(Article originally published in Nov/Dec 2014 edition.)
***From The Maritime Executive magazine, Nov-Dec 2014***
“Different boats for different folks” is the mantra of the offshore business these days because what works in one market may not in another.
Australia stands in stark contrast to the “pond markets” of the North Sea and Gulf of Mexico where the offshore oil and gas arena is supported by widespread infrastructure in ports that virtually surround it. Down Under there are few ports well-equipped as offshore support bases, and they are scattered around a vast coastline. Even the large ports in the country’s North-West are predominantly geared toward the iron ore trade rather than offshore.
Yet while Australia’s geography will never suit the pond analogy, it is starting to benefit from developments in those distant markets as the number of “pond fleet” vessel arrivals jumps.
The Ichthys Project
They are being drawn to the country by mega-projects such as Ichthys, the huge LNG development off Australia’s northern coast, and they are changing the offshore support scene. “We’ve had quite a bit of evolution of late, and a lot of that is tacking back into the Singapore hub,” says Captain Phil Griffin, Director of Marine at London Offshore Consultants (Australia).
Instead of relying on multipurpose vessels, Australia is now seeing the specialization that high activity levels allow. “There’s a lot more PSVs coming into the market at the moment as, for example, they need to supply pipe at a high rate to the Ichthys pipelay, which will continue for around nine months,” Griffin explains. “The suppliers working for the construction contractors are not typically single-sourcing. Part of that is because they can’t. If you look at the fleet spread of some of the larger offshore support vessel companies, they might have 20 PSVs listed worldwide. If Australia wants 12 of them, they just aren’t going to get them.”
New designs are entering the country, such as the X-bow that has been used in larger AHTSs and PSVs elsewhere. “Their arrival in Australia has been about five years after their arrival in the North Sea. The pond markets tend to be the place where there is sufficient activity, scale and consistency to warrant increments in design. Come down here and you don’t have that. You tend to make fit what is available,” Griffin states.
The vessels coming in are a mix of charters and newbuilds. “If you are going to build an AHTS these days, in all probability you’ll make it DP. And if you are going to make it DP, you are going to make it DP2. The cost increment between DP1 and DP2 has disappeared on a newbuild in the overall scheme of things.”
The Small Boat Market
Australia’s fleet of smaller near-shore vessels is growing to support pipeline and logistics operations. The multi-cat – a small, multipurpose, shallow-draft utility tug – is a particular favorite. Crewboats are also growing in number, some co-opted from the fishing industry’s ubiquitous cray boats, which are moving into the more lucrative offshore industry.
“Within the region – Indonesia, Vietnam, Thailand – it is more usual to have a crew transfer vessel that can accommodate 110 people in airplane seats,” says Griffin, “and they might spend five or six hours getting out to a platform. It’s been far less typical here. The baseline for crew changes and personnel transport has been helicopters.”
According to an independent database, there were 183 midsized aluminum crewboats built in the last five years, 76 by Penguin International at its shipyards in Singapore and Indonesia. “At Penguin, we are building on our established Flex brand of crewboats to offer a range of vessels that perform a variety of offshore and security duties from Asia to Africa,” states James Tham, Managing Director of Penguin in Singapore.
One example is the Flex Fighter, a customized crewboat fitted with ballistic protection and machine gun mountings forward and aft. It is designed to serve as an anti-piracy, platform protection vessel and is based on Penguin’s Flex-40SL crewboat, powered by three Cummins KTA-38M2 main engines with private cabins and amenities for 12 security personnel, reclining seats for 30 passengers, and storage tanks for 93,000 liters of fuel and 30,000 liters of water. The vessel has speeds up to 27 knots and provides weeks of platform protection without needing to refuel or restock.
“Crew Boat. Security Boat. Anytime. Anywhere.” is how Penguin pitches its Flex Fighter. Not surprisingly, the biggest buyers come from West Africa with increasing interest from private security companies in Europe.
The company introduced the Flex series in 2006 and builds almost all its crewboats without orders, using its internal cash reserves. “We will roll out our 100th Flex crewboat by mid-2015, and we intend to deliver 40 to 50 crewboats a year for our own fleet and for others,” adds Tham.
The Big Boat Market
The market is different for PSVs and AHTSs, which are facing an oversupply problem. “Over recent years the commoditized segments of the OSV market (i.e., PSVs and AHTSs) have seen a huge amount of newbuild ordering,” comments Dr. James Driscoll, Associate Partner at MarinOIL, “and looking at the orderbook we see a disturbing and enduring oversupply problem,”
A key reason for this is the relatively lackluster performance of traditional shipping investments and the volatility of equity markets in an uncertain global economy, which has pushed investors and funds into the relatively high-yielding offshore market.
This has been good news for some, such as Singapore-based Swissco Holdings, which recently announced it has secured three chartering contracts with options worth $17.3 million. The company has 37 OSVs, the most recent additions including two 36-meter Incat Crowther crewboats built by Cheoy Lee Shipyards. “We continue to build on our strong fundamentals as a leading offshore support vessel service provider,” says Sam Kwai Hoong, Group Chief Financial Officer. “With the new additions, we are confident of delivering consistent quality service to existing and prospective clients to meet their various needs. The Middle East and Latin America continue to see strong investment in oil production and exploration activities. This is likely to have a positive knock-on effect on demand for the offshore support vessel services we provide.”
Generally, the number of actual deliveries compared to original orders has been significantly reduced, but the count of assets under construction and due to deliver over the next 24 months remains high. “The statistics on large PSVs (4,000 dwt and above) illustrate this story well,” says MarinOIL’s Driscoll. “Today, the order book is thought to be around 700 percent of the world fleet. Without doubt the greater focus of PSV building has been for larger units equipped for deeper water support and supply duties.”
Driscoll notes a disconnect between Asian and non-Asian offshore owners and builders, and the gap is becoming ever more pronounced: “Day rates achievable in Asian fixtures tend not to support the costs and operating dynamics of newbuilds from European or even Singaporean yards. We are therefore seeing more and more Asian, Indian and Middle Eastern owners placing orders in China as this is the only way to achieve the economic balance required for their target markets.”
This has led to an unusual situation in which there is a shortage of PSVs in some regions but a surplus of available new and second-hand tonnage in others that simply cannot be employed owing to cost dynamics.
“The almost complete shutdown of Indian offshore vessel construction over the last couple of years has further altered the newbuilding landscape,” Driscoll adds. “New yards at the nexus of Europe and Asia have benefitted, and we are seeing strong order growth in, for example, Turkey, where yards like Tersan have demonstrated and proven their ability to build and deliver sophisticated offshore vessels at prices that sit squarely between China and Europe, the position previously occupied by India.”
Driscoll sees a growing trend in the construction of LNG-fueled PSVs with the U.S. Gulf and Norway taking a strong lead: “We envisage this market will continue to grow as the challenges of infrastructure support in the domain of LNG supply and bunkering facilities are overcome. Governmental eco-compliance standards are likely to enable owners of such vessels to depend upon both preferential selection in tenders and employment potential with a long time horizon.”
The industry continues to change as the flow between markets in and out of ponds continues to evolve. Driscoll again cites India: “In India the rise of new, specialized, smaller and dynamic shipyards is the order of the day. Tebma’s delivery of a VS470 MPSV straight onto contract for Statoil in the North Sea is one example. The Timblo shipyard in Goa has recently delivered a sophisticated DP2 light subsea support/supply vessel and is one of only two yards in India to deliver an offshore vessel this year.”
In Australia, London Offshore Consultants’ Griffin sees new technology flows. Diesel-electric propulsion has already reached Australia from the pond markets. The use of retractable, azimuthing thrusters is increasing overseas, and he has his eye on an OSV with a Voith Schneider propulsion system he recently saw in Houston. The system can run at very low revolutions, which means it could be suited for ice operation. As the Arctic regions open up to oil and gas development, these new technologies will surely filter back to the Australasian offshore market place, he concludes. – MarEx