Local offshore and marine (O&M) companies are well-positioned to ride continued demand for their services in 2025, with activity in the offshore oil and gas industry expected to increase, experts said.
This is despite the possibility of oil prices softening in the longer term, should US President Donald Trump make good on his vow to “drill, baby, drill”.
Ms Carmen Lee, OCBC Bank’s head of investment research, said: “Trump’s intention to achieve energy dominance for the US is expected to drive an increase in oil and gas activity, which will increase the available supply of oil.
“This means that if demand remains constant, oil prices may be pressured.”
Maybank analyst Jarick Seet said that O&M companies that charter out vessels like floating, production, storage and offloading vessels and provide other supporting services to the offshore oil and gas sector should do well for now, owing to a shortage of such assets.
But he warned that this demand could be offset by another factor – delays in offshore renewable projects, as Mr Trump is also seeking to focus less on the sustainability space.
It was reported on Jan 21 that Mr Trump had signed an order to withdraw from the Paris Agreement, the international treaty on climate change, and announced that he would reverse many of former US president Joe Biden’s environmental regulations.
RHB’s research analysts agreed that Mr Trump’s return to the US presidency could be problematic for domestic and global climate progress.
“The uncertainties around green policies, including offshore wind projects and tax credits on clean energy, may unwind investments in clean energy,” they said.
For now, though, RHB noted that with the global shortage in vessels, “we expect utilisation rates and charter rates to stay buoyant for O&M businesses”.
Singapore-listed Mermaid Maritime is among the companies intending to take advantage of the current shortage.
The company provides the vessels, equipment and expertise able to carry out work such as subsea cable laying, inspection, and repairs and maintenance that are critical for offshore oil and gas operations.
Mermaid Maritime’s chief operating officer Paul Whiley said: “Drilling is expensive, and drill ships come with major auxiliary tonnage, and this will put further demand on marine service vessels.
“We expect our vessel day rates to increase slightly on the back of that heightened demand.”
But once US oil production levels increase, “then as a direct result, we expect that oil prices will come down”.
Regardless of oil prices, Mermaid Maritime continues to see prospects in decommissioning work at older offshore wells, which it expects to increase annually, going forward.
Decommissioning involves removing various infrastructure for disposal, reuse or recycling at the end of an oil or gas field’s economic life.
“The bottom line is we expect a short-term spike in demand, and resultant improvement in recovery numbers for Mermaid Maritime – but we see that dropping off in the intermediate term, and then finding equilibrium again on the back of decommissioning works,” Mr Whiley said.
In an earlier interview, Mr Whiley placed the company’s order book at just under US$1 billion (S$1.35 billion), with project awards that span the Middle East, the North Sea and Western Sub-Sahara, for instance.
“We have at least 50 years of decommissioning ahead of us. So we focus there. We also focus on laying cables, and, in fact, the sizes of the cables and the installation techniques are the same (for oil fields or wind farms),” he said.
He added that the company’s expertise in oil and gas can also translate to renewables.
“For us, the big challenge is to position ourselves in a sunrise space. We know that it’s not the sunset of oil and gas yet, but it’s still a case of being fit for business when those changes come.”
Despite Mr Trump’s pullback on renewables, Mermaid Maritime also intends to keep an eye on the green space.
“We plan to be and hope to be (in the renewables space), but, ultimately, that depends on whether governments keep up their subsidies on renewables,” Mr Whiley said.
Shares of Mermaid Maritime closed at 12.6 cents on Feb 4.
Source: The Straits Times
