Norwegian offshore faces another dire year

The coming months will bring a new struggle for the Norwegian offshore shipping companies, says Harald Solberg, CEO of the Norwegian Shipowners' Association, in an interview with EnergyWatch's sister media, ShippingWatch. "There is significant imbalance in the supply chain," he says.
Photo: Maersk Supply Service
Photo: Maersk Supply Service

The Norwegian offshore shipping companies will have to wait a while yet for the much-needed recovery in the struggling sector.

Recent years have been weak for supply and anchor handling vessels, which in the past made a lot of money servicing the Norwegian oil and gas sector. But since 2014 and the oil price's collapse, employment and rates have gone down.

The shipping companies have been so strained that CEO of the Norwegian Shipowners' Association, Harald Solberg, said already back in January that the Norwegian fleet of offshore ships is built to a global market that no longer exists.

This has largely turned out out to be true of 2018, Solberg's first year as head of the Norwegian shipowners. But the market still turned out to be worse than initially expected back in January, he says.

"2018 has been more demanding than expected. The increase in activity is slower than we hoped for, and rates are not sustainable," says Solberg in an interview with EnergyWatch's sister media, ShippingWatch.

2019 is also not expected to bring a turning point for the sector, which represents a significant portion of the members of the Norwegian Shipowners' Association.

"We're seeing increased activity and more tenders in the market, and that's positive. But for now it's not enough to increase prices. Demand remains too weak," says Solberg:

"We're preparing for 2019 to also become a demanding year on the Norwegian shelf."

Even though huge sums are being invested on the Norwegian shelf these years, there is a delayed effect in terms of when there will be more work for the offshore ships, which often come last in the oil and gas sector supply chain.

The ships' earnings this year have also not been high enough to produce profits among the major shipping companies in the sector. Norwegian players such as Solstad Offshore, Dof Subsea and Eidesvik Offshore have so far reported large deficits this year.

Solstad Offshore, which most recently published a deficit of NOK 446.6 million (USD 52.1 million) in the third quarter alone, has asked its creditors to suspend payments for a year. The company's debt stands at NOK 30 billion.

Solstad asks creditors for one-year suspension of payments 

Debt refinancing is a theme that is expected to continue next year.

"Several members have signaled a need to refinance their debt commitments. These processes will also happen in 2019," Solberg tells ShippingWatch.

Do you worry that this could lead to insolvencies?

"We don't comment on that, but we do see extremely challenging markets and tough times, and that there is significant imbalance in the supply chain," says Solberg:

"Oil operators are making more money than ever, but the costs are unnaturally low, as services in the market are priced lower than the cost of providing them."

Big potential in wind

However, Solberg also sees positive signs in the sector, where the activity level is, after all, on the rise. And there are also big opportunities in the anticipated billion dollar market for offshore wind.

Most recently, ShippingWatch has reported how several Danish players are establishing offices in markets such as Taiwan and the US in an effort to get more into the offshore wind market.

"There are big opportunities. Norwegian shipping companies are well placed in terms of servicing floating offshore wind, as these involve demanding construction jobs, an area where Norway has a deep experience. For fixed offshore wind projects competition is even fiercer, and Denmark is well placed here. We view this as a tough and exciting area for our members with construction vessels or who build purpose made solutions," says Solberg.

Of the members of the Norwegian Shipowners' Association, Fred. Olsen, for instance, is active in offshore wind.

English Edit: Daniel Logan Berg-Munch

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