Broker reflects on cancelled Russian contractsNews // December 4, 2014
Broker Westshore says the†Russian authorities "have dealt a crushing blow not only to offshore activities in their territorial waters but also to shipowners expectations for the North Sea next year."
The news that Viking Supply Ships, Siem Offshore and Rem Offshore have had their Kara Sea contracts cancelled came as a setback but did not surprise market observers.
"However," said Westshore, "the subsequent announcement by Russian authorities that the South Stream project would also be put on ice came as quite a shock to the markets and contractors. This seems particularly true for the contractor Saipem
who has said it intends to press on with the work.
"However, there is a question mark over the charters of a dozen vessels including four from Deep Sea Supply, three Solstad and Sealion Shipping vessels and two from Maersk."
The broker said that, for the early termination of the Kara Sea contracts a number of shipowners are expecting to receive compensation, which is understood to be worth up to 30 per cent. However, this will do little to compensate the companiesí utilisation figures or their expectations for the seasons in 2016 and 2017.
"The change in circumstances in Russia is causing a headache for shipowners who now face returning their tonnage to the North Sea market which is already experiencing issues with oversupply. At the same time the whole industry is facing a period of
cost-cutting and efficiency savings which are likely to drive down activity in the
forthcoming season," said the broker.
"This could also spell the end of Western companies involvement in the Russian market for the coming years too."