IHS Markit analyst Catherine MacFarlane explains why ‘recovery’ may still be an optimistic term for events unfolding in the subsea sector
Speaking at the OSJ Subsea Conference in London, IHS Markit analyst Catherine MacFarlane confirmed many operators’ worst fears: “The short answer to the question, is the subsea fleet recovery real? is, not really.”
Discussing the rationale behind this opinion, Ms MacFarlane examined the current fleet, determining the number of vessels that have been retired, those under construction and those sold. Some 16 vessels retired in 2017 and the same number again in 2018, she said, while a total of 19 pipelayers have retired since 2010. Eight diving support vessels (DSVs) were retired in 2017-18; however, only five ROV support vessels have been retired during the course of the last nine years.
“It is no surprise that we’ve seen high levels of attrition in recent years, due to the downturn,” she explained.
The subsea sector is seeing a high number of vessels under construction, with 58 vessels due for delivery in 2019, alone.
And of the 71 vessels under construction as a whole for use in the sector, accommodation vessels account for more than any other vessel type (31).
The market for walk-to-work (W2W) vessels is particularly strong, “It is certainly a growing market,” Ms MacFarlane said, adding “It is not going to replace helicopters any time soon … but certainly we are seeing positive signs in the oil and gas sector.”
Service operations vessels (SOVs), Ms MacFarlane said, “look like the market to be in”, when strictly comparing utilisation rates against the rest of the sector.
In terms of sales, Ms MacFarlane’s data shows that 2018 had a historically high number of vessels sold (29), with the majority of those remaining in the markets they traditionally served.
Remotely-operated vehicle support vessels (ROVSVs) currently offer the most flexibility for shifting between markets. Ms MacFarlane’s data shows a growing trend for such vessels moving away from oil and gas and into offshore wind work; utilisation and day rates for ROVSVs tell a similar story.
“The non-oil and gas work is having an impact,” explained Ms MacFarlane, noting that this is not only in terms of offshore wind, but incorporates salvage work and other types of marine work, “so [utilisation in those new markets] has increased hugely in the last decade. In 2009, that was 9%,” she said.
Looking at 2019 and beyond, Ms MacFarlane said: “This year, [overall utilisation for ROVSVs] is looking quite stable and hovering above 50% through 2023.”
DSVs do not fare so well in the short term, with a “huge oversupply of vessels” limiting utilisation below 50% through 2023.
On the whole, Ms MacFarlane expects utilisation to improve slowly, and day rates to make a “very slow recovery”.
“We are still very far away from those rates that we saw in 2013 and 2014,” Ms MacFarlane explained. “On a global scale, the recovery has been very slow and very painful for the subsea market.”