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International Growth Despite The Downturn

A new report by Menon Business Economics reveals that the Norwegian-based supply and service industry has strengthened its international market position, despite the global financial crisis. From 2007 to 2009, the industry’s international turnover increased from NOK 95 billion to NOK 118 billion, with the average Norwegian share in international offshore markets rising from 12% to 14%.

The report was prepared by Menon in June 1010 for the Norwegian Ministry of Petroleum and Energy to chart Norwegian offshore supply companies’ international activities. It found that the Norwegian petroleum-related offshore industry increased its turnover nearly 25% from NOK 195 billion in 2007 to NOK 244 billion in 2009, half of which was due to increased international turnover.

The most important regional markets are Southeast Asia, West Africa, the UK, USA and Canada, and Brazil and Mexico. But there have been variations in ranking over time, according to Menon. In 2007, Russia, Azerbaijan and the UK were central markets. In 2009, the largest international market was Southeast Asia, including Australia and India, with approximately 35% market share.

“The UK remains an important market ranking as number three,” said Gulbrand Wangen, managing director for INTSOK, the Norwegian oil and gas network organization. “However, and for the first time since INTSOK was established in 1997, a significant decrease in export to this market is visible. This downturn reflects the Norwegian supply and service industry’s successful in shift towards moving out of the North Sea basin.”

Growth in Asia, Angola, Brazil
An important reason for the extreme growth in the Southeast Asian market is the large export of drilling equipment to rigs and floating production storage and offloading (FPSO) vessels that are built or converted in shipyards in Southeast Asia, particularly Singapore. One benefactor of this trend has been the Norwegian Offshore & Drilling Engineering cluster NODE in southern Norway. The cluster comprises 50 technology companies focusing on drilling equipment. From 2000 to 2006, these companies increased their turnover from NOK 500 million to NOK 3 billion. In 2006, two thirds of that amount stemmed from export.

Norwegian offshore suppliers also significantly increased their turnover in the region Angola, Nigeria and West Africa, as well as Brazil, Venezuela and Mexico. These are also among the markets that are supposed to provide the most increase in international turnover going toward 2013, said Menon. Angola is leading the increase in Sub Saharan Africa, having outpaced Nigeria in oil production last year. In South America, the driver is the deepwater field developments offshore Brazil.

Menon predicts that the offshore market will rise in the coming years, but does not expect equally strong increases in all segments. In particular it forecasts strong growth in maintenance, modification and operation (MMO) services and drilling and a more moderate rise within other segments, such as production of fixed, floating and subsea installations.

Photo: Turnover by various geographic regions 2007-2009 (billion kroner). © Credit: Menon 2010

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