New rotorcraft are reducing costs in the offshore helicopter market while E&P opportunities are also opening up. But is this enough to revitalise a sector hit hard by the oil and gas downturn and burdened by oversupply?
Much like the OSV sector, the offshore helicopter market has been buffeted by strong headwinds from the prolonged downturn in the oil and gas market but an analysis by UK-based Westwood Global Energy Group, foresees brighter skies ahead.
“We see about a 5% annual growth rate over the next five years for the offshore helicopter market,” Westwood Global Energy Group director Steve Robertson says. “The main driver is platform operations, plus offshore drilling rigs – similar drivers to the OSV market.”
Expenditures on offshore helicopters are expected to increase to a total of US$18Bn between 2019-2023, with about US$130M related to offshore wind activities. Utilisation rates will be about 63-68%, according to Westwood Global Energy.
Steve Robertson (Westwood Global Energy): “Lower acquisition and operating costs of super-mediums will make them a popular choice in comparison with heavy helicopters”
Some of the most popular models in the offshore helicopter fleet – Lockheed Martin’s Sikorsy S-61 and S-92, the Airbus H215 and H225 and the Russian Helicopters’ Mi8 – are categorised as large units, which is based on maximum take-off weight (MTOW).
The dominance of these larger offshore helicopters is now being challenged by a new generation of ‘super-medium’ rotorcraft with 7,000-9,000 kg MTOW. Manufacturers such as Leonardo, Airbus and Bell say that the super-medium rotorcraft can perform most of the duties of a heavy helicopter at lower acquisition and running costs, with the latest standards in safety, comfort and efficiency.
“Several designs fit this category, such as the Airbus H175 and Leonardo AW189, and Bell’s forthcoming 525,” says Mr Robertson. “In theory, these aircraft can perform many, but not all, of the missions currently performed by heavy (above 10,000 kg MTOW) helicopters.”
Still, Mr Robertson does not foresee the old mainstays, such as the S-92, disappearing from the fleet anytime soon. “Our analysis of the heavy helicopter market shows that utilisation improved in 2018 for the S-92, so it is hard to argue that they are getting replaced just yet,” he says. “Sikorsky is also offering upgrade packages to the S-92 aircraft and a newer variant, the S-92B, which is starting to be sold this year with deliveries expected in 2022. This appears to be a move to improve the competitiveness of the S-92 with the super-medium category,” says Mr Robertson.
Saudi Aramco has upgraded its fleet with new Airbus helicopters for search and rescue operations
One energy company that has initiated the renewal of its offshore helicopter fleet is Saudi Aramco. It has purchased 16 medium-class AW139s for offshore search and rescue (SAR) operations from Italy’s Leonardo. A particularly useful addition to the AW139 rotorcraft is night vision technology, which greatly improves flight safety.
“The super-medium rotorcraft can perform most of the duties of a heavy helicopter at lower acquisition and running costs”
Additionally, Saudi Aramco has replaced five AW109s with the newest variant of the Airbus H145, which are 4-tonne-class, twin-engine helicopters.
“It is thought that the lower acquisition and operating costs of super-mediums in certain roles will make them a popular choice with operators in comparison with heavy helicopters,” says Mr Robertson.
A changing of the guard?
As is the case in the OSV sector, the offshore helicopter segment is also being weighed down by oversupply.
“Our analysis shows that demand growth alone is not going to absorb the excess supply,” explains Mr Robertson. “The problem is that the industry has gone through a fleet replacement and renewal process and brought into the market more efficient, more comfortable aircraft built to the latest safety standards. [But] the industry has not taken the older units out yet because there are still companies happy to use a 30-year-old unit and there is nothing else driving the need to scrap older helicopters, such as regulations or requirements from oil companies.”
Overall utilisation of the S-92 remains relatively strong – an estimated 78% – despite the oil industry downturn, which is testament to the performance of the helicopter. Also, points out Westwood Global Energy, it is the only real alternative to the Airbus H225 units, many of which have not returned to the market since 2016.
In some limited instances, crew boats and fast supply boats, outfitted with comfortable airline-type seating, well-appointed cabins and walk-to-work gangways, have displaced helicopters, but, says Mr Robertson, “there are many areas around the world where oil and gas operations are too far from shore, or sea conditions are too harsh, to make them a viable alternative.”
While it does not have historical data to compare to, Westwood Global Energy reports that some helicopters in Brazil and the North Sea are being used intensively, with some units recording over 100 flights over an 18-day period. The main workhorses in such cases were the 150 active S-92s, which completed 5,335 flights over an 18-day period, averaging two flights per day. Data provided by Sikorsky shows overall offshore flying hours for the S-92 increased by 7.5%, to more than 154,000 hours last year.
“There are many areas where operations are too far from shore, or sea conditions are too harsh, to make crew boats and fast supply boats a viable alternative to helicopters”
The busiest heliport for S-92 operations was Aberdeen, with a total of 5,335 flights. As of 18 December 2018, nearly a fifth (19.3%) of the active fleet was working from Aberdeen (ABZ); Stavanger (SVG) in Norway accounted for 10% and Houma-Terrebonne (HUM) in Louisiana and Broome International in Australia each accounted for a further 9%.
Based on 407 rotorcraft in the large offshore helicopter fleet, the Westwood Global Energy demand model puts large helicopter requirements at 235 units in 2018, yielding an implied utilisation of 59%.
Examining the supply-side in more detail, Westwood Global Energy notes that for supply and demand to achieve equilibrium this year, out-of-service H215/225 and older helicopters would have to be removed from the fleet. This would bring the effective supply down to 226 units (compared to a modelled demand of 235 units) and would require full utilisation of the S-92 fleet. However, some of the newer super-medium aircraft, such as the AW189 and H175, are likely to be used in roles that were previously serviced by large-class helicopters. This could inflate supply to as many as 278 offshore helicopters.
“It’s hard to speak about the market in terms of bright spots, because the main international helicopter operating companies have all found this downturn very difficult and have faced pressure in terms of reduced flying hours and reduced rates on new contracts,” points out Mr Robertson.
“Helicopters are expensive to acquire and the costs of having un-utilised aircraft is high. I think where we have seen new opportunities in the market is where new regions have opened to E&P operations, and developments which have brought with them the need for helicopter crew transfer and SAR services,” he says. He cites Guyana, Senegal and East Africa as new prospects and the expansion of existing operations, such as in Brazil, as bringing opportunities for new helicopter contracts.