The marine construction business remains a “tough place to work” due to the lag time between projects being sanctioned and work getting started offshore, an industry expert has said.
Allen Leatt, chief executive of the International Marine Contractors Association (IMCA), said the picture looked “more positive” thanks to a combination of higher oil prices, increased demand, positive licensing rounds and better company finances.
While he is encouraged by the prospect of activity picking up, Mr Leatt said the sector still had a long way to go before the Champagne corks are popping once again.
“Marine construction is still a tough place to work,” Mr Leatt said. “We thought last year would be the low water mark but this year is not proving to be very stimulating.
“We are seeing a shallow recovery curve.
“Tendering is up but there’s a gap between the final investment decision being made and work actually
“For short-cycle projects like tiebacks, the lag time from FID to being in the field is short.
“But when it comes to the elephant projects, the lead times are much longer, usually three to four years. That creates a volume gap for the supply chain to absorb. The contracting world’s backlogs
have been absorbed and that’s a problem.”
Mr Leatt, who heads an industry body with members from more than 60 countries, said the sector was unrecognisable from two or three years ago.
He said: “We have to remember the marine industry is half the size it used to be. A huge readjustment needed to be made. Contractors have done a good – but painful – job of resizing but oversupply in tonnage remains. That puts pressure on the market.
“There will be scrapping of obsolete vessels but there is still a big oversupply. There was a big new-build boom during the good years. It means there is a lot of new equipment in the market, and with the present lack of demand, contractors have had to look at every angle.”
Mr Leatt also urged the renewables sector to take advantage of the situation.
He added: “Renewables is helping but it’s not making a massive difference.
Oil can bring huge benefits to offshore wind construction.
“Taking lessons from oil and applying them to wind will bring huge efficiency gains. Wind should embrace the offshore oil contractor sector.”