In 2013, the oil & gas market segment was forecast to account for nearly 30% of the new helicopters market over the five years to 2018.
Commercial operators were not only looking to replace their ageing rotorcraft, but also were looking to transit longer distances with the offshore industry requiring more resilient helicopters with greater endurance and payload.
Leader in this regard has been the North Sea, which is the primary and most demanding market for medium and heavy choppers. It is also where there has been huge investment in new machines.
According to analysis by Frost & Sullivan, the market has boomed in recent years, with “numerous multi-billion purchase agreements” signed with original equipment manufacturers (OEMs) during big helicopter and aerospace trade shows around the world.
However, this was before oil prices went into freefall from Q3 2014, since plummeting to nearly a quarter of where they were in June that year.
Almost two years later, there is still no perspective on when oil & gas prices will recover. But some market forecasts do not envision a recovery over the next five years.
The latest predictions are for the oil price to drop into the $20-30 range with Brent down in the mid-30s during the run up to Christmas. At sub-$35 now, this poses a huge threat to the future of a growing list of UKCS mature fields.
“This triggers serious concerns across the helicopter industry: how this decline is impacting pending oil & gas helicopter deliveries and is it still reasonable to envision strong order backlogs?” asks Alix Leboulanger, who is an aerospace & defence analyst at Frost & Sullivan.
“Several pessimistic market crash scenarios can be envisioned, the majority of them being translated by cancelled orders, personnel layoffs, less visibility on production lines and severe impact on platform prices, with quite a negative effect on future procurements across the entire civil market.
“Besides, OEMs will have to face tougher competition from re-sellers and lessors,” predicts Leboulanger.
“Most importantly, what could happen to medium-size helicopters that represent more than 60% of the new procurements and that are one of the biggest sources of revenue for OEMs?
“These multi-million platforms need to be recycled if the market was to actually really crash.
“This is where the challenge is quite problematic: Are there any other applications where they could fit in? There are very few segments across other domains capable of absorbing such helicopters,” says Leboulanger.
“The follow-on question is: what can be done to avoid such a catastrophic situation?
“There are some niche applications across non-traditional markets that can be undertaken by medium-sized helicopters initially configured for offshore transport, but at a certain cost.”
He added that this was where helicopters OEMs and operators could invest, but these would be risky and costly investments, mostly involving (aircraft) platform conversion, reconfiguration and personnel training.
“Very few players will be financially able to make such a bet. This will also eventually call for further market consolidation,” warned Leboulanger.
While there have been some lay-offs by the North Sea big-three helicopter operators . . . Bond, Bristow and CHC . . . the numbers are opaque.
Jim McAuslan, general secretary of pilots’ union BALPA, said in August that there was a “real risk” that cuts would compromise safety.
Reacting to the news that CHC Scotia was entering a consultation over job losses with 50 staff, including around 25 pilots and that a total of 130 Bristow Helicopters were under threat, McAuslan said this posed a safety risk for offshore workers.
He warned: “Job losses are bad but loss of life is inexcusable and those who let contracts need to be publicly challenged under oath on how far safety really figures in their calculations.”