The development situation and prospect for global offshore engineering equipment industry in 2017

By Xu Xiaoli & Zhang Hui

The development situation and prospect for global offshore engineering equipment industry in 2017

By Xu Xiaoli & Zhang Hui

2017 is the critical year for the intensive adjustment of offshore engineering market. Firstly, the energy structure has changed a little and it would be normal for the oil price to keep at low level. The industry is optimistic about the market in 2017, but the agreement of production reduction can only last for 6 months. In addition, US President Trump will pursue strong energy policy, including energy independence plan, after taking office, which will surely strengthen domestic oil production and will be another disaster for the market when the oil price turns around the corner and the production recovers. Therefore, the oil price is still unclear in the future, and the low oil price would be a normal phenomenon.

Secondly, the supply and demand in the operation market is unbalanced, the owner’s operation condition is worrisome. The operation of major drilling owners further declined, and both the operation income and net profit show sharp decrease. Moreover, most of the fleets holding the chartering contracts face huge challenges, the contracts held by owners will decline after 2017.

Thirdly, the industry situation is complicated, and the competition is more severe. China has maintained the market share for 4 years since it overtook South Korea and ranked the first in 2013 for the first time. South Korea and Singapore which had competed intensely with China have both lost in terms of the number of orders. It can be said the falling oil price is the direct cause for the above problems. But there is no denying that through the intensive adjustment, the product structure, design ability, technical level of South Korea and Singapore have improved a lot, this is a fact that should be faced actively by China’s offshore engineering industry.

Fourthly, the risk for orders rise, and delayed order withdraw is a frequent phenomenon. Under thecondition that the delay and cancellation of order are not taken into account, 761 offshore engineering equipment should be delivered in 2017, among which, China is projected to deliver 457, accounting for 60%. But for the current market environment, the delivery situation is not optimistic, the pressure of delivery for global offshore engineering equipment market would be more serious.

The development prospect for the future is as follows: firstly, the situation for offshore engineering market will keep low and will be difficult to recover. It is predicted that the offshore engineering market will continue to be sluggish in 2017, with turnover for the year being $7 billion, 110 equipment. Under the overall downturn situation, the different equipment will show different performance, it is expected that the situation for drilling equipment will be terrible, but the production equipment will experience increase, and the performance of offshore engineering ship will be just so so. On the other hand, with clean energy drawing more attention and the ocean exploration speeding up, some natural gas equipment and new energy development equipment will develop. Secondly, the influence factors will be more complicated, people place hopes on new energy development. The low oil price is difficult to support new development project in marine oil and gas, but the cost reduction can stimulate the development of certain projects. In addition, the environment problems will promote natural gas application and relevant equipment development. With the increasingly strict requirements for emission of greenhouse gases, the demand for clean energy will gradually increase.