Offshore opportunities in low crude price environment

Offshore opportunities in low crude price environment

Companies serving the offshore energy sector must accept that crude oil prices are not going to bounce back anytime soon and look to diversify into other market areas in the same way that the commercial shipping industry has done when high crude oil prices squeeze profit margins.

The shipping industry has an uncanny ability to adjust to the historical boom and bust cycle of international seaborne trade and diversify into maritime sectors that are more commercially favourable, but it seems those companies serving the offshore sector are just waiting for an upswing. This isn’t going to happen in the near term and the offshore marine sector must look at opportunities elsewhere.

With Brent crude oil prices tumbling to less than US$30/bb and analysts predicting persistent low oil prices for the medium term opportunities do exist for the offshore marine sector in other areas.

While some equipment suppliers will struggle, particularly those pushing processing equipment, other OEMS that have traditionally served the offshore sector could find opportunities in the commercial shipping market and the nascent offshore mining industry.

With sanctions now lifted on Iran, increasing the flow of oil from the Middle East, there could be a requirement for additional FSO (floating storage and offloading) capacity, while offshore support vessels could find employment in the emergent offshore mining industry, particularly offshore Australia. This is a new area for both sectors.

Offshore mining is nothing new but most activities are confined to shallow waters close the shore. However, deep sea mines are now beginning to emerge as the industry looks to exploit higher yield concentrations for significantly less investment and infrastructure required of a land mine.

According to mining industry analysts there are massive sulphide deposits, manganese nodules and cobalt-rich crusts on the seabed that can be extracted relatively easily. 

However, the mining industry knows little about subsea exploration and shipping companies knows little of the requirements of the mining industry, so there is a need for concerted marketing drive if these industries can combine their know-how to benefit commercially from the extraction of minerals and metals from the seabed.

Certainly both sides have to placate environmentalists that the technology is available to ensure that the extraction process is contained and will not impact negatively on the marine ecosystem. But this is a potentially vast new market for the offshore shipping industry.

This blog was published in World Maritime News