Mikaila Adams
Editor-News
In a bustling area of Houston sits a building in which OGJ staffers work diligently to inform. Across the freeway, a helipad atop another building lies just above this editor’s eye level. The rhythmic sound of the associated aircraft is unmistakable, and work is suspended as landing and takeoff are watched in awe. The building has a great view. From the outside, one doesn’t see certain challenges within—similar to the initial presentation of a rotorcraft industry conference held in October.
Walking into “a vast hall full of smiles and perfectly polished multimillion-dollar machines…you could be forgiven for thinking nothing was amiss in the offshore helicopter world,” Westwood Global Energy Group said of the event. There, the firm presented data showing an increase in offshore project sanctioning in 2018 vs. 2017—the first time since the downturn. Offshore oil and gas helicopter expenditure is expected to total $18 billion in 2019-23—a slight increase over the $16 billion in 2017-22 as reported in 2017. Despite the growth, the helicopter market is facing chronic overcapacity.
While not unique to an asset-heavy facet of the oil field service market, in the absence of strong external factors such as new regulations or exploration and production activity, little can be done to alter the situation, Westwood said. Too many rotorcraft were ordered during the last cycle. The fleet stands at over 1,900 units and nearly 200 medium and heavy units have been delivered in the downturn so far (2015-18). More than 100 remain on order.
Once a holy grail
A boost could come from a change in E&P spending, but there aren’t many signs of that, Westwood said. Nonessential operations have been cancelled and oil companies have negotiated lower standby rates in addition to working contracted rotorcraft harder.
Deepwater operations, once a holy grail for helicopter operations, have seen a tremendous drop in demand for service, said Westwood. After years of scandal, Brazil is only now beginning to see new project sanctioning. The Gulf of Guinea has seen very little new sanctioning, with delays in the passing of the Petroleum Bill in Nigeria and uneconomic high cost greenfield projects in Angola, Westwood said. The Deepwater Horizon tragedy in April 2010 coupled with the surge in North American onshore operations has hit activity in the US Gulf of Mexico.
There are bright spots. The series of discoveries in Guyana, a rush to develop deepwater gas reserves in the East Mediterranean and East Africa, deepwater development in the Krishna Godavari basin in India, as well as promise—and challenges—from the South China Sea and Australasia, Westwood said.
Some color
From the thick of the aviation space, some color. In November, Bristow Group agreed to combine with Columbia Helicopters. A spokesperson told OGJ that globally its oil and gas segment remained relatively flat year-over-year. With the combine, however, the customer base is more diverse geographically and by end-market, with contributions from the oil and gas industry reduced to 58% of pro forma revenue for the trailing 12-month period, it said. The company expects an opportunity to use idle oil and gas aircraft to pursue government deals.
From another insider: “The sustained downturn in oil and gas has had an effect on the helicopter industry as a whole, but we remain committed to the long-term commercial helicopter market,” said David Martin, Sikorsky’s vice-president, oil and gas. Martin said Sikorsky, a Lockheed Martin company whose S-92 has played a large role in the offshore oil and gas space, will continue to support the current fleet “while being prepared for eventual new helicopter demand requirements with advanced technology.” As for the products in service, he said, the S-92 is projected to reach close to 180,000 fleet flight hr in 2018 compared with 163,000 flight hr in 2017, “with nearly 90% of them serving the offshore oil industry. This year, average monthly S-92 fleet flight hr have grown by about 10%,” he said.
For now, said Westwood, the helicopter industry can expect a slow and measured recovery with a projected compound growth rate of 2%/year to 2023.