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Review&Forecast—January 2010 Issue

Firing Line Report: Oil Concerns Linger, Ocean Renewables
Offer Promise

By Lauren Masterson
Managing Editor
Sea Technology Magazine

For our 28th annual 'Firing Line Report,' Sea Technology magazine once again asked leaders in the oceanographic/marine products and services industry to review their business over the past year and give their projections for the next.

The global recession precipitated by the collapse of the financial markets in the fall of 2008 had not fully set in when we last surveyed the industry—nearly all the companies that responded said they had experienced growth, or at least level sales, in that year, though a number of them did express concerns that sales would drop.

According to the current survey, their predictions seem to have been somewhat valid. Thirty-eight percent of respondents said their sales went down in 2009, and only a quarter experienced growth.

However, about half the respondents replied that they expected their sales in 2010 to remain steady, with the remainder split between sales rising or falling.

Oil Stabilizing, Anxiety Continues
The declining enthusiasm for the offshore oil and gas industry that was seen last year seems to have been warranted.

The record highs of the previous summer—almost $150 per barrel—that had plummeted that autumn gave way to even greater lows of $35 per barrel as the global recession ground demand to a halt in early 2009. Though prices returned to more stable levels later in the year, concerns remain in the industry.

While the percentage of companies that responded that the offshore oil and gas market provided them with the most orders last year remained high (63 percent), only 13 percent replied that they thought this sector had the greatest potential growth. This hope was also tempered by concerns regarding U.S. federal government policies toward offshore drilling.

In the latter part of 2008, with prices at the pump through the roof and the country in the midst of a hotly contested presidential election, many were calling for fewer restrictions on offshore oil and gas leasing, hoping that the government would open areas that had been long off limits to drilling.

Then, on January 16, four days before President Barack Obama took office, the U.S. Department of the Interior's Minerals Management Service (MMS) issued a Draft Proposed Program (DPP), a major step in the process of creating a new oil and gas leasing offer.

The MMS proposed 31 Outer Continental Shelf (OCS) lease sales—mostly in the conventional areas off Alaska and in the Gulf of Mexico, but also off the Pacific and Atlantic coasts.

After Obama took office, however, he appointed Ken Salazar as the new secretary of the interior, and Salazar quickly extended the DPP's comment period by an additional 180 days.

When the comment period ended on September 21, the MMS announced that it had received more than 530,000 comments from the public. As yet, the service has not announced any official action on the program.

Renewables: Next Big Market?
While the new administration's policies on allowing expanded drilling remain in question, when Salazar extended the comment period on the proposed OCS five-year program for 2010 to 2015, he also announced that his plan for offshore energy would include renewable energy resources in addition to oil.

Several projects are in the planning stages or already under way in the U.S. and Canada, and more are in the pipeline for 2010 and beyond. Additionally, European countries have already established a strong foundation in this sector, with countries like the U.K. and Denmark already producing a large amount of power from offshore wind and other new technology, such as Aquamarine Power's (Edinburgh, Scotland) Oyster wave energy converter, which recently began producing power for the U.K. grid.

This promise for economically viable and politically backed offshore renewable energy projects gave hope to some respondents, who see this sector as having the greatest potential for growth.

The push by governments around the world to study the oceans in relation to climate change and other environmental issues may have been reflected in the replies as to which market provided the most business in 2009, with 75 percent of respondents saying that they had high or moderate activity from academia and research institutions and about 60 percent saying the same for government civilian agencies.

Active Product Categories
The product category that was most active in 2009, according to our respondents, was echo sounders. Other areas of high activity were cameras, video and photo equipment; radar systems; sensing, measuring and sampling systems; laboratory equipment; electrical equipment; and meteorological instruments.

Overall, Sea Technology's survey of the oceanographic/marine products and services industry suggests that manufacturers have taken somewhat of a hit from the global recession, but they are cautiously optimistic about the year to come, with the possibility of expanded offshore drilling projects, the creation of a market for ocean renewable energy projects, and further funding for academic and research institutions and government science programs.

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Sea Technology is read worldwide in more than 110 countries by management, engineers, scientists and technical personnel working in industry, government and educational research institutions. Readers are involved with oceanographic research, fisheries management, offshore oil and gas exploration and production, undersea defense including antisubmarine warfare, ocean mining and commercial diving.