The Middle East is witnessing a substantial increase in offshore exploration and production investments, which is boosting the need for offshore support vessels (OSVs). This trend is providing a positive market shift for vessel owners.
Currently, the use of vessels and charter rates have reached their highest point in seven years, with expectations of further growth into 2024. This surge is attributed to increased investments in offshore oil and gas infrastructure development and maintenance.
Erik Tonne, the Managing Director for Shipbroking, Offshore, and Renewables at Clarksons, highlighted the rise in upstream budgets in the Middle East. This increase is largely fueled by state-run energy companies investing in offshore facilities and assets.
Speaking at the Riviera Maritime Media’s Offshore Support Journal Conference in the Middle East, Tonne noted that offshore investments in countries like Saudi Arabia, the United Arab Emirates, and Qatar are expected to grow by over 25% collectively by 2025, compared to the budgets in 2022.
Tonne also emphasized the potential for developing more collaborative and sustainable regional offshore ecosystems and local capabilities in the current market.
Mark Kachouh, Managing Director of Petro Services Middle East, presented a highly optimistic view of offshore activities and the demand for oilfield services in the Middle East. He reported that OSV utilization in the region is currently between 85-90%, indicating potential for further spot market growth.
Kachouh observed that national oil companies are vigorously maintaining exploration and production (E&P) campaigns, supported by favorable oil prices. This is expected to result in a sustained demand for support services and OSVs.
The increasing demand and higher vessel utilization may prompt owners to consider modernizing and expanding their fleets. However, Kachouh noted several challenges, including shipyard capacity constraints, complexities in accessing capital, extended build schedules, and local content regulations, which could hinder significant OSV newbuild orders in the next two years.
Beyond the Middle East, offshore investments are shifting towards deeper waters in regions like South America, West Africa, South-East Asia, and Australia, with some deepwater E&P projects planned in Northern Europe.
Jesper Skjong, a market analyst at Fearnley Offshore Supply, anticipates that the growing offshore E&P expenditure will lead to a demand for more complex vessels and operations, such as floating production systems.
Additionally, the renewable energy sector, particularly offshore wind projects, is contributing to the increasing demand for vessels. According to Skjong, project backlogs indicate a strong growth in vessel demand, with day rates potentially rising significantly by mid-decade due to supply constraints.
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