ABERDEEN—The subsea sector will have to keep its overcoat on for a few more years, as the cold wind that has been blowing through the industry since the oil price crash of late 2014 is forecast to continue.

While the oil price is expected to firm up over time, the subsea sector—including in deep waters—will not recover to pre-downturn levels until at least 2019 or maybe not until the beginning of the next decade, Douglas Westwood’s Andrew Reid said while delivering the market outlook Feb. 1 during Subsea Expo.

Subsea hardware deliveries in the 2017 to 2021 period are expected to be 20% lower than earlier forecasts, while spending on newbuild offshore vessels is expected to fall 13%, he said.

Reid indicated there would be an uplift in floating production projects this year with new orders projected to hit 22, compared with none in 2016. In more general macro views, he expects some recovery in international capital spending by 2018 and a pickup in offshore activity in 2019.

With many industry watchers and oil company executives commenting on the lower cost of doing business, the latest buzz words heard repeatedly at the conference were “lowest marginal cost,” as different parts of the industry try to kick start some new field activity.

Looking Back, Forward

While Reid provided an outlook, Mark Richardson, group manager for Apache Corp.’s North Sea projects, touched on how the industry got to where it is today.

Richardson has spoken at these events before and has never failed to raise a few eyebrows. He blamed the current parlous state of the offshore business on “20th century management thinking” in the 21st century. He said the current speed of change and the speed of communications combined with the “failure to learn from failure” have pushed the industry into the position it is in today.

Richardson even suggested that the U.K. should “rethink decommissioning” policy as a result of the referendum, which will push the country out of the EU. Current policy is based on the OSPAR Convention, which was promulgated via the EU. With the country leaving the continental body, he said it should “forget OSPAR.”

Time For Change

Top tier installation contractor Subsea 7, which has been hit as hard as any company in the sector—shedding more than 40% of its workforce and 25% of its fleet—has endured tough times. Phil Simons, who leads the company’s North Sea and Canada division, said it was time for “radical change,” reducing not only project cost but also risk. He asked, “what is the perfect design now?’ and suggested that it was not the gold-plated “Rolls Royce” version often used in the past.

Subsea 7 has adopted the “eliminate, standardize, simplify and automate,” or ESSA, approach to business. Also mentioned was the need for more trust between the service and supply sector and its clients, including operators.

But Simons suggested that the greatest threat to the future of the industry is the departure of many of its younger staff. While older employees have weathered earlier downturns, the current prolonged depression has had “a traumatic effect on people” and pushed many in the younger generation away from the industry. A prolonged period with “no raises and no promotions” has given this group the view that there is no future in the offshore industry.

—Steve Sasanow

Offshore