Oil Firms Must Pay More for Service Vessels -Norway Ship Owners

Oil companies should be prepared to pay higher rates for renting offshore service vessels, in order to secure the long-term survival of a key part of the industry's supply chain, the Norwegian Shipowners' Association said on Thursday.

Energy firms sharply curtailed investments in the wake of the 2014 oil price crash, idling many service vessels and driving down market rates to unsustainable levels, Chief Executive Harald Solberg of the Norwegian lobby group said.

At the peak last year, some 183 offshore vessels and rigs, corresponding to almost one third of the Norwegian fleet, were mothballed, he said, adding that by February the number had dropped to 162 units.

And although most Norwegian ship owners see a brighter future, the offshore vessel industry's outlook is more subdued, even though lay-ups are likely to fall to around 110 vessels and rigs this year, a survey of the association's members showed.

"There isn't sustainable profitability in offshore and rig. Rates have to improve to secure this business. It's not only the oil companies that should earn money, we need a better balance," Solberg said.

While revenue in the offshore services business is expected to further decline in 2018, turnover in Norway's combined maritime fleet is expected to increase by some three percent to 219 billion Norwegian crowns ($28 billion) after falling in each of the last three years.

Reporting by Ole Petter Skonnord, editing by Terje Solsvik