Even though spending on new offshore service and supply vessels has been increasing, the spike in output is not expected to be enough to keep up with demand in the Gulf of Mexico over the coming years, a top executive of Harvey Gulf International Marine, of New Orleans, said Wednesday.
“A significant amount of capital spending on new construction has been going on for the last 12 to 16 months, and it will continue for the next two to three years,” said Jeff Henderson, Harvey Gulf’s chief financial officer, in a keynote speech at the International WorkBoat Show, which opened Wednesday at the New Orleans Ernest N. Morial Convention Center.
“We all get the question: Is there overbuilding?” Henderson said. “Will there come a point where we plateau, where we have too much supply out there?”
Executives at Harvey Gulf don’t think so: More than a dozen new drillships and five additional production facilities are slated to start work in the region by mid-2015.
“There is still a big incremental gap of vessels that are going to be needed to support these assets,” Henderson said.
He pegged the gap at about three dozen supply vessels needed by 2016, including vessels under construction.
“We know the assets are coming, we know they’re contracted, we know they’re going to be working here, so it’s just a matter of time,” he said.
Founded in 1955, Harvey Gulf specializes in towing drilling rigs and providing offshore supply and multi-purpose support vehicles for deepwater drilling operations.
Organizers at the WorkBoat Show said they expect the three-day event will draw more than 14,000 visitors from around the world to New Orleans.
The show’s director, Bob Callahan, said it has more than 1,100 exhibitors spread across 200,000 square feet, highlighting their products and meeting with potential — and existing — clients and vendors.
Shane Guidry, Harvey Gulf’s chairman and CEO, was slated to give the keynote but canceled at the last minute, with Henderson filling in.
Many people in the maritime industry who attended the first day of the show were talking about Guidry’s busy schedule.
As attention has turned to the potential of using liquefied natural gas to power offshore supply vessels — a push helped by major players such as oil giant Royal Dutch Shell, which has invested billions of dollars in its LNG business — Harvey Gulf announced this year that it would build and operate an offshore refueling station at Port Fourchon in Lafourche Parish, the hub of deepwater oil and gas production in the Gulf.
Harvey Gulf has ordered six 302-foot dual-fuel workboats that run on LNG or diesel, due for delivery over the next three years and being built by Gulf Coast Shipyard Group in Gulfport, Miss.
Although the dual-fuel boats each cost about $12 million more to build than conventional workboats, the company expects to make up for the added cost partly with longer leases and reduced maintenance costs.
Low LNG prices, compared with diesel, could make a big difference to companies chartering the vessels.
“Every two to three weeks, you could save millions of dollars on operating costs for these vessels,” Henderson said.
Those plans, along with Harvey Gulf’s pending acquisition of Abdon Callais Offshore LLC’s assets, including 48 offshore supply vessels, led to plenty of chatter Wednesday.
“The real buzzword in the marine industry is LNG,” said Gary Lipely, director of sales and marketing for Conrad Shipyard LLC in Morgan City. “I wish I had a crystal ball for that.”
Not everyone is buying it.
In June, Todd Hornbeck, head of Covington-based Hornbeck Offshore Services, said going full-bore in the direction of using LNG fuel is cost-prohibitive.
“We’re not there yet as a company,” Hornbeck told a crowd of analysts, investors and industry executives at the opening day of the Louisiana Energy Conference in New Orleans.
But David Krapf, editor of WorkBoat magazine, a trade publication, said Harvey Gulf is all-in on LNG.
“You know they’re sold on it completely,” Krapf said. “We’ll have to wait and see what happens. I think it’s almost like the chicken and the egg.”
So far, Shell has chartered three of Harvey Gulf’s vessels, adding some legitimacy to the company’s gamble.
“That was the right thing to do, we felt, since there were a lot of naysayers out there,” Henderson said about the deals.
Addressing prospects of taking Harvey Gulf public, Henderson said it’s an idea that has picked up more steam recently.
“Certainly, it’s something that there’s been a bit more dialogue about” at the company, he said.
“Taking the company public is certainly a feasible route,” he added. “It’s certainly an option. We feel we have the best story out there to tell. We feel that we have the best assets to offer our customers.”
The WorkBoat Show, now in its 34th year, is one of the top 20 conventions scheduled in the city this year, according to Morial Convention Center officials.