Tank cleaning and bulk handling services are only required if full tanks have been emptied and there is actually bulk to handle. Along with the rest of the offshore sector, firms providing these services have suffered during the downturn. But while the North Sea is yet to enjoy any spring fever, the recovering oil price has boosted tendering activity
The tank cleaning industry has been hit hard in recent years. As the economy stumbled and production dwindled, so the amount of tanks being filled decreased. And if a tank has not been used, there is little call for a tank cleaning service, as MMASS Ltd managing director Ian Mcdougall explained: “If no one is building new ships, they’re not looking for package prices.” Tank cleaning systems are only used when tanks themselves are being filled said Mr Macdougall, adding “if there’s nothing going in the tanks, which could happen for months on end, they won’t be on at all”.
However, halfway through 2018, signs of life in the sector are starting to emerge. OSVs are coming out of layup as supply overhang decreases and investors appear willing to return to the offshore oil and gas sector. Furthermore, energy firms have resumed spending on exploration. UK-based Awilco Drilling has commissioned a newbuild harsh-environment semi-submersible rig from Keppel Fels, the first such order in four years, for US$425M.
Alfa Laval’s first-quarter results presentation highlighted an uptick in oil, gas and offshore activity. “Improved activity in upstream oil and gas, on shore as well as in the off-shore sector, contributed to both Energy and Marine reporting a somewhat better order intake than we had expected,” said Alfa Laval president and CEO Tom Erixon. “We expect that demand during the second quarter of 2018 will be on the same level as in the first quarter,” he added.
Norway-based pump system provider Frank Mohn (Framo), which was acquired by Alfa Laval in 2014, is reaping the benefits of this activity.
In April, Framo announced orders for a floating production, storage and offloading (FPSO) vessel in the North Sea (a contract worth Skr125M (US$14.2M); a floating LNG (FLNG) vessel to be built in South Korea (Skr50M); and an FPSO vessel to be built in China (Skr70M). An order worth Skr170M was also made for Framo pumping systems and emergency generators to form part of the safety and emergency power systems of a North Sea oil platform.
Meanwhile, compatriot PG Flow Solutions announced in January it had been awarded a contract to supply equipment for recovered oil services for an OSV returning to market after layup. The OSV is owned by Brazilian firm Wilson Sons Ultratug Offshore, a joint venture between Wilson Sons and Ultramar.
Aberdeen-based TWMA, which was acquired by offshore-focused private equity firm Buckthorn last year, recently announced it would be providing drill cuttings management - in the form of bulk transfer and storage of cuttings, as well as at-source processing - for a two-well offshore drilling project with New Age Cameroon Offshore Petroleum.
This follows the announcement in January of a three-year contract with Total for drilling waste management services in the UK continental shelf, and in August 2017 of a three-year contract, estimated to be worth £1M (US$1.3M), with E&P firm Azinor Catalyst for drill cutting containment and processing services on the Ocean Guardian rig in the central North Sea.
TWMA chief commercial officer Gareth Innes spoke to Offshore Support Journal about how the company had made it through the downturn and what the future might hold.
Mr Innes believes the key to TWMA riding out the downturn was “our customer-focussed approach and the uniqueness of our technology,” referring to the TCC RotoMill.
The traditional means of handling offshore drill cuttings in the North Sea has been via bulk handling and transfer, combined with ‘skip & ship’ for handling on shore. TWMA’s TCC RotoMill technology allows drill cuttings to be processed at source, with recovered base oil recycled back into the mud system; clean, treated water and solids can be safely disposed of at sea within environmental regulations.
While TWMA still offers bulk transfer and ‘skip & ship’ solutions for onshore treatment, the offshore TCC RotoMill method allows for increased logistical and operational cost savings.
“We do the processing offshore, which means we can return valuable base oil back to the customer to use in their mud systems,” said Mr Innes, adding: “It eliminates all the logistical and HSEQ issues associated with shipping hundreds of tonnes of cuttings and processing or disposing of them on shore.”
Mr Innes described this as “the cornerstone” of TWMA’s business. The company is working on expanding its geographical reach with this, and is currently involved in projects in Norway, the Middle East and Africa to this end.
Discussing TWMA’s acquisition last year, Mr Innes said: “The main thing with Buckthorn is it brings investment capital and the drive to turn the company more into an international oil service company.”
Previously TWMA was “a UK company with some international operations,” Mr Innes says, but its target now is to become a full-scale global oil service company – “the world’s drilling waste specialist”.
The Buckthorn investment also brought about changes in management, of which Mr Innes is an example, having joined the company from US oilfield services company Weatherford in October 2017. Another former Weatherford employee, Tony Branch, joined TWMA when the company was acquired, before taking on the role of CEO from Ronnie Garrick, who is company president. Nicholas Gee also joined the company from Buckthorn partners as chairman.
According to a company press release announcing Mr Branch’s appointment as CEO, the company is targeting turnover of £200M and a headcount of 1,500.
Commenting on oil prices and the resulting impact on OSVs, Mr Innes sees volatility as having driven investment to tight oil and shale gas in the US, as such projects have a shorter timeframe in terms of return on capital.
Offshore and deepwater projects, on the other hand, have longer development times and production cycles and are more attractive in times of stability. “We are expecting stability to come back into the oil price due to stock overhangs being depleted,” Mr Innes said. “We want the oil markets to balance as they are and continue to gain some ground.”
“That stable backdrop is what we need on the service side,” he concluded, noting that as long-term projects in any market benefit from such stability, so offshore will benefit from balance in the oil markets.