Offshore Marine Monthly - March, 2011, Vol 3, No.3

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This Issue: Upheaval in North Africa
For once it is not West African hittling the headlines because of political unrest, but the North African countries of Tunisia, Egpyt and mot recently, Libya. The upheaval has already casued the fall of two governments and is putting pressure on the long-standing regime of Colonel Gaddafi in Libya.
Oil companies are divided over how serious the implications of these protests are likely to be for their future operations. For the moment many are taking the threat seriously, with operations onshore and offshore being suspended and workers evacuated. The leaders of the so-called rebel groups controlling much of eastern Libya have already announced that oil deals made with the Gaddafi gvnt which are "legal and to the benefit of hte Libyan people" will be honored if they remain in power in the region, or even take over the rest of the country.

Vessel owners are feeling the strain too, with operations being seriously affected by the collapse of the country's infrastructure. Flights in and out of may Libyan airports have been cancelled, with the main coast road between Tripoli and Benghazi, which are unde rgont and rebe lcontrol respectively, has been closed. Standard procedures like crew changes are becoming a logistical nightmare, with one owner saying that Tripoli is completly out of action and that vessels are being forced to travel to Italian ports or Malta to pick up suppliers and staff or to simply wait out the trouble. It has never been say to work in Libya, as Gaddafi' gvnt controlled the oil industry with an iron fist, imposing dozens of conditions on companies that wanted to operate there. The violent protests that have hit the country have made the situation even more uncertian, with many pepole both inside and outside the iok industry wondering when the situation will calm down - and who will be in power when it does.

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ASIA-PACIFIC

Malyasian Momentum

The malysain gvnt's annoucement last year that it intends to put measures in place to boost oil production in Malaysia has increased interest in the country from both foreign oil companies and associated marine service companies. Extensive tax incentives for capitial development and support from the govemment by national oil company PETRONAS that it is scaling backing its international exploration campaigns in favor of local development. Late last year both Shell and ExxonMobil announced that they were going to invest capital exceeding MYR 15bln (USD4.2 bln) over the next years into Malaysia, where they already have substantial assets. But new players such as Total and BHP Billiton Petroleum have already commenced drilling operations, and with the country potentially  becoming one of the four major "deepwater hubs" in the world, the requirement for larger tonnage should increase.

With strict licensing laws for marine operators in Malaysia, where all vessels must be offered through a Malaysian company with a valid PETRONAS Marine Licence, and malyasian-flagged vessels given priority on long-term contracts, it is of little surprise that Norwegian vessel owner Deep Sea Supply recently entered into a partnership agreement with two Malaysian entities to gain direct access to the local market. The partnership wit hlocal compay Efogen and a Malaysian goverment-owned investment fund has already purchased the Sea Weasel 6,500 bhpATHS from Deep Sea Supply at market terms.

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All Go Australia
Despite the floods, cyclones and recent fires that have affected Australia, the offshore  market continues to strengthen with record profits being posted by some of the larger Australia-based energy giants. For larger tonnage, the Australia offshore marine market continues to be dominated by Farstad, whose high specification vessels are welcomed by operators such as woodside and Chevron. The latter is preparing to welcme the UT731CDs For Shogun and Far saracen to the country in March to start a long-term contract supporting the Ocean Osprey semi, following the vessel's mobilisation from Norway. The out of favor Thai Operator PTTEP, which took a hammering from the Austrilian media over the Montara blowout and resulting oil spillage, has managed to retain its operating license and recently awarded Swire Pacific a 9 month program for an AHTS and a PSV to support new drilling activities with the Ocean Patriot. The program should commence in April. wiuth big projects like Woodside's North Rankin Redevelopment program, where Hereema requires six AHTS this year, as well as Gorgon, Browse Basin and Ichthys which are all due for further development in 2011, opportunities for more vessels are inevitable. Singapore-based Otto shipyard has entered into a deal with Austrilian crew and vessel management company Go Marine.

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No affinity to OSV building
Even the announcement in Jan tht 14 new OSVs were scheduled to be built between 2012-14 did not persuade a Deutsche Bank-led consortium to increase its offer to Affinity Equity Partners for a major share in troubled Jaya Holdings.

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LATIN AMERICA

Need for skilled labor grows in Brazil
The Brazilian OSV market is continuing to grow rapidly, with more medium to large OSVs being mobilised for term work in Brazil, pushing up against the domestic supply of skilled mariners.

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Increase spot activity
The spot market in Brazil in growing and becoming organized and transparent as int'l OSV companies take advantage of oppotunities in the growing market. Old Brazilian-built vessles are finding increased opportunities trading on the spot market, while Brazilian newbuilds are on offer in the spot market for brief periods before commencing long-term engagaments with Petrobras.

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Brazi absorbs more int'l tonnage
Int'l oil companies are increasing OSV demand in Brazil.
In Feb, Petrobras announced fixtures for four non-Brazilian 3,000 dwt PSVs. The contracts are fro four years plus four years of options with day rates between USD 24,000 and USD 26,000.

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PEMEX lowers day rates
Mexican vessel owners are in the process of submitting bids and signing new long-term contracts on vessels currently working for PEMEX, but most are very disappointed with the new maximum reference price which has come in approximately 10% below previous years.

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PEMEX cautiously drills deeper
PEMEX's progress in deepwater exploration will continue to more forward very slowly, unless the gvnt of Mexico finds a way to attract int'l deepwater drilling expertise. Recent efforts have so far failes.

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Workin picking up in French Guina
An upcoming drilling program offshore French Guiana is providing work for a rig and serval PSVs affected by the slow pace of permitting in the US Gulf of Mexico. Tullow oil has sublet Ensco semi ENSCO 8503 from Cobalt International Energy, and it is due to work in French Guiana until the end of June. The rig is being towed to Latin America by Harms Bergung 24,000 bhp AHTS.