The seasonal downturn in the North Sea was compounded by the weather, but while global utilisation rates remain low, increased scrapping and sales point to a potential firming of values
The offshore charter market in the North Sea throughout January and February 2020 was dominated by very unhelpful weather. Storms trapped OSVs in port and those that ventured out on cargo runs and rig moves found activity delayed for hours or days until conditions calmed sufficiently to allow safe operations. As a result, some spot-hired anchor-handling tug supply vessels (AHTS) were taken off-hire before work could commence.
Reported charters in the North Sea included the LNG-powered dual-fuel platform supply vessel (PSV) Siem Pride, which has been on contract to Norske Shell since delivery in 2015 and has had the charter extended for another five years Siem Pride is built to Wärtsilä’s VS 4411 DF design and powered by either LNG or marine diesel oil. The PSV has a length of 89.2 m, a deck area of 980 m2 and a capacity of 5,500 dwt.
Another reported charter was that of the multi-purpose support vessel (MPSV) Siddis Mariner, which was fixed for a firm 14 months to support Neptune Energy’s drilling session with the newbuild semi Deepsea Yantai in the Duva oil and gas field (formerly Cara) located in the Norwegian sector of the North Sea at a water depth of 360 m. Siddis Mariner has an interesting history, having been completed at Kleven Maritime in Norway in 2011 it started life in conventional fashion as a MPSV on a one-year plus one-year charter with Norway’s state oil company Statoil.
In 2015, Siddis Mariner was converted to a cable-layer by Remontowa Shiprepair Yard, which included the installation of new decks where cable-laying equipment was installed, the addition of cranes to the vessel, structural strengthening in several places and the installation of cable cradles and hydraulic piping connections. Tensioners, roller ways, slide frames, protection frames and winches were also installed and on the main deck, a 750-tonne cable turntable was installed. The Polish yard was also responsible for building foundations, connecting cables and hydraulic piping, and a submarine cable guide jib was incorporated into the vessel. In total, some 160 tonnes of steel structures were installed on the vessel, which was due to go to work on an offshore windfarm in German waters.
Once the job was complete, in 2015, Damen Shiprepair Harlingen was engaged to remove the cable-lay equipment from Siddis Mariner. The Damen yard was made responsible for demobilisation and reinstatement of the original structure. The cable-lay equipment was removed over a two-week period. Having removed all of the cable-lay and related deck equipment, the yard placed Siddis Mariner in temporary storage before transportation back to the original owners. The mezzanine deck and its supports – which had been specially fitted for the temporary role – were carefully cut and removed in such a way that they can be re-used again. Siddis Mariner’s original bulwarks, cargo rails and piping were rebuilt and the ship left the Dutch yard as originally designed and built. In theory, Siddis Mariner could revert to cable-laying duties.
Active as always in the North Sea was the Norwegian state oil company Equinor, which fixed eight PSVs for work during the North Sea spring season. Three PSVs, Havila Clipper, Stril Pioner and Viking Queen were already on hire to Equinor and these have been joined by Troms Pollux (reported at £11,000/day (US$12,800) for seven days), KL Brofjord, Saeborg, Torsborg, and Troms Castor. The PSVs are coming off various charters but the particular work for Equinor or the rates have not been reported. Other hires for Spring work in the North Sea include Hermit Galaxy and Hermit Horizon which will be supporting Island Innovator.
Premier active was also active in the North Sea Oil, having chartered the PSVs Skandi Caledonia and Normand Flipper from DOF and Solstad Offshore to work in the Tolmount field. The work will commence in June 2020.
Another reported PSV charter was for a large decommissioning campaign in the North Sea. Vroon Offshore Services (VOS) secured the charter of the 2010-built PSV VOS Prelude to oil company Eni UK Limited. Operating out of the port of Great Yarmouth, the PSV is fixed for a 31-month charter supporting a plug and abandonment and decommissioning campaign in the southern sector of the North Sea. The contract contains options to extend the charter if required.
Eni UK Limited has decommissioning projects at the Big Dotty, Dawn, Hewett and Little Dotty fields in the North Sea, according to the UK’s Oil & Gas Authority database. The UK Oil & Gas Authority has approved Eni UK’s application for the cessation of production operations at the Hewitt field, with plans for a well plug and abandonment campaign to commence in Q1 2020. Production at the other three fields has been shut-in, with similar plans for well plug and abandonment activities in Q1 2020. Valaris has been awarded the well plug and abandonment contract.
Flying the Dutch flag, VOS Prelude is a UT-755 LN design PSV built at Cochin Shipyard in India, managed and operated by VOS Den Helder. Constructed to Lloyd’s Register clean class notation and dynamic positioning class 2 capable, VOS Prelude has an overall length of 73 m, beam of 16 m, depth of 7 m and maximum draught of 5.9 m. The PSV has a deck cargo capacity of 1,600 tonnes, with a deck area of 708 m2.
The decommissioning support work for VOS Prelude follows a separate charter with Eni UK completed for a drilling campaign in Q4 2019.
The low level of charters due to seasonal storms took a toll on activity and by late January 2020 it was clear that utilisation had fallen to very low levels. Seabrokers’ utilisation index for large AHTS in January 2020 was recorded at 36%, which was the lowest level recorded since the Norwegian OSV shipbroker began the time series in 2012. Seabrokers has also launched a smart phone-first app called SeaPortal, which should speed up the research and fixing of OSVs. SeaPortal handles vessel chartering, communication and document management. Charterers can review offers, which are stored indefinitely, allowing historical review. All certification and documentation regarding a vessel can be stored, speeding up the research stage.
In Malaysia, OSV provider Nam Cheong Limited inked charter contracts for six vessels with international oil majors worth RM116.4M (US$27.7M). Under the contracts, Nam Cheong will supply three AHTS vessels, two accommodation work barges, and one PSV, all of which will mainly operate in east Malaysian waters to support the drilling activities of international oil majors. Combined with a previous RM54.8M (US$13M) charter signed in December, these latest contracts are expected to contribute positively to Nam Cheong Group’s financial performance for the financial year ending 31 December 2020 and 31 December 2021.
With the new order wins, Nam Cheong’s orderbook stands at RM318.2M (US$75.7M), after including revenues from options for extension. Nam Cheong’s revenue from vessel chartering for FY2019 surged by 112% year-on-year, from RM134.5M (US$32M) in FY2018 to RM285.4M (US$67.9M) in FY2019, mainly attributable to the expanded fleet size (from 28 vessels in FY2018 to 36 in FY2019). Commenting on the new contracts, Nam Cheong chief executive Leong Seng Keat said: “The sizeable new order wins are a good start for the year, adding more stability and visibility to our revenue and orderbook.”
He added: “While we remain vigilant on the market outlook, we will continue to capitalise on our capabilities and reputation in the vessel chartering business and diversify into engineering, procurement, construction, installation and commissioning projects to capture more opportunities during the industry upturn.”
In the US Gulf, one extraordinary charter involved a PSV that required a new propulsion system. Given the number of inactive vessels, this highlighted a certain level of faith in the unit. Odyssea Phoenix was built in 2013 by Fincantieri Bay Shipbuilding, Sturgeon Bay, Wisconsin, as Dean Edward Taylor. In 2018, Odyssea Phoenix was sold by Tidewater to Odyssea Marine. The unit is a MMC 887 design PSV, dynamic positioning (DP) class 2 capable, with a length of 92 m, beam of 18.8 m and a loading capacity of 3,300 tonnes. The US-flag PSV is one of 14 DP1 class and DP2 class vessels operated by Odyssea Marine. When Odyssea Marine acquired the vessel, its propulsion system needed replacing; it had already failed after a brief period of operation and a simple repair was not possible. The propulsion solution had to be available quickly, since the vessel was to begin a charter in the Gulf of Mexico. Odyssea Marine selected Schottel for the retrofit, opting for the company’s azimuthing rudder-propellers.
In South East Asia, Vroon also signed a two-year extension with Brunei offshore vessel owner JISCO Marine Sdn Bhd. The deal covers a two-year extension for a third-party shipmanagement contract for the accommodation workboat Nautical Aisya. The renewal will extend the co-operation between JISCO and VOS Singapore until at least the end of February 2022. The extension follows the award of a new contract by Brunei Shell Petroleum to JISCO Marine for Nautical Aisya. Built in 2015, the accommodation vessel has DP class 2 capability, an overall length of 85 m, beam of 23 m and draught of 6.1 m, with a 900 m2 working deck and helipad. The new charter, which commenced on 1 February, continues an initial two-year, DP class 2 charter, during which Nautical Aisya was cited by Brunei Shell Petroleum as its best-performing vessel in 2019, according to Vroon. Sailing under the Brunei flag and in ABS class, Nautical Aisya will now widen its job scope to include helicopter operations, creating added value for Brunei Shell Petroleum in South East Asia.
South East Asia recorded the second highest level of OSVs idle or out of work. According to VesselsValue – which uses the measure that if an OSV that have not transmitted an AIS signal in the last eight weeks it is considered out of work or in lay up – 30% of the available OSV fleet is idle. The highest level was recorded in the US Gulf, where 37% of the OSV fleet was out of work. VesselsValue head of offshore Robert Day noted that North America has been the most active in reducing fleet supply. Speaking at Riviera Maritime Media’s Annual Offshore Support Journal Conference in February 2020 he said: “The vast majority of scrapping took place in 2018 and 2019 and from the North American fleet.”
He continued: “Over in Europe, the owners are reluctant to scrap due to the low residual values, and their desire to continue to work the vessels. The big player in the North Sea, Tidewater, has done its part, but the smaller two or three vessel operators are hanging onto the vessels. Among the bigger players, Solstad have not done so and nor has Bourbon, although it may be forced to later.”
Mr Day cited as another influence on reducing OSV supply “vessel’s selling out of the offshore market.” These factors will influence the sale and purchase market and the direction of values. “We have seen some strong sales at firm prices and these have pushed values up,” he said. “Also, thanks to Toisa (distress sales) the market [is] at the bottom.”
His prognosis for the rest of the year was encouraging: “There are more enquiries and people are buying ships: there is a smaller pool of ships to choose from and there are some strong (cash-rich) buyers,” he said. “If there are more buyers from outside the offshore market, the trend will continue.”
The trend however is not yet firm enough to tempt any newbuilding orders, no matter how low the prices on offer from the yards. No AHTS or PSV has been ordered since February 2019. The sale and purchase market was relatively active in January and February 2020, with 23 trading deals recorded by VesselsValue. Two of the trading sales are for small units close to or over 40 years old and could be aggregated to the seven sales for demolition report during the period.
At the other end of the scale, two 2020 newbuilding resales are reported: one is a 1,500 dwt PSV built at Fujian SouthEast in China. The seller is Coastal Contracts of Malaysia. No price was reported. Coastal Contracts has a further 30 OSVs on order, including 10 at Fujian SouthEast and 16 at Hangtong. The OSVs on order range from dive support vessels to 150-bhp AHTS. No prices were reported.
One trading deal with a reported price was the sale of the 2012-built, 5,000-bhp Teras Genesis by Teras Offshore of Singapore. Astro Offshore of the UAE reportedly paid US$2.25M for the Cheoy Lee-constructed vessel. Another Cheoy Lee-constructed 5,000-bhp AHTS was sold to Tan Chang Saigon (Vietnam) by Emas Offshore of Singapore. The 2005-built, Lewis Sapphire changed hands for a reported US$1.2M.