Offshore influence: redefining the competitive landscape

The corporate landscape of the subsea market has changed drastically over the last decade. A new wave of consolidation emerged in 2015, which forced operators to focus on two priorities – reducing costs and improving efficiency.  

Now in 2024, pricing power has shifted back to suppliers in the subsea space. Wood Mackenzie research believes that this could benefit operators as it reduces lead times and streamlines better design and execution through integrated companies.  

That said, reduced supplier competition and a market duopoly could drive costs up and quality down if demand hits capacity ceilings. 

Read on as we discuss the changes in the supplier corporate landscape or fill in the form to read the full version of our ‘How offshore companies are structurally changing the competitive landscape’ report.  

How has the market changed? 

The corporate landscape for offshore equipment manufacturers wasn’t large to start with, and consolidation has shrunk this even further. OneSubsea and Aker Solutions’ joint venture (JV) combination creates a truer competitor to TechnipFMC. This creates what is effectively a duopoly, particularly for the largest operators. This has also impacted the operators who only utilised Aker Solutions and weren’t as familiar with TechnipFMC and OneSubsea. 

What are the considerations for operators and suppliers? 

Consolidation has an impact on barriers to entry for both oilfield services companies and operators.  

For operators that are not regular participants in the subsea market and do not have strong supplier relationships, it will take more time or money to ensure access to supply. For suppliers, the gap between top-tier suppliers and the next level has become greater due to scale, technological integration and levels of investment to compete.  

We break down considerations for both below: 

Operators: 

• Integration: this is the primary benefit - suppliers can provide solutions across the value chain, from concept selection through to installation, aiming to provide better value and improved design while reducing risk, cost and cycle time. 

• Strategic relationships: relationships have always been important within the supply chain, and even more so in the subsea space. And with many contracts being directly awarded, these are set to become even more important. If you don’t have a strategic relationship with a supplier, you may have to pay more to access capacity or be willing to accept a longer lead time for equipment. 

• Flexibility: operators may need to be flexible in vessel choices if installation windows are delayed. Competitive tenders allow the operator the choice of supplier for all components of the project whereas the integrated strategy is a one package deal. 

• Competitive duopoly: consolidation has shrunk the competitive landscape to a point where there are two main players, TechnipFMC and OneSubsea, who effectively control supply into the market. This could create a competitive equilibrium, increasing prices and stifling innovation. 

 Suppliers: 

• Vertical integration: by vertically integrating the JV will better control the value chain and reduce inefficiencies. They can offer a fully integrated package targeting reduced execution risk. 

• Fewer competitors (effectively): this implies greater market power (to a greater or lesser extent). And a smaller competitive landscape means improved visibility into market dynamics. 

In our report ‘How offshore companies are structurally changing the competitive landscape’ we discuss if the integrated strategy has been a success and if further consolidation is expected. Fill out the form at the top of the page to read the full version of this report.