Financing Ocean Ventures in Today’s Economic Climate

Contributor:  David Lyons
Posted:  08/21/2011  12:00:00 AM EDT
Rate this Article: (4.6 Stars | 41 Votes)
Tags:   FPSO | LNG | funding | legal | M&A

The reality of today’s economic environment, combined with the world’s multiplying energy demand, creates enormous financial challenges for the industry, government, and institutional communities.

The funding necessary to invest in leading-edge & game-changing technologies, fast-track the expansion & grow of companies, and restructure capital requirements for mergers & acquisitions are driving forces behind the need for innovative long-term capital solutions to meet our ocean industry requirements.

After a flurry of merger and acquisition activity in the geophysical and seismic survey business, there is still a lag in the data processing capabilities of most of the major service providers. These same companies have made significant investments in next-generation vessels at prices that are staggering when compared to the last new build boom. Whether it is the funding necessary to acquire yet another round of leading edge technology, or restructure the debt for an existing asset base, a non-traditional approach to financing is essential.

With offshore drilling waters depths advancing quickly from deep to ultra-deep, and target drilling depths increasing at a similar pace, we are seeing a need to finance high-specification rigs and special-purpose vessels that require a major infusion of investment capital.

The success with floating production, storage & offloading systems (FPSOs) in the deep waters of Brazil, West Africa, and the United States Gulf of Mexico’s Continental Slope has generated a growing demand for similar and more advanced FPSOs for planned exploration & production expenditures by the international, independent and state-owned oil companies.

The early-to-production feature of these systems does include a substantial cost savings to the oil company. The same can be said for the use of FPSOs to achieve higher recovery rates in mature and marginal fields. These advantages to the oil company represent a major financial challenge to the contractor.

The strong demand for liquefied natural gas (LNG) has seen a dramatic increase in the number of LNG projects. This requires a very capital-intensive infrastructure that includes new receiving terminals, specialized vessels, and new & expanded production facilities. These projects tend to bring together buyers and sellers on a global scale, including the need to secure a blend of debt and equity financing at an international level that recognizes the importance of taking a long-term perspective of the investment.

With emerging Far East markets expected to generate growth for the shipping community, it is still a challenge to secure the financing for next-generation ships and also refinance existing vessels in the new build delivery chain. A joint-venture partnership with institutional investors is an attractive alternative.

Clean, alternative and renewable energy will increasingly challenge today’s conventional thinking in tomorrow’s capital markets. High on the list of future energy projects that will be at the frontier of this new thinking are coastal & offshore wind farms, ocean power, and waste water to energy.

Our industry is recognized for technological innovation. The same creative thinking is essential for securing project funding. “Thinking outside the box” means going beyond traditional funding sources and attracting equity capital that has a long-term investment perspective.


David Lyons Contributor:   David Lyons


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