With some 1,000 OSVs stacked, owners should look to employ or sell their vessels into other markets outside the oil patch, says John Snyder
While the offshore oil and gas market is in the midst of a slow recovery, there is still a vast oversupply of offshore support vessels and wringing out this excess supply has posed a real challenge to the industry.
Over the last six years, US-based Tidewater made some tough decisions regarding its fleet, scrapping or selling 217 of its OSVs, 85 of which were sent to ship breakers.
Now, with utilisation rates creeping up and vessel day rates stabilising, Tidewater has decided to reactivate 10 OSVs this year for work in the Middle East, Nigeria, Thailand, Angola and Guyana. The reactivations were only decided upon after securing contracts for each vessel, generating a total backlog of US$110M. Each reactivation comes with a hefty price tag — about US$1.4M per vessel.
It is estimated that 1,000 OSVs are stacked around the world, about half of which have been out of service for more than three years and more than 400 of which are over 15 years old. Many of these OSVs will not be returning to service in the oil patch because the economics of their reactivation simply do not make sense.
Some OSV hulls, however, might be suitable for other lines of work. Back in the 1980s, some OSVs were converted to commercial fishing vessels, and it is an idea whose time has come (again), with several fishing companies acquiring former OSVs for conversion from owners or banks at distressed prices.
Seattle-based fishing company Ocean Peace, for instance, acquired 15-year-old anchor handling tug supply vessel Ken C Tamblyn for conversion to a factory trawler for operation in Alaska. Crowley Maritime’s naval architectural arm Jensen Maritime also identified this opportunity for platform supply vessels (PSVs), which by their very nature would seem to be good fits for conversion to fishing vessels. PSVs are single-deck vessels that offer large open aft deck areas, with similar crew accommodations and propulsion systems to commercial fishing vessels.
While not all PSVs are suitable for conversion, an opportunity could exist for interested parties to acquire a relatively new asset for far less than its original cost to build. Additionally, a well-engineered conversion could help a commercial fishing vessel operator get a ‘new’ vessel in the water far faster and, again, at far less cost than a newbuild.
One solution that has perhaps even more merit is converting an OSV hull into a small-scale LNG bunker vessel. There are several naval architects already working on engineering and cost analyses of these conversions. As we reported, a Norwegian company received an agreement in principle for a small-scale LNG bunker vessel based on an OSV hull.
One of the stumbling blocks for the expansion of LNG as a marine fuel is available LNG bunkering infrastructure. The conversion of an OSV hull into a small-scale LNG bunker vessel would lower initial capital investment, rapidly expand the availability of marine refuelling infrastructure and spread the availability of LNG in more remote and island areas.
OSV owners would also benefit from the sale of the vessel, turning a liability into an asset. An entrepreneurial OSV owner could even expand into the LNG bunkering business. From what my sources are telling me, we could well see some news on that front shortly.