Why Singapore offshore industry kings must gear up for Norwegian opportunities

Singaporean businesses involved in the offshore industry would be well advised to rug up warm, get a hot cup of tea, and take a close look at the growing volume of business opportunities coming from the coldest part of the world.

While the offshore boom in Brazil and regional opportunities closer to home have caught people’s attention (and bank accounts), it is the increasing volume of work out of Norway that truly plays to Singapore’s strengths.

This trend can be seen in a string of positive reports from Barclays Research on the Singapore offshore construction industry. North Sea projects, and in particular those on the Norwegian Continental Shelf, have been identified as having the potential to provide a steady stream of core business to the top Singaporean yards and offshore service providers.

Barclays Research has made a number of telling observations:

With more than half of the current offshore drillers (c10 of 19) in the GOM and (c10 of 19 also) in the North Sea previous or current customers of the Singapore yards, an increase in demand for rigs in those regions should bode well for likely repeat orders, particularly with drillers looking to standardize their fleets.

We believe that there could be a c42% increase in the total no. of floaters operating in the North Sea by 2015 (60 from 42 currently). With the North Sea traditionally a key region for absorbing semi-submersible supply, an uptick in demand could potentially incentivize new orders.

But while the observations on an increase in drilling activity are important, it is also worth looking at what the Norwegians want in terms of equipment and business partners.

It is safe to say that the North Sea and the Gulf of Mexico have some of the highest demands when it comes to equipment quality, timely delivery, and reputation protection. In Norway, reputation, regulation, and North Sea compliance means that quality counts. And Singapore leads the world when it comes to the provision of high-end kit.

The NORSOK standards are developed by the Norwegian petroleum industry to ensure best-practice safety and the cost-effectiveness of petroleum industry developments and operations. Furthermore, NORSOK standards are, as far as possible, intended to replace oil company specifications and serve as the operational regulatory framework.

The standards are very strict, and Norwegian contractors often note that foreign yards are not sufficiently aware of the requirements and "how things are done in Norway". It’s an important piece of feedback, from an increasingly important market.

These standards, in the short run, could also mitigate the risk of immediate competition from the Chinese yards. Although Chinese yards should not be underestimated, and there is no doubt their construction quality and technical expertise is improving rapidly, their progress will take time.

Interestingly this pattern can be seen in the offshore services and equipment sectors, where Chinese companies are increasingly providing drill pipes, drill collars, large diameter steel pipelines, and control valves to highly reputable operators – including Norway’s Statoil.

What can certainly be said of the above is that, across the board, Singaporean oil and gas companies should be actively looking to develop their business links with their Norwegian counterparts.

Neglecting to do so might not only mean the loss of short-term jobs, but will also allow others to get their foot in the door and jeopardise future, large-scale, construction contracts. And as Norwegian companies operate all over the world in this space, ultimately it is not just North Sea contacts at risk.

So…it’s time to invest in a warm jacket.