Drilling and offshore service providers, such as Great Ship and Dolphin Offshore, expect a revival in demand for services as the price of crude oil has stabilised in the range of $70 to $80 per barrel.
Explorations at high costs became unviable when Brent, the benchmark crude oil price, crumbled from a high of over $145 per barrel in July 2008 to just $34 per barrel in December 2008 due to the economic slowdown.
Many oil producers shelved their plans for exploration as the economic downturn coincided with the drop in oil prices. This led to the global supply of assets like rigs and platform supply vessels (PSVs) exceeding the demand for them.
According to industry analysts, the average charter rates for jack-up rigs of 300-foot water depth has dropped to $136,000 (over Rs 63 lakh) a day from a high of over $200,000 (over Rs 93 lakh) a day in mid-2008. The charter rate for PSVs of over 2,000 dead weight tonne has dropped to $5,600 (over Rs 2.61 lakh) a day now from $42,000 (nearly Rs 20 lakh) a day a year ago.
In addition, West Asia is expected to see an investment of $16 billion (nearly Rs 75,000 crore) for the development of oil fields by such countries as Iran, Qatar and Abu Dhabi.
“With oil steady at over $70 (over Rs 3,200) a barrel and with the credit crisis easing out, demand would be back to an extent,” Great Ship Managing Director Ravi K Sheth said. Great Ship is a subsidiary of India’s largest private shipping company Great Eastern Shipping.
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“Demand usually has a six-month lag. So, the real impact would be seen if oil prices sustain at these levels till then,” he added. Great Ship is currently operating two rigs and has chartered out 14 vessels, with 14 more vessels on order for supply.
“Globally, the utilisation level for rigs would pick up in 2010 and this would eventually help get better rates for these assets,” said Ramesh Singhal, chief executive officer of Navi Mumbai-based i-Maritime shipping consultancy. The global utilisation levels for rigs have dropped to 80 per cent from 87 per cent a year ago. In India, there are 47 rigs deployed by Indian as well as international service providers currently.
Apart from rigs, the demand for other offshore services is also expected to pick up.
“We expect restoration of offshore works overseas,” said Satpal Singh, managing director and chief executive officer of Dolphin Offshore, which executes offshore projects on a turnkey basis. It provides all three dimensions of marine constructions, including diving services, marine operations and topside fabrication service for making platforms.
Due to the downturn, some of the recent contracts with Indian oil producers were executing at rates 15-20 per cent lower than the normal budget. India’s two largest rig and offshore service providers Aban Offshore and Great Offshore were not available for comment.