AlexShippingA Glance at the Offshore Industries

The global increasing demand for energy has led the growth of the two major offshore industries. The global offshore oil and gas and the offshore wind energy. Key role in the Oil and Gas industry’s’ Exploration and Production (E&P) phases, plays a specialized category of the shipping industry which is broadly recognized as the offshore shipping industry. These Offshore ships are the vessels which are particularly set to support the offshore industry (oil drilling or wind). They are the main means of transportation for carrying supplies and personnel to the huge oil stations deep inside the ocean or for example, drill ships which are used as offshore platforms in the oil and gas E&P cycle.  Offshore ships can generally be categorized into PSVs (Platform Supply Vessels), AHTS vessels (Anchor Handling Tug Supply vessels), CSV’s (construction support vessels), offshore barges, with all the other types and sub-types of these specialized sea vessels. The offshore shipping industry, despite the challenges, has kept up well with many technological developments that have taken place through the years. It is a well-known fact that these capital intensive businesses are called to operate in a very tough environment. Offshore operations are inherently difficult to execute and the smallest error could be proven disastrous, whereas at the same time the investment at stake is significant. In the case of a failure in the operations, the environmental, human and economic cost is huge. Another important fact is that as the offshore shipping industry players grew in number, so did the competition.  Therefore, it is crucial for the offshore shipping companies to attain the highest level of effectiveness and efficiency without compromising their success and at the same time by keeping the standards of environmental and economic sustainability high.

The Impact of the Regulatory Framework

There are many factors that contribute to the prosperity of this industry and one of the most substantial of them has to do with the regulatory framework and the tonnage tax regime under which the offshore shipping companies operate. In the conventional, standardized shipping industry (bulkers, tankers, and passenger vessels) major changes took place in the past 25 years and basically this happened in parallel with the introduction of the commercial friendly regimes in the shipping industry. However, there is no uniformity in these regimes, especially when it comes to a specialized category of shipping like that of the offshore shipping. As it is understood, the jurisdiction of the company plays an important role here and the research that has been conducted on the matter shows that the regulatory framework in many countries is outdated or not focused enough on the offshore shipping industry.

The difference on the jurisdiction’s friendliness is primarily due to the particular tariff regime followed like for instance, if it is a tonnage tax regime, a tax efficient regime but without any incentives for shipping companies, or a regime that is based on specific shipping benefits and incentives. However, the overall tariff and legislation framework is also affected by the specific type of offshore business. The business types of Oil and Gas Drilling, Ocean Wind Farms and the Offshore construction industries, also define the tax environment in a great extent. From an onshore perspective (i.e. the jurisdictions that cannot be purely characterized as offshore despite their beneficial taxation structures), there is a positive correlation, between most of the countries and their respective offshore business types that offer an advantageous and constructive environment for offshore shipping operations. Thus for international shipping companies the process to select the proper location from where they will conduct their business operations, is a demanding one. Tonnage tax regimes – are based on the tonnage of the vessels should be carefully observed as they can differentiate between different vessel types or they are phased out in certain regions. Taking into consideration several variables, starting from the qualitative capabilities of the company’s ship management and the accurate matching of the company’s specialized operations with the respective tariffs framework, to cost efficiency and financing decisions along with the whole capital and operational structure.

Going Offshore and Public at the Same Time

Due to the fact that both financing and tax-regime selection decisions are crucial for a company’s growth, there are companies that combine a going public strategy with headquartering in their Stock Exchange listed entities or their subsidiaries in offshore jurisdictions of good and long-established reputation. There are numerous companies headquartered in offshore jurisdictions like Bermuda, Marshall Islands, and the British Virgin Islands, in various sectors and industries, represented in major and non-major stock exchanges worldwide like London Stock Exchange, NASDAQ, NYSE, OSLO, Singapore, Hong Kong and others. From the Energy, Minerals and Industrial Services sectors, there are companies in the Oil and Gas production, Contract Drilling, Engineering and Construction, Oil and Gas Pipelines, Oilfield Equipment and Services and Mining. From the Transportation sector the Marine Shipping industry (mainly Deep Sea Freight Transportation, Marine Cargo Handling, categories of shipping) which are largely represented in the international stock exchanges. In the Financial sector with the industries of Banking, Investment Management and the Insurance sector with Property and Casualty Insurance at its core, these also are represented in the stock exchanges. In conclusion, despite the complexity level of decision-making in the offshore shipping industry, there are alternatives in relocating or repositioning offshore and being publicly listed on a stock exchange as well. These alternatives are friendlier towards some businesses in this industry. Companies operating in this industry face frequent risks and challenges as they operate in difficult and demanding environments thus every factor should be carefully weighted.