Greasing the Skids
Record gas prices, OPEC solidarity and a U.S. administration doling out incentives for exploration and production all add up to good news for those companies conducting business in or profiting from the offshore market.
There is little doubt that the international offshore market, led by the Gulf of Mexico, is poised for a record rebound in the second half of 2001 and beyond.
The tandem of high crude prices — spurred by OPEC's seeming solidarity on controlling output — combined with the emphasis on expanding offshore production by the new U.S. administration seemingly provides the proverbial "win-win" for all companies that makes its living finding and recovering resources, or those companies that supply vessels, products and services to the offshore oil business.
Given the cyclical, sometimes unpredictable nature of the business, though, it is never a sure bet to celebrate prematurely. For instance, if the U.S. economic downturn extends beyond many analysts predictions, it could significantly reduce demand, thus helping to more quickly drive pricing down. In the latest Oil Market Report dated May 11, 2001 from the International Energy Agcncy (IEA), the organization notes that first quarter 2001 oil demand appears to have fallen short of expectations by more than a half million barrels of oil per day, yet still grew at 1.1 mb/d. Meanwhile, world oil production fell by 900 kb/d to 77.1 mb/d in April, with OPEC supply coming in 560 kb/d lower. Extraordinary gasoline prices made the headlines in late Spring, and the strong U.S. gas prices drew unusually high imports. Preliminary weekly statistics for April show that U.S. imports of gasoline blendstocks were 115 kb/d higher than a year earlier, an increase of 57 percent. The main concern in the U.S., besides of course high gasoline prices that are approaching $2 per gallon and starting to cause public outcry, is the availability of oil to meet peak summer demand, which because of a number of factors (North Sea maintenance, refinery shutdowns for unscheduled maintenance, etc.) is anything but certain.
Regardless, it appears that a strong oil market is here to stay, a situation that bodes well for the marine builders and suppliers, particularly in the Gulf of Mexico region. The recently concluded Offshore Technology Conference (OTC) in Houston was perhaps the most well attended and positive exhibition in years, as there were strong, positive vibes regarding the near term business prospects.
Dayrates To Hit 3-Year Highs Global Marine Inc. Chief Executive Bob Rose recently said in published reports that he expects dayrates for offshore oil and gas drilling rigs to surpass their highs of three years ago in 2001. Dayrates are currently running at about 74 percent of their 1997/98 highs. Rose said, with the West African and North Sea markets now showing signs of recovery as a longerestablished natural gas drilling boom continues in the U.S. Gulf of Mexico.
Global Marine's vice president of Investor Relations Michael Dawson welcomed energy proposals unveiled by President George W. Bush, saying proposed incentives for offshore oil and gas exploration were "a plus" but were unlikely to have much immediate impact on Global Marine, which he noted was already benefiting from a cyclical upswing in offshore drilling.
Rose said Global Marine is currently limiting the length of new contracts that it signs for its rigs so that it can benefit from the further increases in dayrates that it expects. The average dayrate for the company's rigs was $71,100 during the first quarter of 2001, up from $52,000 in the same period of 2000. The fleet utilization rate reached 100 percent last month for the first time since July 1988.
Rose said he expects some drilling rigs to be moved from the U.S. Gulf of Mexico to other markets, such as West Africa, this year, as international dayrates catch up with and overtake domestic rates.
Rose said he also expects rigs to be moved from the Gulf of Mexico to the North Sea, saying that market and West Africa are both improving "tremendously."
Other stories from June 2001 issue
- Galician Grit page: 8
- MariTel Completes Field Test of Wireless DSC VHF page: 10
- ASRY Converts Heavy-Lift Crane Ship page: 12
- Transfer of Ownership Commences at Grand Bahama Shipyard page: 12
- Hydrex Breaks Ground with Repair page: 13
- Detyens Shipyard Profits From Dredger Work page: 14
- Derecktor Signs Contracts For Two Vessels page: 15
- Rodriquez Cantieri Navali Wins $57M, 10-Boat Contract page: 16
- Rodriquez Cantieri Navali Launches Largest Fast Ferry page: 18
- Freeport Shipbuilding Delivers Aluminum Research Vessel page: 18
- Image Marine Delivers Aquacat To Blackbeard's Cruises page: 19
- VT Concludes Sandown Class page: 20
- VT Reaches Milestone With New RN Survey Ships page: 20
- EuroFerrys Takes First Auto Express 101 page: 22
- Caterpillar Introduces Compact Marine Propulsion Engines page: 24
- Jotun Expands U.S. Presence page: 26
- Maritime World Joins Together at Asia Pacific Maritime 2001 page: 28
- Camacho Returns to His Roots page: 30
- U.S. Shipbuilding Industry: A Bright Future Tempered with Challenges page: 34
- No Leg Left to Stand On - An Obituary for MarAd? page: 36
- Bordelon Marine To Christen First of Three Utility Boats page: 38
- SeaStreak Launches New High-Speed Catamaran page: 39
- Lassen (DDG 82) Commissioned In Florida page: 40
- Future Requirements for Shuttle Tankers in the Gulf page: 42
- MARCO Shipyard Delivers Ahead Of Schedule page: 47
- Shipbuilding Prices Firm Up page: 48
- Strong Market Continues page: 50
- Frozen Gas Market Heats Up page: 50
- Freight Rates To Fly High In Coming Years page: 51
- Greasing the Skids page: 56
- State of the P&I Market: As Stocks Drop, Rates Will Rise page: 58
- Innovators Recognized At Patent Ceremony page: 62
- New Launching Platform For Navy page: 63
- Tests Prove CLT Prop Characteristics page: 67
- Texas Maritime Academy Ship Simulator Attracts All Levels page: 68
- World Industry Drives Freight Rates Up page: 70
- MITAGS Chooses STN Atlas For Major Upgrade page: 73
- Superior Diesel and ALGAE-X Sign Distributor Agreement page: 78
- Incat Takes Top Honors At Cruise & Ferry page: 80
- Portland Remains New England's Largest Tonnage Port page: 81
- An Artistic Interpretation page: 84
- Rolls-Royce to Supply Podded Propulsion For QM2 page: 90
- BV Proposes 12,500-TEU Mega Containership page: 92
- Piracy Hits New Heights page: 95
- New Welding Process Put To The Test page: 96
- Analysts Predict Hutchison Whampoa Expansion Will Offer Long Term Potential page: 97
- Osprey Maritime To Sell LNG Operations For $635 Million page: 97
- Norwegian Line Unable to Remedy Leaky Sprinklers on the Norway page: 98
- Analysts Speculate Possible Carnival / Hapag-Lloyd Deal page: 98