Myth – U.S. coastwise marine service companies will fill the gap in the market with U.S. coastwise qualified vessels
The International Marine Contractors Association (IMCA) is selecting a key fact-a-day on the 7-day countdown to the April 18, 2017 U.S. Customs and Border Protection (CBP) comment submission deadline, to highlight the potential risks if CBP revokes 40 years of precedent as reflected in its own rulings. Rulings that have brought decades of stability and billions of dollars in investment to the oil and gas industry in the Gulf of Mexico.
IMCA issued its vessel impact report on April 4, 2017 and it is crammed with information and facts and figures showing that the U.S. coastwise fleet is unable, on its own, to support activities in the deepwater market.
- Myth: Revocation of the CBP Rulings will allow coastwise qualified vessel owners to fill the gap.
- Fact: Offshore deepwater marine construction is conducted by marine contractors, not marine service companies.
Over the past decade, marine service companies have invested in building ships for the high volume markets of logistical supply vessels, tugs, and crew boats. With the single exception of some light construction vessels, U.S. marine service providers have clearly not invested in the offshore deepwater construction niche markets, for good reason as the business models are very different:
- Deepwater construction is a high risk business where work is conducted on a fixed price basis, and totally unlike the commodity markets which are day-rate businesses.
- In addition to specialised ships, contractors need advanced engineering, project management and procurement skills to manage large sophisticated projects both safely and efficiently on a fixed price basis. This is a market for marine contractors not marine service companies.
- The specialised ships represent very high levels of unit investment, often incorporating the contractor’s intellectual property of equipment design and layout. Unit investments can range from a lower end of around $200 million to upwards of $1 billion at the higher end.
- This is a world-wide market for the large marine contractors, as no single domestic market can support the levels of investment needed; and many of the assets that work in the deepwater Gulf of Mexico move from one geographic market to another as projects dictate. That said, marine contractors in the U.S. have substantial investments in their workforce, industrial assets and market positioning; and importantly a long history of pioneering safe and efficient development in the GoM.