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Offshore Oil & Gas: Half Year Review

13/07/23

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First half 2023 statistics for the offshore oil and gas vessel and rig markets have been released by Clarksons Research. Reviewing the data, Steve Gordon, Managing Director of Clarksons Research commented:

  1. Encouraging trends in offshore oil and gas vessel markets continue, with the Clarksons Offshore Index (covering rig, OSV and subsea dayrates) up 18% across 1H-23 to 99 points, the highest level since 2014.
  2. Supportive project investment environment, with $68bn of CAPEX reaching FID in 1H 2023 (up 57% y-o-y and 41% on ten-year trend); oil price environment also supportive despite global economic weakness.
  3. Rig, OSV and Subsea vessel demand remains strong, particularly in the Middle East, Brazilian and West Africa sectors.
  4. Supply side constraints continue, with limited newbuilding orders and ageing fleet dynamics.
  5. Energy security focus supportive in short and medium term (offshore oil and gas provides 16% of global energy supply), energy transition trends to impact longer term.


FID Uptick

  1. Despite some softening, energy markets remained generally supportive of offshore activity and project sanctioning. Brent averaged $80/bbl in 1H-23 (14% above 10-year trend): views on the outlook need to balance global economic weakness with support from Chinese demand growth and impact of OPEC/Russian cuts.
  2. A total of $68bn of offshore oil & gas project CAPEX reached FID in 1H, up 57% y-o-y and 41% on the ten year trend, with the focus on security of energy supply supportive (offshore oil and gas supplies 16% of global energy, the exciting offshore wind market only 0.4%). Investment in strategic gas projects and in FPSO-developed oil fields in Brazil, Guyana and West Africa remain strong; we expect 13 FPSO contract awards in full year 2023, an 11-year high.


Sector Review

  1. Overall offshore oil and gas markets continued to strengthen, with the Clarksons Offshore Index (covering rig, OSV and subsea dayrates) up 18% across 1H-23 to reach 99 points, its highest level since 2014 (when it reached 101). Our index has now moved to 87% of the 20 year peak in 2007 / 2008.
  2. The rig market enjoyed a strong first half. Our Rig Rate Index is now up by 74% vs start-21, while a 4% y-o-y gain in demand has taken utilisation to 85% (JU: 86%, FL: 84%). Rate improvements continue to be driven by the floater sector (our index has reached 78% of previous peaks), with one fixture agreed at $484,000/day in June (a harsh-environment semi for Australia). Jack-up rates have been steadier, with activity 'cooler' (following robust Middle Eastern fixing in late 2022) but fixtures of >$150,000/day are now typical for high-spec units (Jack-up rates have reached 66% of previous peaks).
  3. The OSV sector has built upon the strong progress of 2022, with our OSV Rate Index up 17% in 1H-23 to 161 points, the highest level since late-2014. Gains in demand are continuing but at a slower pace (+1% across 1H-23, vs an 8% rise in 2022). Global OSV utilisation rose to 72% by start-July (the highest level since 2015) but the current balance may be tighter than this 'headline' figure suggests given increasing difficulty reactivating long-term lay-ups (43% of laid-up OSVs have now been in lay-up for = 5 years). Meanwhile, our MSV Rate Index is up by a strong 38% y-o-y to a 10-year high. Along with the PSV sector, MSV rates are closest to previous highs (87% of previous peak rates).


Supply Constraints

  1. Constraints in supply continue to impact market dynamics, following the multi-year rebalancing / removal of tonnage during the long downturn. Supply growth remains modest (only small numbers of legacy newbuilds from the "stranded inventory" are delivering: reactivations from lay-up are getting more "tricky"). Some signs of increased newbuilding interest are emerging (e.g. small AHTS supported by NOCs, MSV orders) but given challenges securing finance (banks have ESG focus and "scar tissue" from previous losses), relatively high newbuild pricing, fuel choice uncertainty any uptick in ordering volumes may be gradual. Newbuild prices are approaching previous cycle peaks, while second-hand prices continue to lag (financing costs are a factor).
  2. Macro-economic concerns aside, the outlook for offshore markets remains encouraging, with demand well set and supply looking constrained.

 

 

A more detailed half yearly review is available on request or is downloadable from SIN / OIN / WOR for subscribers. Any views or opinions presented above are solely those of the author and do not necessarily represent those of the Clarksons group.

 


Offshore Intelligence Network (OIN) is the market leading data and intelligence platform from Clarksons Research, providing comprehensive coverage of all offshore energy infrastructure including vessels, rigs, production platforms, subsea trees, pipelines, oil and gas fields, windfarms, operators, oil service companies, yards and fabricators, contracts and projects. With wide ranging range of data, trend analysis, analysis and insights, OIN is a powerful tool for participants across the offshore and energy sector.


Clarksons Research, the data and analytics arm of Clarksons, are the market leaders in the provision of independent data and intelligence around shipping, trade, offshore and the maritime energy transition. Millions of data points are processed and analysed each day to provide trusted and insightful intelligence to thousands of stakeholders across maritime. Better data for better decisions.