Page 80: of Maritime Reporter Magazine (October 1998)

Despite a number of business swings, the U.S. maritime market maintains its resilience with a dedication to technology and the flexibility to change.

GUARD

Marinette Marine has made quite an impact on the U.S. shipbuilding front of late, delivering a series of advanced technology buoy tenders to the USCG and being chosen to participate on one of the teams trying to win a massive USCG fleet rebuild contract.

As the price of a barrel of oil continues to struggle through the worst crisis in decades, the question facing the U.S. maritime market today (and always) is: What's next?

It was oil — or perhaps more accurately the renewed vigor to explore and produce oil and gas reserves in the deepwaters of the Gulf of

Mexico — that drove a significant percentage of business into U.S. shipyard and equipment suppliers during the past few years. With per barrel pricing at 10 year lows, and an uncertain near-term prospect for a significant revival, oil companies' withering E&P budgets are starting to adversely affect near-term prospects for a continuation of the rig and boatbuilding boom.

This is not to suggest, however, that offshore exploration will stop driving rig and boatbuild- ing business, particularly for work involving the discovery and development of deepwater projects. It is, however, an acknowledgment that a succession of non-related international crises have conspired to sour the oil consump- tion projections — not to mention the overall economic prospects — for much of the world.

In its latest monthly report, the

International Energy Agency (IEA) said simply that sentiment in crude markets turned "exceedingly bearish" in August, as monthly averages for Brent and West Texas

Intermediate dipped to their lowest level of the year. In addition to physical data, the organi- zation referred to the psychological impact of the growing financial crisis in Russia as a detri- ment to a near-term rebound. "Evidence that Asian financial difficulties are spreading to Russia and Latin America has shaken investor confidence and dampened speculative appetite for commodities like oil."

The IEA said that the recent data indicated a slowdown in demand for oil in China and the former Soviet territories. "Slower Chinese apparent oil demand growth is consistent with indications of a cool- ing economy, which is being mirrored in a marked deceleration in the demand for electric- ity," the IEA report said. The result is a 400,000 bpd downward revision to the IEA's forecast for world oil demand in the fourth quarter of this year. In total, world demand for the year is seen growing only 700,000 bpd from 1997 to 74.5 million bpd. Growth of 1.6 million bpd is still expected in 1999 to a total 76.1 mil- lion. While this lucrative bit of business to

U.S. yards is starting to evaporate, attention has swung recently to new government and navy programs which promise to fill shipbuild- ing and equipment supply coffers for years to come. The plethora of new opportunities also highlights the growing trend toward teaming and cooperation among U.S. builders and equipment and service providers, as companies which at one time may have been competitive are now aligned together in an effort to drive new cost and time efficiencies in building for the government.

Rebuilding The Fleet Starting In 2002

Perhaps the most significant U.S. newbuild- ing effort will be led by the U.S. Coast Guard (USCG), which has set on a course to revamp its vast yet aging arsenal of ships, boats and aircraft. The USCG awarded three $7 million contracts to begin the initial concept develop- ment for its Integrated Deepwater System acquisition program. "We look forward to work- ing with industry to develop this system of sys- tems approach which will both meet the mis- sion requirements we'll face and will minimize the total ownership costs," said Admiral James

Loy, commandant of the USCG.

The USCG said this system would represent the full range of assets including surface, air,

C4ISR (command, control, communications, computers, intelligence, sensors, and reconnais- 80 Maritime Reporter/Engineering News