Mixed bag for smaller forwarders
While much of the world’s O&G shipments involve huge pieces of machinery, there are also numerous smaller forwarders around the world that keep vital supplies moving, always trying to keep ahead of the boom-and-bust cycle.
Rosendo Gonzalez, director of Houston-based international freight forwarder Salinas Forwarding Co., is no exception. Seventy percent of her company’s customers are in the oil and gas industry. “The price of crude oil has affected most of our clients,” she said. “Our international shipping is 50 percent down from last year.”
Gonzalez said her customers are not doing much drilling or exploration. Consequently Salinas Forwarding is shipping only spare parts to keep the current equipment working while waiting “for the price of gasoline to go up – to go back to normal. For the very first time in 40 years, we have had to lay off some employees,” she added.
What’s happening today isn’t nearly as draconian as 1985-1986, when the price of crude oil dropped 67 percent and took two decades to recover. Granted, prices have dropped 60 percent since June 2014, but the difference is that shale oil production can come online in weeks, not years. Also, in the 1980s, the savings-and-loan business had its meltdown due to deregulation and risky lending, a scenario that has not repeated itself during the most recent price decline. World demand for oil is not pulling back, and won’t be anytime soon. It might take a few more years for the price of oil to come back to a level where new investment feels right for energy companies, but that’s better than 20 years.
“Our first quarter was extremely strong, when oil prices were at their lowest,” said Volga-Dnepr’s Boumerkhoufa. “It’s hard to predict, but it is our belief that the oil and gas sector will remain a profitable sector for us.”
Brian Fainter, the president of forwarder N/J International in Houston, is similarly optimistic. “Everybody’s looking at $65 to $75 a barrel by the end of the year or sooner,” he said. This expectation is based on the reduction of new production in the U.S. and increasing demand over the summer, continuing into winter. He said N/J is still working because materials to maintain existing wells are needed, even if new wells are not being drilled. However, he said materials are not flowing like they used to, and many of his customers have had to furlough employees. However, while he is not seeing new exploration in the U.S., a partner firm in Venezuela told him it is picking up five new oil and gas clients, and he has been told to “power up.”
Interestingly, the sector where he has started to see more action is in agriculture. Through his Venezuelan partner, Fainter sent 20 silos to Venezuela. “Agriculture-heavy machinery is being shipped around the world,” he said.
N/J is currently seeing more action in agricultural heavy machinery shipment than in the oil and gas industry, but Fainter remains confident about O&G. He’s shipped millions of tonnes of oil and gas equipment by air in support of GE over a 15- to 20-year period, working with carriers such as Amerijet, LAN, Qatar, Emirates, Etihad and many others.
We’re hopefully optimistic that the market is going to turn,” he said. “It always does.”