Report reveals oil price impact on offshore sector
A new analysis from Nordea suggests the market for international rig companies has been hit so hard by the plunge in the oil price that hundreds of drilling rigs will have to be retired over the next few years as a result.
"It is very difficult to say when the market will turn, but at the very soonest, it will be in the second half of 2017,” Kristoffer B. Pedersen, credit analyst for Oil Services at Nordea Equity Research, told Shipping Watch.
Nordea predicts that at least 85 floating rigs and 129 jack-up rigs will be forced out of the market between now and 2017. The report adds that this is a conservative estimate.
"We believe that massive rig retirement programs are the only element that could bring the offshore drilling market closer to balance," Nordea writes in the analysis.
This has had a profound effect on the offshore shipping sector, with Clarksons Platou predicting that as many as 600 offshore support vessels will need to be scrapped or idled to bring the sector back into equilibrium.
"With the current orderbook, if everything is delivered, we project an overcapacity of 500 to 600 vessels during 2016. So we believe we're looking at an overcapacity of around 15-20 percent," Erik Tønne, chief analyst at Platou Offshore, said last week.
Between 100 and 250 of the ordered vessels will likely be postponed or canceled at the yards, while more ships will be idled, Tønne added.
"The rigs are serviced by two-four vessels, so for each one that is idled, it will affect even more ships. In general, the appetite at oil companies for rigs is pretty small," said Tønne.