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NEWS FOCUS | 7

LENGTH OF TIME IN LAYUP Number of OSVs in layup globally, by period spent in layup 1,400

1,200

1,000 LAID UP <1 year

LAID UP >=1 AND <2

800 LAID UP >=2 600

400

200

Jan 18

Jul 17

Jan 17

Jul 16

Jan 16

Jul 15

Jan 15

Jul 14

Jan 14

Jul 13

Jan 13

Jul 12

Jan 12

0

Data source: Clarksons Research

The current OSV fleet contains 68% more boats than in 2008, and the average age of vessels has fallen by more than three years. The number of OSVs reported to be in layup remains significant, with around 130 anchor handling tug/supply (AHTS) and platform supply vessel (PSV) units laid up across the North Sea. However, laid-up vessels may still be offered into any term requirements, which means they are still placing negative pressure on rates levels. Despite severe fleet oversupply, the number of OSV demolitions has remained relatively low, as it generally has over the years. One of the problems with scrapping OSVs is the significant costs involved in transporting them to demolition yards in Turkey, China and India. If owners want to bring vessels out of layup, one of the key issues they need to consider is reactivation costs, which may be significant if a vessel has been in layup for a long period of time. This being the case, said Mr Gordon, scrapping in place is expected to become an increasing trend. Another key influence on the OSV market is the number of vessels on order that have yet to be delivered. The more vessels that are delivered, the worse utilisation and rates will be. Mr Gordon said yards are looking for solutions to a significant ‘stranded’ inventory of vessels that they have built or partially completed, which are not yet delivered. Interestingly, more than 50% of the vessels in the orderbook have already been launched but remain stranded. “Since the offshore downturn, there has been a large increase in the number of launched units on the orderbook,” said Mr Gordon. “There has been a 12-fold increase in the number of units launched for longer than two years since September 2015. Of the 191 launched vessels currently on the orderbook, only five have been launched for less than a year.” As he noted, just as there are costs involved in bringing a vessel out of layup, there may be reactivation costs associated with delivering launched units that have not been delivered, and yards may be increasingly forced to enter the resale market. One notable and encouraging development in the offshore oil and gas industry as a whole is that production asset FID is improving. Mr Gordon

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told delegates that there had been a pickup in floating production, storage and offloading units, floating liquefied natural gas and floating storage and regasification unit awards, which could drive demand for support vessels. He also drew attention to specialist subsea newbuild orders and service operation vessels for renewable energy projects, such as in the offshore wind energy market. Describing potential demand growth in what he called “adjacent markets,” Mr Gordon said owners and shipyards are looking for opportunities in just these adjacent sectors. Another potentially encouraging development – at least for owners with vessels in the North Sea – is that 2018/19 will hopefully see exploration/appraisal campaigns in Russian waters. These could have tangible effects on the supply/demand balance in the North Sea OSV market if they remove large AHTS vessels on term charters into Russian waters. Less encouraging is the fact that the financial landscape for shipowners remains very challenging. There are fewer European ship finance banks in the market than there once were. Regulation of financial markets is increasing, and terms are more conservative than they once were. There is more export credit and leasing available (especially in China), which could have a potentially adverse effect if it enables more vessels to be delivered into an already overcrowded market. However, 2017 also saw the first annual increase in finance raised on capital markets since 2013. Day rates for OSVs are one of the most important measures of the health or otherwise of the market. Mr Gordon was able to report “marginal improvements” in rates in the North Sea, but said most rates remain at or close to opex globally. Against this backdrop, he said, there is an ongoing need for restructuring and consolidation. There will be more merger and acquisition activity of a type that typically occur where owners take advantage of countercyclical opportunities. Even so, he told delegates, there are major financial issues to solve. “S&P activity is increasing,” he said, “but there is still room for wider consolidation.” OSJ

Offshore Support Journal | April 2018

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Offshore Support Journal April 2018  

Offshore Support Journal is the leading publication focusing on the offshore support vessel market.

Offshore Support Journal April 2018  

Offshore Support Journal is the leading publication focusing on the offshore support vessel market.