OSLO) Norway's offshore shipping will struggle over the next two years because of a lack of financing and project delays, according to Elisabeth Grieg, president of the Norwegian Shipowners' Association.
Line management: Oil producers such as Statoil ASA, Norway's largest, have cut investments and delayed projects after crude prices plunged last year
The industry has 'started to feel the crisis much more now than maybe they did this spring', Ms Grieg, 50, said. 'The outlook for the offshore industry is more uncertain for 2010 and 2011.'
Norway has the world's second-largest offshore fleet with 465 vessels that service oil and gas platforms at home, in Brazil, West Africa, the Gulf of Mexico and Australia. The industry represents about 55 per cent of the association's more than 160 members, which also includes owners of oil tankers, bulk transport and containerships for cross-ocean routes.
Oil producers such as Statoil ASA, Norway's largest, have cut investments and delayed projects after crude prices plunged last year. Industry spending may fall 8.5 per cent to 118 billion kroner (S$29.2 billion) next year and decline 11 per cent in 2011, according to the Norwegian Oil Industry Association. Brent crude, which rose to more than US$147 a barrel in July 2008, traded at US$79.35 a barrel as at 7am in London.
'We see that 40 per cent of the order book along the coast hasn't been financed yet,' Ms Grieg said, referring to offshore ships at Norwegian yards. 'There are no newbuilding projects at Norwegian shipyards after 2011 and, of course, with the volatile oil price, fewer projects have been started.'
About 10,000 people work in the Norwegian shipyard industry and many more in supporting businesses. Norway, the world's sixth-largest oil exporter and second-largest gas exporter, relies on the petroleum industry for about 25 per cent of its economic output. The country's oil production has been in decline since 2001 as fields in the North Sea age.
Members of the association include Seadrill Ltd, the offshore driller founded by billionaire John Fredriksen, Subsea 7 Inc and Wilh Wilhelmsen ASA, a Norwegian investor in vehicle shipping companies. Ms Grieg, part of the fourth generation at the family controlled Grieg Group, is the first female president in the association's 100-year history.
The group's other big constituency, transcontinental carriers, may start seeing a recovery next year, Ms Grieg said. The industry will be helped by demand for raw materials such as iron ore, coal and soyabeans from China and India as well more willingness to lend by banks, she said.
The Baltic Dry Index, a measure of shipping costs for commodities, has jumped more than fivefold since the start of the year, after plunging 91 per cent in 2008. The index tracking costs on international routes shed 87 points, or 2.2 per cent, to 3,887 points on Nov 30, according to the Baltic Exchange.
'I guess we'll see more of a soft landing for 2010 than we had anticipated just a few months ago,' said Ms Grieg. About 90 per cent of the world's trade is transported by ship, of which 5 per cent is controlled by Norwegian vessels.
China's manufacturing grew last month at the fastest pace in five years, a survey yesterday showed, helping Asia to lead the recovery from the global economic slump.
The industry may also be helped as the number of new ships coming on the market is less than anticipated. Shipowners have cancelled new ships or asked for delays as shrinking global trade and lower rates caused losses. -- Bloomberg
Source: businesstimes.com.sg
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