Offshore Engineering Suffered “Bear Blow”

Reporter Yang Peiju

The year of 2014 was a bleak year for those domestic enterprises which were striving at full force to benefit from the “offshore engineering banquet”. Since the latter half of the year,influenced by the slump demand caused by the sluggish global economy, appreciation of the dollar, increase of product volume and other factors, the global price of crude oil has plummeted like an avalanche. The ensued knock-on effects continued to ferment and have gradually spread to energy and offshore engineering market.

As regards the knock-on effects caused by the sharp drop of oil price, Zhang Qi, an expert from Chinese Shipbuilding Industry Economy and Market Research Centre, believed that the international crude oil price is obviously proportional to offshore engineering equipment market.The recent slump of oil price has led to an obvious revert in the global offshore engineering equipment operation and construction market. In the near future, the offshore engineering equipment market will enter a sluggish period.There are three aspects that are worthwhile of attention.

Firstly, the sharp drop of oil price has rapidly exerted its influence on offshore engineering equipment operation market, and the ratio of utilization of offshore engineering equipment and the level of rent have dropped markedly.The low oil price has led to postponement and cancellation of some offshore oil and gas exploitation and development projects, in particular the deep water oil and gas projects,which has caused obvious drop of the ratio of utilization of offshore engineering equipment. In October 2014, the ratio of utilization of drilling platforms in the world stood at only 85%, down by 3.1 percent as compared with June.Of which, the ratio of utilization of drilling ships and semi-submersible drilling platforms sunk respectively by 5.0 and 3.2 percent.

Secondly, lower oil price results in a further downturn of offshore engineering equipment construction market.The effect of international oil price on the offshore engineering equipment operation market was transmitted to the construction market. Since the rent has gradually dropped due to the increasing difficulty in obtaining offers to rent offshore engineering equipment, owners are less willing to build new equipment. In 2014, the turnover of global offshore engineering equipment has shrank, with 37.1 billion during the first ten months, sunk by 33% compared with the same period of last year. It is estimated that the turnover of 2014 will be at around 40 billion, far lower than the average 65 billion recorded for 2011～2013.

Lastly, it might be difficult for the offshore engineering equipment market to turn around the corner in 2015～2016. Though most of shallow water offshore oil and gas projects are still feasible in the context of the current oil price, the industry will adopt a “wait and see”attitude since the oil price will continue to drop and the future trend and the new oil price balance space is still not clear. This will be the burden for the future offshore engineering equipment market. It is estimated that the ratio of utilization of offshore engineering equipment and the rent will continue to face the possibility of slump in 2015～2016, and the construction market will continue to be sluggish, with the yearly turnover below 40 billion dollars.