By the start of this year the world was hit by a disruptive wave – COVID- 19. The Corona virus clearly has a huge global impact, most importantly through affecting the health of millions of people and the loss of human lives. The economic impact is also huge: small and large businesses suffer, entire sectors have been at a standstill, take tourism and leisure, and the stock markets suffer from the fear of a second wave of corona cases.
The shipping sector also has experienced dramatic change in recent months. Container liners shipping numerous sailings, bulk shipping is low because of lockdown of industries and transport, cruises were at a standstill and ferries were not allowed to transport passengers. Very restricted crew changes take place, causing stress amongst seafarers. To survive these difficult times many shipowners have to take painfull measures. However, one shipping sector flourishes at this time: the tanker market profited of the oil price, as this hitted new lows.
This collapse in oil price accounts for a very disturbed oil and gas market. The economic effects of the low oil price will likely reduce E&P activity: at least nine of the world’s top planned exploration wells for 2020, both onshore and offshore, are at risk of being suspended. It goes without saying that this cut in E&P investments will have a major negative effect on the offshore services market, including the theme-market for this newsletter: Subsea.
For the subsea market the year 2020 is set to be a gloomy year: contract awards are low. However, with the expectation of gradually increasing oil price, with thanks to the easing of lockdown measures and there for an upcoming demand for oil, oil companies are likely to schedule projects again.
Many big projects that were previously planned to be sanctioned in 2020 will likely be prosecuted in the coming years and with that bring with them a substantial subsea scope, aiding a recovery of the subsea market. However, the subsea sector might certainly benefit from the emerging market within the energy transition: suppliers can provide services to support blue and green hydrogen infrastructure, energy storage or carbon capture and storage. In Europe for instance, investments in offshore wind will exceed offshore O&G investment as soon as 2022.