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The April 2020 issue of
Offshore Marine Monthly discusses the looming effects of the
oil price crash and the Coronavirus disease 2019 (COVID-19) on the
offshore supply vessel (OSV) market. You cannot see it in the
numbers yet, but global OSV utilization will fall and the already
low day rates are vulnerable. Exploration and production (E&P)
company plans are in the midst of changing, and vessel demand is
expected to fall over the next few months. Most of the operators
active in the Americas have already announced dramatic cuts in 2020
spending.
After the 2008 and 2014 downturns, operators in the Gulf of
Mexico halted many drilling programs, sometimes idling rigs that
were still under contract. We can expect to see fewer wells drilled
than planned in the third quarter of this year. If the oil crisis
continues, we should expect to see wells shut in. E&P companies
operating in the US Gulf have been historically quick to respond to
falling oil prices. As offshore drilling rigs are idled and
contracts are terminated early, excess capacity in the OSV spot
market will grow, which puts downward pressure on day rates. The
backlog of drilling activity has already started to erode, and more
drilling programmes will get suspended or outright cancelled in the
coming months.
Learn more on the global OSV market and other topics on the
offshore, upstream oil and gas market covered in the Petrodata
Product Suite.
Richard Sanchez is a Senior Marine Analyst at IHS
Markit.
