The subsea industry was showing modest signs of improvement in early 2020, but whether the sector is robust enough to support a recovery remains in question
Analysts at the Offshore Support Journal Subsea Conference highlighted a mixture of fundamental problems in the market, coupled with a few potential areas for growth. And while the outlook isn’t as rosy as many would hope, uncertainty has not stopped innovation among both subsea vessels and the technologies that support them.
Utilisation ‘in the doldrums’
Vessel oversupply and under-utilisation in the subsea market have left rates flat and the situation is unlikely to change any time soon, according to Strategic Offshore Research managing director Ian McIntosh.
In an overview of the subsea market, Mr McIntosh explained that the market is out of balance, leaving subsea vessels and contractors struggling.
"Where are we right now? We are in some pain," he said.
While demand began to increase throughout 2019 –Mr McIntosh even said the subsea sector "turned a corner" – the cyclical, seasonal nature of various segments foreshadow a lengthy recovery period.
Mr McIntosh noted that deepwater was "reaching the bottom of its process" and would take longer to recover than some other segments.
While there is work to be found elsewhere, he said oversupply and intense competition meant such work would not necessarily reach a break-even point for those vessels involved.
"With all this oversupply, you’ve had lots of high-spec subsea support vessels in other parts of the market – sometimes, you have had boats making less in service than they would while laid up," he said.
"Some boats are being used effectively – but at very low rates – by oil companies to house their workers," he added, noting the rates for that type of work could go up if utilisation increased because the vessels represent an attractive option for oil companies, being cheaper than using larger vessels.
Mr McIntosh noted there is construction support work to be had on new field developments, but it was largely seen as a fall-back for contractors aiming for more consistent, better paying work in other segments.
Overall, he described a chicken-and-egg recovery, hampered by persistent oversupply and under-utilisation.
"Pricing in the subsea market is all about utilisation,” he said. “It has started a very modest recovery, but rates are going to take a lot more time to move again, to get the momentum back."
He continued: "Even as demand starts to improve, there is a lot of inertia to overcome for boats and for contractors because utilisation is not going to immediately jump to 90% – utilisation is still going to be in the doldrums."
Hybrid propulsion the safe bet for offshore vessels
Based on technology and efficiency, rather than economic factors, DNV GL segment director for special ships Arnstein Eknes said hybrid propulsion was a sound choice for ships that operate at low speeds.
“What is economically viable is a different story,” Mr Eknes said, acknowledging the cost factors that would drive many companies to take different decisions.
On the subject of innovation in hybrid subsea vessels, Mr Eknes remained optimistic that the transition from petroleum-based engines to cleaner systems could be both cheap and environmentally sound.
He noted that most offshore vessels that are currently operational are not newbuilds but retrofits, making hybrid systems a natural choice and citing the fact that over half of operational vessels now run hybrid systems.
Moreover, the various factors in an offshore vessel’s operation – waiting time, anchor handling, DP operations – result in high fluctuations in power demands. Mr Eknes said hybrid was a natural solution where big variations in power exist.
On the need for batteries combined with hybrid systems, he said vessels with DP2 and DP3 are not allowed to run on one engine alone. Further, he said that battery systems were a natural choice to ensure peak shaving and optimisation of engine load.
With regard to subsea vessels, Mr Eknes stressed that suppliers should consider hybrid systems to match consumer expectations in terms of decarbonisation and emissions reductions.
Heavy lift in the 2020s
Ulstein Design & Solutions sales manager Nick Wessels said current demand projections reveal a shortage of heavy-lift vessels through the 2020s.
Covering guaranteed decommissioning hot spots and renewable projects slated for the next 20 years, Mr Wessels said Ulstein rested its case for a new heavy-lift crane vessel on several factors: post-2020 lifting capacity above 2,000 tonnes; age and placement of vessels; and a 70% utilisation average.
Decommissioning hot spots include the North Sea and Gulf of Mexico, both with thousands of platform structures and wells earmarked for decommissioning. Southeast Asia, too, is an emerging market for decommissioning projects, with numerous platforms and wells, he said.
With 2,000 decommissioning projects in place, assuming 14 days per platform removal and 70% utilisation, the work would keep five heavy-lift vessels in business full-time in the North Sea and Gulf of Mexico alone for the next 20 years, Mr Wessels said. That statistic does not include the southeast Asian market, he added.
In the renewables sector, offshore wind turbines are getting larger and becoming more plentiful, Mr Wessels said. More than 13,500 monopile installations are guaranteed over next decade (to 2030) – with most in Europe and Asia – and more than 10,000 more are in the planning stages, with dates yet to be decided. Assuming two days per monopile and 70% utilisation, the 13,500 monopiles that have an installation date set require at least 10 heavy-lift vessels full time until 2030, according to Mr Wessels.
By 2022, Ulstein’s figures show a total of around 50 heavy-lift units with lifting capacity above 2,000 tonnes, worldwide. Only 10 crane vessels currently exist with adequate lifting capacity for larger projects and half of these, Mr Wessels said, are in China.
Mr Wessels said Ulstein saw a shortage of vessels in the market over the next decade.
While Ulstein acknowledged some of this shortage could be solved by converting units, it argued the strategy "may not be the best fit for future markets".
Instead, Ulstein settled on the specifications for its newbuilding design – the 30,000-dwt DP2 Ulstein HX 118, which will have capability to transport and install six 2,000 tonne monopiles, or five 1,500 tonne jackets.
The vessel design measures in at 193.2 m long, 15.4 m tall, 49 m wide, with a 130-m deck length and a 99-m crane tower.
Ulstein said it was working with Huisman on the crane, which will have a main hoist of 3,000 tonnes at 30 m, 2,000 tonnes at 40 m and 1,000 tonnes at 50 m.
Asked why the company had not opted for a 4,000 or 5,000-tonne crane, as some of its competitors had, Mr Wessels referred back to the market analysis.
Session moderator, Subsea 7 vice president Stuart Smith offered an answer in the form of a rhetorical question: "If you have a vessel that can access 80% of your market, what is your driver to spend more on a 5,000 tonne crane?"
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