LONDON: Norwegian companies that provide supply ships and drilling rigs to the global oil industry face a bleak year ahead as contracts disappear and financing options dwindle in the face of weak global crude prices.
They could increasingly be forced to sell or write down the value of assets, cut jobs and tap shareholders for cash to weather the downturn, according to industry experts.
This would herald more pain for Norway, where the overall oil sector accounts for about a fifth of the economy and unemployment is rising, especially in the oil capital Stavanger and its environs on the west coast.
Oil firms like Statoil, which offshore shipping companies rely on for business, have slashed costs and projects to cope with a 60-percent plunge in crude prices since June last year.
The offshore shipping sector provides complex services and equipment for oil and gas companies such as platform supply vessels and anchor-handling tug supply craft which tow oil rigs and assist in their positioning. It employs around 17,000 people, according to the Norwegian Shipowners’ Association.
The Norwegian oil services sector stock index has lost more than half its value since Brent reached its peak in June 2014. (Graphic: reut.rs/1lUcSH9)
The effects of the oil price drop have been underlined by supply ship owners in recent weeks. Last month Deep Sea Supply said it had taken 10 platform supply vessels out of service – out of its total fleet of 39 ships. Days later, World Wide Supply had said it would not be able to make a scheduled debt interest payment.
And the industry’s predicament could deepen next year, when oil investments in Norway are expected to fall even further . Several supply ship companies also have bond debt maturing in 2016, with more cash-raising options limited.
