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Shipbuilding

Looking For

By Jim Romeo

New Markets

Photo: Shipbuilders Council of America

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With offshore oil and gas flat, shipyards are looking to other opportunities

t’s been a tough year for offshore supply vessel operators in the U.S. Gulf of Mexico and, by extension the shipyards and suppliers that depend on the oil patch to support their businesses. While the number of rigs drilling for oil and gas in the U.S. jumped to 909 as of the end of October 27—up from 557 the same time last year—the number of offshore rigs slipped by one, from 21 to 20, during the same time period. That’s because the shale oil and gas boom remains strong in North Dakota, Texas and Oklahoma. And that trend is expected to continue in the near term. The U.S. Department of Energy reports that it expects American drillers in shale oil regions to increase their output another 81,000 barrels per day in November for a total of 6.12 million barrels per day. That’s about two-thirds of the total domestic daily oil output. The depressed number of offshore drill rigs operating in the GOM means that there are limited opportunities for OSV operators. In a presentation to investors this past September, for example, publicly traded Hornbeck Offshore Services (HOS) said it had stacked 41 new generation OSVs and had plans to stack another four OSVs in the third quarter of this year. Vessel stacking reduces operating expenses between $500 and $1,500 per day per vessel and allows the company to defer cash outlays for vessel dry-dockings until market conditions improve. Matthew Paxton, President of the Shipbuilders Council of America (SCA), the lobbying arm for the shipyards, says the industry has seen a slowdown but, from his perspective, there are new and exciting opportunities in commercial shipbuilding.

Modernizing the Fishing Fleet “We are especially interested in the opportunities to recapitalize the fishing fleet of the Pacific Northwest,” he says. “These vessels are more complex than their predecessors and are absolutely integral to the commercial fishing industry. Such demand is welcomed, particularly on the tail of a downturn in the oil and gas industry.” A study prepared for the Port of Seattle and Washington Maritime Federation, suggests that $1.6 billion in modernization projects for the North Pacific fishing fleet will be completed within the next 10 years. Modern freezer longline vessels can cost upwards of $34 million, while a factory trawler could be as much as $130 million. “The downturn in the oil and gas industry has led to a dramatic drop-off in demand for offshore supply and support vessels,” says Jamie Smith, President of ABS Americas. “Looking ahead, we would expect this sector’s future to remain intimately tied to the evolution of energy demand.” Smith says that recent orders for tugs and barges have been relatively steady for shipyards in the GOM when compared to the previous two years. Also, he notes an upturn in work for governmental entities. “Specifically, there has been an increase in ferry orders for local and state authorities, oceanographic research vessels and non-combatant USN and USCG vessels,” says Smith. “The present market conditions have compelled many owners to put vessel-repair projects on hold, electing to lay-up vessels until the market improves rather than conduct dry-dock surveys and repairs for ships whose utilization rates may be less than ideal.” November 2017 // Marine Log 37

Marine Log November 2017