SINGAPORE: Saipem, Europe's biggest oil services company, expects orders for the industry to begin growing in 2013 after staying mostly static this year, a top company official said on Sunday.
The company told analysts in July that the European economic crisis had weighed on gas demand there, delaying projects in Russia and Algeria in which Saipem was involved.
Reiterating this, chief executive Pietro Franco Tali said a lot of big projects, which had been delayed in 2012, may resume next year, adding to the business of oil service firms.
"The (order) backlog of the industry at the end of this year will be very similar to what was existing at the beginning of the year; 2013 appears to be more promising," Tali said during a visit to Singapore.
"2013 should be a year when the contractor industry should see some significant backlog addition, some of the big projects which have been postponed from 2012 should come to fruition."
While Saipem's drilling services remains well utilised with a steady inflow of business, the outlook for the construction sector remains less clear.
"On the one hand, most of our clients are saying that they want to increase the capital expenditure because they want to increase production. But there is a certain discrepancy between these very positive statements and actual behaviour," said Tali.
"We don't see any hurry in these companies to speed up the process of sanctioning projects and awarding contracts."
For natural gas projects, this may be because of low demand for gas in Europe and the low price of gas, which may lower returns on many of these investments.
"As a consequence, many of the gas-driven projects which were to bring additional gas to EU will be postponed," he said.
In Asia, the company's presence is limited to highly technical projects, and to some extent, to Australia.
With Chinese contractors becoming very competitive, the onshore pipeline business, especially in the mainland, was no longer a market for international contractors, Tali said.
Still, the company does not expect the slowdown to hurt the industry in the immediate-term.
Saipem, whose advanced offshore fleet makes it well placed to grab growing investments in ultra deep waters and other harsh environments, specialises in big-investment projects, typically undertaken for the oil majors.
"Our exposure is to the big oil cos so there is little risk that they will find any financial constraints," said Tali.
"The future (order) development will inevitably depend on the global demand," he said.
The oil services industry is late-cycle as it relies on multi-year contracts with oil companies which make their investment decisions based on oil price trends.
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