Battle lines have been drawn and, frankly, the US domestic big projects offshore construction fleet is no match for the powerful Asian and European armadas when it comes to capability.
Study the article opposite on Page 3, read the recently copious “propaganda” (from a US perspective) pumped out by the International Marine Contractors’ Association and big concern voiced by the American Petroleum Institute and it seems pretty clear that the Americans are about to score an own-goal.
Perhaps spurred on by Trump, but not necessarily so, the US Customs and Border Protection Agency’s (CBP) intends to extend the reach of the Jones Act … a piece of American cabotage-related (domestic coastal trade) protectionism that reaches right back to the Prohibition Era … that will effectively exclude almost the entire global heavy-lift construction, pipe-lay and survey fleet from working in American waters.
With oil apparently comfortably in the mid-$50 range for now, oil & gas companies with sizeable mid- to deepwater portfolios in the US Gulf of Mexico face a choice; either get on with harvesting hydrocarbons and finding and developing new resources, or sell-on.
That is of course a huge temptation at this time given the way in which onshore shale gas and oil production has come roaring back, the simple key indicator in that regard being the sharply rising domestic onshore rig count.
Indeed, a number of US majors and large independents have, since oil prices took a tumble in H2 2014, redirected investment away from overseas and domestic deepwater into shale, picking up Permian Basin acreage at knockdown prices as a result of the tidal wave of busts and defaults among producers and therefore positioning for the upturn that appears to be in-train. Chevron and
Exxon are leading examples.
Let’s assume most in US GoM mid- to deepwater decide to stay at the table. That means they need chips financed from their own coffers, debt or equity to keep the game rolling along, bearing in mind each dosh option is hard to secure.
Assuming the money’s there, very simplistically it means getting moving again with field development plans put on ice as a result of the crisis rewarmed and new ones put together and approved with timelines set. Contracts for platforms, subsea infrastructure and pipelines and whatever else have to be tendered, bid and issued.
But then comes the “Oh S***” moment when it is realised that there ain’t no floatin’ toolbags with which to cart offshore and instal all the stuff because the CBP had effectively barred them from its waters by extending the reach of Jones.
Now, I’m not getting at the American government for wanting to protect its industries and the EU could learn a lot in that regard, but the myopic stupidity of the intended changes beggar belief.
And it’s not necessarily because foreign flag tonnage may no longer be allowed to play in the GoM; rather it is because US bureaucracy may hinder US companies trying to lawfully go about their business in home waters.
Offshore oil & gas is a rare example of where some approved foreign flag tonnage gets to play a part on the development of US domestic offshore resources.
And it is for very good reason, as IMCA ably maps out in its report. It is thanks to the battle to develop the North Sea over the past five decades that we have the world-class capability that places companies like Allseas, Subsea 7, Technip, Heerema and Saipem in the offshore construction Premier Division.
That fleet is a global resource and has certainly made the difference in the GoM where domestic capability AND capacity are severely limited.
Let’s face it, why would the Yanks invest in the kind of uber-mega capacity that the Europeans have ploughed many $billions into when, at least until now, it has been possible to hire what’s needed? Of course, there will be those who will say, “Hell boy, we’ll build our own fleet”. But that will take many years.
And then, having built the tool-bags and imported/manufactured all the gear that goes with, what about the people?
Even with a “Martial Plan”, it would take 10 years minimum to fill the vacuum created by protectionist meddling.
But this reaches beyond oil & gas. The US is doing remarkably well on the renewables front onshore and is about to take its first biggish steps offshore.
That too requires construction capacity of a kind that is pretty much non-existent on the other side of the Atlantic but which has emerged and grown strongly on the North West Europe Continental Shelf – primarily North Sea coastal states near-shore waters.
Offshore wind began in Europe 25 years ago, gaining massive traction over the past 10 years especially.
Billions of euros have been invested and catalysed a near-totally different generation of construction vessels to those that serve offshore oil & gas, though with plenty of overlaps. Some have been built in European yards though most have come off the maritime production lines of Asia.
Granted the situation for US offshore wind is totally different to Europe and IMCA quite rightly makes no mention of this in its submissions to the US Authorities. But it needs bearing in mind.
I have one more observation to make and, again, check out the story opposite.
There is the issue of collateral damage and I’m worried that many small and very able Scottish and wider UK firms that earn their living in the subsea space and depend on US GoM-related business for a proportion of their turnover will be hurt by the Jones Act carry-on.
I trust that the UK and Scottish Governments have taken note of the situation, likewise agencies such as Scottish Enterprise. They may be toothless, but they must not simply shove their heads in the sand on this one. It’s too significant to ignore, IMO.
