Disruptive ROV technology is adding uncertainty to a slowly recovering dive support market
After a prolonged downturn, confidence is returning in the dive support vessel (DSV) market, bolstered by a rise in subsea, construction and IMR activity, coupled with an increase in the scrapping of older vessels in the fleet.
“There’s a cautious recovery underway, with increasing utilisation, but rates have not yet followed,” Aberdeen-based subsea market consultancy Archer Knight executive director David Sheret told delegates at the Offshore Support Journal’s Subsea Conference in London.
Royal IHC area sales manager Daan Uiterwaal agreed with Mr Sheret that positive signs were emerging in the DSV market, noting the overall fundamentals are improving.
Despite a dramatic drop in utilisation over the last couple of years – according to Mr Uiterwaal about 50% of the fleet was looking for work as of Q4 2018 – IMR work is now on the rise. “You can only postpone IMR for a limited amount of time,” he said. “We see that market picking up and the construction market as well. There is more demand for DSVs; utilisation rates, however, remain low because of the influx of newbuilds entering the market.”
Despite the delivery of 15 newbuilds from 2016-2018, more than a third of the DSV fleet is over 30 years old, according to Archer Knight data. Mr Sheret said there are about 119 traditional DSVs in the world fleet; this does not include barges, for example, that have been used for saturation diving.
Utradeep Solutions' Lichtenstein has a twin-bell, 18-man saturation dive system
DIVE SUPPORT VESSEL NEWBUILDS, 2016-2018
Vessel - Yr Built
Deep Explorer - 2016
HYSY 285 - 2016
Khakendi - 2017
Kreuz Challenger - 2017
Lichtenstein - 2017
MPV Everest - 2017
Oceanicasub IV - 2017
Rawabi 501 - 2017
Seven Kestrel - 2017
Southern Star - 2017
Oceanicasub V - 2017
Deep Discoverer - 2018
Picasso - 2018
Said Athena - 2018
Van Gogh - 2018
Source: Archer Knight
Mr Sheret emphasised that there are 42 vessels that are 31 years or more of age and over the last few months a number of these vessels have been decommissioned.
According to Mr Uiterwaal, the vessels that disappeared from the fleet had reached the end of their useful service lives. Still, about 50% of the fleet is stacked or laid up: “Most of those will not return to the market,” he said. “We expect to see a replacement rate for DSVs of about 18% over the next five years. That paints a completely different picture of the market. Demand for newer assets is being driven by the oil majors.”
Dive support activity is starting to pick up in shallow water regions in the Asia Pacific, US Gulf of Mexico and Mexican Gulf, Europe and the Middle East; DSVs in Latin America are mostly being deployed as IMR vessels, according to Mr Uierwaal.
“In the past, older assets from the North Sea would cascade down into Asia Pacific or the Middle East. Used to working with higher-end tonnage, local oil majors are now pushing out those older assets. The fleet is a lot younger than it was a few years ago,” he said.
ROVs disrupt the market
While there have been new DSVs ordered – Singpore-based Ultradeep Solutions, for example, recently ordered three high-spec vessels – Mr Sheret questioned whether retiring vessels would be replaced by new tonnage or by emerging technologies, such as remotely-operated vehicles (ROVs) that are now being utilised for various types of activities. The question posed is: can the overall subsea operational expenditure (opex) market sustain a lack of DSVs, or will more ROV-type activity be incorporated as a cost reduction measure?
“Operators have gained the upper hand in the control of the supply chain in recent years and will fight tooth and nail to keep control of it”
Mr Sheret noted that private equity-backed operators, such as Norway’s Point Resources and OKEA, Scotland’s Siccar Point and the UK’s Chrysaor, are playing the role of disruptors in the market, taking fresh approaches to subsea operations management.
These companies have stolen a march on their competitors, thanks to an increasing use of ROVs, such as autonomous underwater vehicles (AUVs) and sonar-equipped fast-scan ROVs. Further, ROVs are starting to have impact on how IMR is carried out. A new breed of independent contractor has entered the market with innovative ideas on how things can and should be done; how this plays out will have an impact on utilisation as well.
The increased use of ROVs in subsea operations has left some owners questioning the very future of saturation diving, which has had a knock-on effect on investments in new vessels, according to Mr Uiterwaal. Additionally, he noted, more equipment manufacturers and contractors are competing for their slice of an ever-smaller DSV pie, creating increased competition for shipbuilders.
Activity ‘heats up’
Unsurprisingly, subsea vessel activity is concentrated in the North Sea, the Gulf of Mexico and the Middle East, areas while the majority of DSVs, construction support vessels and ROV support vessels (ROVSVs) currently operate.
As a means to improving or maintaining fleet utilisation, subsea support vessel owners have also diversified their market portfolios, working in the renewables, salvage, and fish farm sectors, observed Mr Sheret.
While capex in the UK North Sea fell for the fourth year in a row last year, the UK Oil and Gas Authority said it expected to see the downward trend of UK oil and gas upstream investment halted in 2019, projecting a 4% increase.
Oil and gas production in the UK increased by more than 4% in 2018, averaging 1.7M barrel of oil equivalents (boe) per day, according to a Projections of UK Oil and Gas Production and Expenditure Report from the Oil and Gas Authority.
In 2018, oil production alone rose to 1.09M barrels per day – up 8.9% on the previous year and the highest UK oil production rate since 2011.
This increase can be attributed to over 30 new fields coming onstream since 2015, improved production efficiency and asset integrity, the realisation of enhanced oil recovery projects and the continued focus on associated exploration, appraisal and development commitments in the UK’s offshore licencing rounds.
Mr Sheret noted that there is still a significant volume of infrastructure in the North Sea that needs certain types of diving intervention and ROV intervention. In the UK North Sea alone there is an installed network of over 300 platforms, with 20,000 km of pipelines.
In the US the shale revolution continues to weigh down the offshore oil and gas market, oil majors such as Shell and Chevron are continuing to push their deepwater developments in the Gulf of Mexico, where subsea technology will continue to play a significant role, he said.
“Last year there were 17 or 18 brownfield type developments in the UK North Sea that were either in FID or going forward. Those will probably not impact the market until the end of 2019 or early 2020,” said Mr Sheret.
While the outlook for North Sea drilling activity is beginning to brighten, multiple challenges remain for DSV owners, included a continued vessel oversupply and depressed day rates. They are at the mercy of operators, who have gained the upper hand in the control of the supply chain in recent years and will fight “tooth and nail” to keep control of it, according to Mr Sheret: “You could argue over the last year that they are in the best position they have been in a long time.”
He also mentioned the emergence of more national cabotage laws and regional protectionism as a factor that could hamper operational flexibility, citing requirements in Brasil, Indonesia and the Jones Act in the US, which requires vessels to be US flagged, US built, US owned and US manned when working on the US Gulf, except under special conditions. “You could argue that there is protectionism in every market in one form or another. There are some legislative barriers like the Jones Act that have to be incorporated into every company’s strategy,” he said.
Rethinking the dive philosophy
As a means of developing a portfolio of diving support vessels, with fully integrated saturation diving systems, Royal IHC forged a partnership with German safety equipment manufacturer Dräger. This approach benefits vessel owners who no longer need to purchase their diving systems separately from their newbuilds. It also helps the shipyard and owner avoid issues during the vessel’s design and production process that might result from late equipment delivery, according to Royal IHC.
Royal IHC is now developing a new DSV, building on the design of the Seven Atlantic, which was delivered in 2009 to Subsea 7. At the time, the Seven Atlantic was one the world’s most sophisticated DSVs, with a 24-man saturation dive system, dynamic positioning class 3 and 120-tonne active heave compensated crane. Built to Lloyd’s Register class, Seven Atlantic has an overall length of 145 m, beam of 26 m and design draught of 7 m. Its diesel-electric propulsion system incorporates three azimuth stern thrusters and two retractable azimuth bow thrusters. The vessel has a transit speed of 15.5 knots.
One innovation Royal IHC is considering for future DSVs involves better control over the diving bell when it is lowered into the moonpool.
There is also a possibility of converting an existing vessel, with a drop-in module, noted Mr Uiterwaal. Working with Dräger, Royal IHC would be able to supply a complete integrated module with the saturation diving system that could be shipped out and installed in a suitable existing vessel.
New DSV will support North Sea IMR
Technip has acquired Deep Discoverer, which had originally been ordered by the Harkand Group
UK-based TechnipFMC has acquired a newbuild diving support vessel, the Deep Discoverer, from Norway’s Vard shipyard. The DSV is currently undergoing an operational readiness programme and will begin work in the H1 2019.
London-based law firm Watson Farley & Williams advised Technip UK Limited on a £70.5M (US$93.4M) financing agreement to purchase the Deep Discoverer, arranged by Crédit Industriel et Commercial (CIC) and BNP Paribas.
The vessel was acquired by a CIC-owned company, while the financing comprised a French lease (charter by way of crédit-bail) of the vessel from the CIC-owned company and leased to Technip UK Limited.
Deepwater Discoverer had previously been contracted by the now bankrupt subsea service provider Harkand Group in 30 December 2013. Vard cancelled the original contract with the Harkand administration to facilitate entering into the new agreement with Technip UK.
Based on a Vard 3 03 design, the 121-m vessel will primarily service the North Sea diving construction and inspection, maintenance and repair (IMR) markets.
Deep Discoverer has dynamic positioning class 3 capabilities, as well as an 18-person, twin-bell saturation diving system, supporting split-level diving operations to a maximum diving depth of 300 m, in-built air diving spread, a 250-tonne NOV Hydralift subsea crane and a service speed of 14 knots.