Our semi-annual review and outlook of the offshore and energy markets, Offshore Review and Outlook, has now been released, with the full version of the report available via a subscription to Offshore Intelligence Network and Renewables Intelligence Network. For subscription options and access contact research.crs@clarksons.com.
Summarising the report, Steve Gordon, Managing Director of Clarksons Research, commented:
- Offshore markets are making encouraging progress, with the Clarkson Offshore Index (covering Rig, OSV and Subsea dayrates) up 32% since start 2021, reaching levels last seen in 2015. The oil price environment, increasing offshore activity and impacts on fleet supply of consolidation, restructuring, limited newbuilding and ongoing removals have all been supportive. Overall, sentiment is positive for further market improvements. Offshore wind meanwhile, continued its rapid and exciting growth phase, with ongoing newbuild investment and high peak season vessel utilisation.
- Energy markets are experiencing extreme volatility. The original outlook for steadily improving global oil demand, gradual supply release as OPEC quotas unwound and high, but potentially easing, pricing has been superseded by the uncertainty related to the Russian Ukraine conflict. For the moment, it is too early to understand the full impact on the world economy and overall energy balances (today the oil price is in “backwardation”, and other emerging developments include new Chinese lockdowns and speculation that US and Middle East production will increase). As a predominantly non-Russian source (offshore is only 6% of Russian oil and gas production), offshore activity may benefit from diversification of energy supply while concerns around security of supply may free up investment previously held back due to a focus on decarbonisation or direct shareholder returns. The EU has already announced accelerated offshore wind investment.
- Offshore oil and gas was 17% of global energy supply in 2021 (offshore wind is 0.3%). Offshore oil production is expected to grow by 3.5% in 2022 to 25.4m bpd (27% of global oil output) and gas production is projected to grow by 4.7% to reach 129.2bn cfd (32% of global gas). Total capital commitments to new oil and gas project FIDs are projected to reach $86bn in 2022: marginally in excess of 2021 and double 2020. Global E&P spending is expected to grow by 16%, after c.6% growth in 2020. Meanwhile offshore wind capex commitments reached $43bn in 2021, down 23% on 2020 but still the second highest ever. We are projecting $50.2bn ($28bn ex. China) of offshore wind FIDs in 2022.
- The rig market is improving, with utilisation increasing (jack-ups up 4 points to 81%, floaters up 8 points to 73%), supported by slowly improving demand and further supply-side contraction. Dayrates improved too, although from a low base and more significantly on the floater side (UDW floater assessment for the US GoM up 78% y-o-y to $290-350,000/day). With additional fixing activity and ongoing tendering, we are projecting jack-up utilisation of 86% and floater utilisation of 84% by year end (see Offshore Drilling Rig Monthly for more detail and 2023 projections).
- OSV markets had a positive 2021, and demand rose by 14% y-o-y, to marginally exceed the levels of Q1 2020. Our OSV Rate Index responded, rising by 28% to 109 points. This represents the highest level since Q3 2015. Steady supply contraction continues (removals up 75% in 2021), but much of the improvement has come due to fundamental improvements in demand. Emissions reduction continues to be a focus, with further battery retrofits in the European and US markets. Newbuilding could still be a way off but the next round of orders will be likely to feature alternative fuels (see Offshore Support Vessel Monthly for more detail and 2023 projections).
- Subsea support vessel demand and rates improved markedly across the mid-2021 peak season, and despite Q1 seasonal softness, sentiment is positive for 2022. Global MSV utilisation is estimated to have reached a peak of 80% in September 2021, the highest for 6 years. Rates assessments were also up, by 30-40% depending on vessel type. MOPU ordering remains a bright spot as operators (particularly Petrobras) progress previously delayed projects. 15 awards (including 7 FPSOs) were made in 2021, we forecast 17 projects as likely candidates for award in 2022 (there are also 4 redeployment opportunities considered likely).
- We expect offshore wind to play a vital role in global energy transition. 2021 was another record year, as 18.5 GW of start-ups grew global capacity by 58% to 50.5 GW. This included 16 GW of start-ups in China, rushing to meet an end-year subsidy deadline. Europe was also active ($19bn capex committed). Geographical diversification continues. Floating farms are also moving forward e.g. recent ScotWind licence round. Newbuild ordering continues in wind, with 21 WTIVs confirmed in 2021 plus 15 SOVs. (see Renewables Intelligence Network , Renewables Intelligence Monthly, Clarksons Research Energy Transition Model for more detail and 2030 and 2050 projections).
- Despite the huge geo-political and economic uncertainty, our latest review profiles encouraging progress for offshore oil and gas and a continuation of offshore wind’s rapid growth. Overall, cautious optimism.
Renewables Intelligence Network (RIN) – is a powerful new offering from Clarksons Research covering both macro and granular data, intelligence and forecasts around: long term Energy Transition modelling; project tracking of offshore wind farms; detailed country briefs and forecasts; profiles of all developers involved in offshore renewables; the offshore “wind” fleet and the vessels, owners and yards involved; green technology across this fleet; dashboard analytics; dynamic mapping and deployment analysis; port analysis; tidal, hydrogen and carbon capture projects; a comprehensive intelligence report series. If you are not a subscriber and would like to arrange access, register here or contact research.crs@clarksons.com.
The author of this feature article is Stephen Gordon. Any views or opinions presented are solely those of the author and do not necessarily represent those of the Clarksons group.
