On June 11th and 12th, I attended the Offshore Support Journal Conference, Americas 2024. Attendees included major US offshore vessel owners, bankers, equipment manufacturers, regulatory bodies, statutory agencies, and other industries involved in the offshore marine space. While not surprising, there was a significant focus on offshore renewables which seems to continue the aversion to conventional offshore oil and gas investments. 

The most notable observations regarding the strong preference for renewable energy came from a panelist of marine-lending bankers. First, it was stated that lending for vessel transactions (whether to build new or to acquire/convert) is much more stringent for vessels supporting conventional oil and gas. One example is a higher loan to value percentage, meaning how much of the transaction value can be financed is much higher for renewable energy transactions. A loan for renewable associated vessels can be as high as 80% of the total value where as a loan for a conventional vessel may only be 50% of the total value. 

Another example is that many lenders are now requiring prior approval for deals by their respective Environmental, Social, and Governance (ESG) committees  before going through the bank’s credit approval committees. This means that for approval, a deal must meet the requirement of the ESG committee which will be very focused on the environmental impact of the transaction. Generally, deals for conventional vessels will be looked upon much less favorably than deals for renewable energy vessels. As a result, it will be much harder to finance a conventional vessel construction or acquisition. 

Based on the current state of the OSV industry (which is in support of conventional oil and gas) the aversion to lending is not necessarily a bad thing. The value of existing conventional OSVs, particularly the younger ones in the fleet, will continue to rise with little to no risk of meaningful numbers of new vessels being built.