Significant oversupply remains, despite 550 vessels demolished over last five years
Global utilisation rates for OSVs are up 9% year-to-date (ytd) and the number of working vessels has risen by over 300 since 2017, indicating a continued strengthening in the offshore oil and gas market.
UK-based ship broker and research firm Clarksons Research reports that global utilisation has reached 64% and, led by a strong UK North Sea peak season for large PSVs, has prompted a 12% increase in its OSV rates index.
“However, oversupply remains,” cautions Clarksons Research, “with laid-up OSVs still material, and the evidence of 2018 showing that reactivation (at least of newer units) was possible.”
Clarksons also warns that there still remain a number of newbuilds that have yet to be delivered, but, on a brighter note, there has been an increase in valuations. “Solutions for the 231 OSVs still on order have been slow. However, there has been some increase in guideline price assessments (+13% ytd for a large PSV resale) given stronger charter markets. Secondary market sales continue to focus on older units.”
Speaking to delegates at Riviera’s Asian Offshore Support Journal Conference in Singapore in September, Fearnley Offshore Supply managing director Tor Allen Widing went deeper in his assessment, putting global utilisation rates for high-end PSVs at about 75% and low-end PSVs at less than 50%. Mr Widing said globally the market for anchor-handling tug supply (AHTS) vessels has stabilised at about 1,000 for the last three years, representing a collective utilisation rate of 55% between high-spec and low-spec vessels.
One of the bright spots is the Middle East, with Saudi Aramco’s spending spree driving demand for PSVs. The number of working vessels has hit near record highs and utilisation rates are at 80%; utilisation among AHTS vessels is at about 70%, with 400 vessels working.
Mr Widing said “significant oversupply” still plagues the market, with close to 1,100 vessels stacked worldwide. On a regional basis, southeast Asia, US Gulf of Mexico and West Africa have the most idled vessels.
Record levels of scrapping
Mr Widing believes that 230 AHTS vessels, that are composed of either vessels above 15 years old or long-term stacked vessels in the 10- to 15-year-old range, are scrapping candidates. Fearnleys Offshore Supply forecasts that the scrapping of these vessels, in conjunction with the addition of 40 newbuilds delivered through 2020, would allow the market to reach a “real” utilisation rate of 75%. Based on its projected rig demand, the Norway-based shipbroker forecasts an additional 220 AHTS vessels required to meet demand in 2020.
Prospects for PSVs appear to be even better, based on 250 older vessels being scrapped and only 50 newbuilds being delivered through 2020. Based on Fearnleys Offshore Supply’s rig forecast demand, about 250 more PSVs would be required, translating to utilisation rates of about 85% by next year.
Shipyards hold contracts to build 105 AHTS vessels, equivalent to less than 5% of the total world fleet. There are 141 PSVs on order, representing 9% of the world fleet, according to Fearnleys Offshore Supply.