After a challenging year, 2021 has started off on an optimistic note, with North Sea spot rates up 74% year-on-year and PSV capacity selling out
While the one-two punch of Covid-19-related challenges and volatile oil prices made 2020 a year like no other, brokers are starting to see a glimmer of optimism in the offshore support vessel market.
“OSV owners will have been glad to see the back of 2020 but there are already some signs emerging that indicate 2021 might bring them better fortunes in the North Sea,” wrote ship broker Seabrokers in its Seabreeze report in February.
Indeed, this time of year in the North Sea can be slow, with Seabrokers noting: “Limited levels of demand and a spot market that is primarily in charterers’ favour during the quiet winter period. However, we have experienced spells where spot platform supply vessel (PSV) availability has been in very short supply. There were times in February where the market was effectively sold out and some charterers had to look towards anchor-handling tug supply (AHTS) vessel availability for cargo runs.”
Average day rates for PSVs with clear deck areas of less than 900 m2 were up a whopping 74%+ in January 2021 over the same time last year, hitting £11,012 (US$15,400) per day. In January 2020, average day rates were £6,308 (US$8,800).
Among those owners achieving peak fixtures were Vroon Offshore Services (VOS), which secured a day rate of £20,000 (US$27,890) on the spot market for VOS Paradise in the UK, and Remøy Shipping fetching Nrk205,000 (US$23,695) for the 2016-built offshore supply tug vessel Hermit Horizon in Norway. A Vard 1 08 design, Hermit Horizon was built for standby and oil recovery service, with a clear deck area of 830 m3.
Meanwhile, VOS Paradise, built in 2015, is an Ulstein PX121 design built by COSCO (Guangdong) Shipyard, with dynamic positioning class 2 capability, flexible tank capacities to support drilling operations and 830 m2 clear deck space.
Day rates for PSVs with larger capacities were also up, with those with more than 900 m2 of clear deck space commanding an average rate of £9,861 (US$13,761) for January 2021, up more than 23% year-on-year.
“The market could swing back in charterers’ favour if too many vessels are brought back into service too quickly”
Underpinning these lusty rates was capacity discipline by OSV owners, according to Seabrokers, which noted: “Limited availability comes largely as a result of the layup activity, with owners collectively moving the supply-demand balance more in their favour by removing tonnage from the active fleet.”
But the Norway-based ship broker warned: “Recent rate levels will make it tempting for owners to reactivate PSVs, and the market could easily swing back in charterers’ favour if too many vessels are brought back into service too quickly.”
In March, DOF Group reported the award of term contracts for three of its PSVs for work in the UK sector of the North Sea. Starting in April, DOF will charter Skandi Gamma to Ithaca Energy (UK) Limited for a period of two years. The contract contains two options for additional one-year extensions. Skandi Gamma has been working in the UK continental shelf since 2019.
Two other DOF PSVs will go to work supporting pipe-haul operations in Guyana in 2021 and 2022, reported the Norwegian OSV owner. The campaign will begin in Q3 2021, and the award secures a backlog of at least 150 days in 2021, and 270 days in 2022.
|North Sea average rates January 2021|
|Category||Avg rate Jan 2021||Avg rate Jan 2020||% Change||Minimum||Maximum|
|Supply duties PSVs <900m2||£11,012||£6,308||74.57%||£5,250||£20,000|
|Supply duties PSVs >900M2||£9,861||£8,014||23.05%||£5,250||£15,995|
|AHTS duties <22,000 bhp||£10,928||£18,562||-41.13%||£6,108||£27,132|
|AHTS duties >22,000 bhp||£20,121||£16,901||19.05%||£9,327||£46,633|
|Source: Seabrokers Group|
DOF is also in the process of rationalising its fleet. On 3 March, it announced the sale of the 2006-built Skandi Texel, an MT 60009S design PSV, out of the oil market for Nrk12M (US$1.4M).
As of 1 March, year-to-date, there has been US$44M in OSV sales, less than half of the level at this time last year and less than 25% of 2019, according to a VesselsValue monthly report for February; sales were US$91M and US$186M a year earlier. This does not include sales and purchases of smaller PSVs (300 dwt and under) or fast supply vessels. Some OSVs are being sold out of the sector and converted for other sectors.
Despite oversupply in the OSV market, demolition sales for the sector continue to be extremely low, with only US$4M completed year-to-date – the same as 2020 and half of 2019 levels. Based on offshore fleet development data, the biggest fleet rationalisation over the last seven years occurred in September 2020, when it shrank more than 40,000 dwt.
|North Sea spot average utilisation (January 2021)|
|Source: Seabrokers Group|
As of 1 March, 3,867 OSVs (74% utilisation) and 1,024 offshore construction vessels (78% utilisation) were active globally, according to AIS data. VesselsValue considers a vessel out of work or in layup if it has not signalled in over eight weeks.
OSV and offshore construction vessel (OCV) owners operating in Northwest Europe, incorporating the North Sea, and South America, covering Guyana and Brazil, are enjoying the highest vessel utilisation rates. In northwest Europe, 656 OSVs are active, representing an 84% utilisation rate, while 252 OCVs (91%) and 63 mobile offshore drilling units (76%) are working. In South America, 275 OSVs (82%), 61 OCVs (92%) and 33 (94%) are active, by far the smallest market by number of vessels in service. The largest market by number of vessels active is the Middle East, with 1,275 offshore vessels active – 75% OSVs, 20% OCVs and 5% MODUs.
PSVs, anchor-handling tug supply, anchor-handling tug, fast supply crew, crew transfer, standby or emergency response and rescue vessels and oceangoing tugs are categorised under OSVs. Subsea support, well service, lay, utility, maintenance, accommodation, crane, liftboat and windfarm vessels all are considered OCVs.