December 2015 18 MN

MN Dec15 Layout 18-31.indd 18 11/24/2015 9:54:18 AM