Ships sail on in IndonesiaApril 6, 2018
Adi Agung Tirtamarta, the president-director of Bayu Martim, talks to TOGY about how maritime companies are reacting to lowered rates, the availability of projects in Indonesia and advice on how related entities can weather the storm. The company is an offshore services provider focusing on accommodation work barges (AWBs) that works alongside the oil and gas industry.
On reduced demand: “Market share has become smaller because most oil companies have been doing efficiencies. They reduce the fleet. Whereas before they would use two vessels for one project, now they combine maybe two to three vessels for two projects.”
On costs: “Shipping is different from other investments. The opex is small, but you need to pay for the hardware to use it – electricity, maintenance, the minimum crew and the security.”
On projects: “The oil companies in Indonesia are still running their projects. Even if the project is for the short term, we hope they can launch it because, when they do so, not only are they helping their own operations side to produce more fuel and gas for the Indonesian government, they are also helping plenty of vendors who depend on these projects.”
On outlook: “If SKK Migas can convince oil companies that are holding concessions for longer periods to proceed with projects now, at least they will have the benefit of getting the cheapest price. The market will not be down forever.”
Most TOGY interviews are published exclusively on our business intelligence platform TOGYiN, but you can find an abridged version of our interview with Adi Tirtamarta below.
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What has changed in the market since 2016?
The market is really bad. Our turnover is down 40% from 2016. We are operating accommodation barges. When the deepwater operations all stopped, some of the oil companies in Indonesia were still trying to maximise their margins for work over shallow-water platforms, so they needed some of our barges. Some of our barges are still doing well, but because of the oversupply of the units, the price has dropped up to 60% compared to 2015-2016.
The rate in 2015-2016 for an accommodation barge with capacity of 300 passengers and a 300-tonne crane was USD 30,000 per day, but in today’s climate we only get USD 10,000-12,000. Meanwhile, the rate for the 150-passenger vessel with a 150-tonne crane used to be USD 16,000-17,000, but today we get around USD 8,500-9,500.
How have cutbacks by upstream companies affected the vessel market?
Market share has become smaller because most oil companies have been doing efficiencies. They reduce the fleet. Whereas before they would use two vessels for one project, now they combine maybe two to three vessels for two projects. They are cutting around 20-30% of their vessel requirements. Number two, because the oil price is not good, they are trying to reduce their cost per barrel. They frequently invite us to do price negotiations because otherwise they will need to terminate their contract with us since many vessels are available on the market. They will do this with contracts you have already negotiated. We fully understand because, sometimes, SKK Migas puts some responsibilities and obligations on oil companies to reduce their overhead and cost per barrel.
What is the status of the maritime community in Indonesia and elsewhere?
At this time, the bigger you are, the more you feel the suffering. In Indonesia, Singapore and the US, there are many big boys who are falling down. They are asking for Chapter 11 bankruptcy. In Singapore, there are seven or eight big companies who have already gone down.
Would you like to see longer contracts for the services rendered?Yes. Before the crisis, the general length of a contract was between one and five years. It depends on how long the company is holding the concession. That means most of the contracts we have with companies such as CNOOC [China National Offshore Oil Corporation] or Chevron will expire around 2018. Therefore we need to be careful with what we spend. They are only willing to spend to maximise production right now until the government gives them a new concession.
All the foreign companies’ investments will be given back to Pertamina as the main operators. Pertamina is expanding its offices into Nigeria and Malaysia, everywhere. It is up to Pertamina which partner they want to have. They may have a policy to hire expats and get the most well-known technologies.
Where are the biggest opportunities in Indonesia?
For deepwater, the opportunity is very minimal, except if the company is already running big projects, like BP. Maybe their vision is that this crisis will end in the next two to three years so they need to proceed with their big projects for development. Now, BP is drilling for phase 2 or 3 of the Tangguh project, which will be around 12-15 wells. This is for a four-year plus four-year drilling project. They are still promising the project because they already have the rigs. They’re using Ensco rigs. They have already proceeded with the tenders for the shipping and supporting offshore vessels.
BP is still proceeding because, on the drilling side, they need around four years of concessions rights. BP may believe that after four years the oil price will be different. When the oil price is in recovery, it means that the facilities will already be there. If they proceed now, that means that they will spend less than when the market is in recovery. That is an opportunity for the oil company side. Vendors and businesses are running because we can at least compete and have the opportunity to get projects. Even if there is a positive or negative cashflow, the project is there.
Do you see new investments being made in the short to medium term?
SKK Migas can convince all the oil companies that own concessions to follow the BP strategy of investing now. If SKK Migas can convince oil companies that are holding concessions for longer periods to proceed with projects now, at least they will have the benefit of getting the cheapest price. The market will not be down forever. After two to three years – maybe once the facilities are there – the oil company will benefit. Meanwhile, if the oil companies proceed with the big projects and request many suppliers or vendors participate, it means that this taste is still there. BP could get their opportunities, and we as vendors could get ours. When the market recovers, then maybe everybody will benefit.
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