Thai energy minister calls off oil concession bid
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Cheaper oil puts brakes on OSVs
Kohe Hasan from law firm Oon & Bazul on the offshore outlook for 2015
The offshore supply vessel (OSV) industry has seen significant growth in recent years. However, the steep fall in oil prices of late could put a spanner in the works for the OSV industry.
At present, global oil prices are in the middle of one of its steepest selloffs since the financial crisis of 2008/2009. World oil prices, which were hovering in the region of $110 per barrel from January 2010 until mid-2014, have taken a nose dive since June, more than halving in the past six months.
Whilst the decline in oil prices is likely to be a boon for consumers, the same cannot be said for the OSV industry. This is because oil majors are likely to cancel or delay their drilling operations and big-ticket production projects which are predicated on high oil prices. Evidence of this can already be seen in the recent announcement by ConocoPhillips that it would be cutting investment spending in 2015 by 20%.
The potential reduction in drilling operations and production projects would be of particular significance to OSV operators (both owners and charterers). This is so as drilling operations are a key driver in the demand for the use of OSVs such as platform supply and anchor handling tug vessels. OSV operators are therefore expected to experience a fall in the demand for OSVs.
One possible repercussion of the fall in the prices of oil and the expected fall in demand for OSVs is that charterers may seek to discharge themselves from charterparties which they had concluded prior to this decline. Such a trend was seen from the collapse of the freight market in 2008 which saw many charterers in the dry bulk industry attempt to discharge themselves from unprofitable charters. Similarly, this trend is likely to be seen in the context of the OSV industry as charterers would find that their charterparties have become significantly less profitable if the OSVs are unutilised as a result of the fall in demand. The need to discharge ... More>>