Markets characterized by regional differencesBy Peter A. Buxbaum, AJOTThe recently expired six-month moratorium imposed by the Obama administration on deep water drilling in the Gulf of Mexico should provide a boost to an industry that has been slammed from more than one direction. The Deepwater Horizon disaster, the biggest environmental calamity in United States history, led to a halt on 33 deepwater operations and new federal safety requirements. These developments came on the heals of a global recession which saw worldwide demand for oil and gas shrink. Experts now say that demand is on the rebound but that its strength varies by region. Developing economies are still thirsty for oil and gas while the more mature markets are likely to see slower growth, thanks to efficiencies implemented during the recession and the gradual move toward consumption of non-fossil fuels. Oil and gas exploration equipment make up a healthy chunk of the worldwide breakbulk cargo market. Patterns in exploration and consumption could impact breakbulk shipping models. “Uncertainty” seems to be the consensus watchword for the industry, in the Gulf of Mexico and beyond. But with production in the Gulf of Mexico accounting for 15% of US natural gas and 27% of US domestic oil supply, it is doubtful that decision makers will allow those fields to go unexploited. Indeed, energy developers have announced new projects in the gulf in recent days, with the expiration of the moratorium. Just a few months ago, however, the BP oil spill in the Gulf of Mexico created dislocation among offshore drilling companies. Last July, for example, Diamond Offshore Drilling, Inc., a provider of contract drilling services, in an effort to boost utilization of its deep water assets, suspended a Gulf of Mexico contract and relocated a deep water drilling rig to an offshore Africa location. Diamond Offshore President Larry Dickerson noted, as part of the recent announcement of the company’s third quarter financial results, that “uncertainty persists in the U.S. Gulf” but that “international markets for our rigs remain relatively stable, supported by higher oil prices and consistent demand.” Higher prices reflect the increased demand for oil and gas as the world slowly climbs out of the recessionary chasm. “Oil and gas markets are starting to show signs of recovery, but the impact of the recession differs across regions,and the outlook remains very uncertain,” said Nobuo Tanaka, Executive Director of the International Energy Agency (IEA).
Tougher Regulations AheadBW Group CEO, Andreas Sohmen-Pao says at DNV Forum that tougher regulations are likely for the offshore industry. The oil spill in the Gulf of Mexico is widely expected to lead to tougher regulations with consequences for the whole offshore industry, says Andreas Sohmen-Pao, CEO of the BW Group, one of the world’s leading maritime groups, to DNV Forum. He adds that new requirements, if based on thoughtful regulation, can bring the industry forward and generate business opportunities for progressive companies. Andreas Sohmen-Pao is interviewed in the latest issue of DNV Forum, sharing his views on topics such as the outcome of the oil spill in the Gulf of Mexico and the impact of the financial crisis on the shipping industry. “We are watching carefully to see what the outcome of the oil spill will be. It is hard to predict specifically how the regulations will change, as some of the changes will be politically driven. However, there is no doubt that requirements will be tougher,” he says. One concern he has is that decisions will be made on emotional rather than practical grounds. “A general trend towards higher environmental expectations from soc