There are hot spots that exist right now in a service sector that is dusting itself down after the most prolonged downturn in our memory.
I look forward to 2018 with cautious optimism. While competitive pressures in the service sector will continue to require management, I believe that the tendering for work at below cost, as has been prevalent in many sectors over the last couple of years, is coming to an end. Balance sheets and resources have been depleted to a point where low balling is no longer possible and the increasing activity levels allow for more realistic pricing. I anticipate that the ‘off the shelf’ products we have previously been used to procuring at a couple of days’ notice will have more extended lead times running into weeks and months as the reduced stocking levels carried through the lean times become more pronounced. It will take increased activity and some price inflation before commodity supplier stocking levels return to normal service.
Offshore decommissioning prospects will continue to increase through the year, with plugging and abandonment, platform removal preparatory works and subsea infrastructure removals offering the best opportunities for the sharpest technologies and the slickest executors. I don’t get a warm feeling for 2018 for the UK harbours and port authorities who are investing heavily in promoting facilities for anticipated decommissioning opportunities, I think this will take a bit longer to play out.
The UK well service market will continue to gather pace, with a number of down sized service companies challenged to find the capacity to meet the increase in demand.
An increase in unplanned offshore maintenance activities being called off at short notice will continue through 2018. The ageing infrastructure is being pressed a bit harder and the economics of ad-hoc call offs versus deferment are more easily justified.
The trend for the operators and tier one contractors to reach further down the supply chain to secure the technical and commercial propositions required to meet their business objectives will continue, although a further softening of the brute force often seen in contractual negotiations may be required to more fully exploit these benefits.
Despite the high numbers of skilled personnel made redundant throughout the industry during this downturn, I would question if we have the correct skills and experience readily available for immediate deployment. I would suggest not. Much industry experience has gone for good through retirement or career change, and many personnel have been out of the loop for some time. The industry has recently moved forward very quickly and extensive retraining is going to be required to get the best out of the available human resource.
As an industry we are all in a very different place to where we were a few years ago. We needed a correction and we got it. The challenge is going to be to move forward in a lower cost environment whilst driving the technological edge we once had. The most economical solution is often not the lowest day rate. A low cost environment challenges company resolve to deliver the best technologies. The OGTC is doing its bit to address this gap, but the support of the operators will also be required to push new technologies forward.
So I foresee 2018 bringing more activity, more employment, more opportunity, more challenges. It will be captured by the suppliers and service companies that are ‘good to go’ at short notice. This will require good planning, good people, good technology and good luck.
Andy Buchan is the managing director of Hiretech.
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