The global roll-out of Covid-19 vaccines combined with rising oil prices is offering Singapore’s hard-pressed offshore industry another glimmer of hope, says a top local analyst.

“Since our last sector update in March 2021, global rig utilisation and day rates have largely improved, albeit slowly,” said UOB Kay Hian head of research Adrian Loh.

“Since their troughs in November 2020, the number of active offshore rigs as well as competitive utilisation have continued their recovery.”

Loh said that although utilisation rates for jack-ups have stagnated this year, utilisation for semi-subs and drillships have risen by 8% to 24% this year, while day rates for jack-ups and mid-water semis are up by 15% and 22%, respectively.

“While we caution that a few months’ worth of data points may not point to anything meaningful at present, the short-term trend is nevertheless positive,” he said.

“While demand for new drilling rigs will likely continue to be weak, demand for production assets could recover after experiencing capex delays related to Covid-19 in 2020.”

According to Sembcorp Marine, several major offshore production projects will probably head towards final investment decisions in the second half of this year, benefiting Keppel Corp and Sembcorp.

This year, 37 rigs have been taken out of the market — equivalent to around 4% of the global competitive fleet — according to Loh.

Of the 37 rigs, 21 were converted to non-drilling applications, three were to be converted to other uses and only two were sold to other drilling companies. In addition, 13 rigs were scrapped.

Loh said that should activity in the oil and gas industry strengthen, leading to a revival in the offshore industry, a cyclical upturn could start in the next six to 12 months.

“This assumes that the current second or third waves of Covid-19 infections globally are dealt with in a reasonably quick manner, and the global vaccine roll-out is effective,” he added.

Loh said the roll-out of various vaccines over the past six months should allow for global oil demand to recover in 2021, with prices already trending upwards towards $80 a barrel.

“Clearly this has been helped by Opec+, which to date has retained its tight grip on oil supplies, with an eye on supporting higher prices and its own fiscal balances,” he said.

Furthermore, he expects oil prices may hit $100 per barrel sooner than previously forecast, due to a lack of exploration capital expenditure over the past five years.