(Westshore Shipbrokers AS)- Following in Petrobras’ footsteps, Shell Brasil is about to embark on its > 2,000m water depth portfolio. Drilling will continue into the second quarter of 2012 in the Santos Basin. On the one hand, it’s just another oil major doing something not much different from other operations in the likes of the US Gulf of Mexico. But put into the Brazilian context, it’s much more than that, it’s a milestone for the nation in nearing its offshore exploration and production ambitions, but why is that?
Deep water exploration characterizes the offshore industry in Brazil yet this is actually only the second time an IOC will be involved in an exploratory campaign that breaks the 2,000m water depth threshold, and at quite a distance from shore. Moreover this is being done with a moored semisubmersible and on a pre-salt prospect. The challenges involved with such a combination are huge and require a complex logistical strategy to ensure that when the rig is on location and ready to spud, not the smallest detail is left behind. However we are unlikely to see the last of this type of drilling scenario, Petrobras and other lOCs will follow.
The next piece in the puzzle is shore-based infrastructure, i.e. the demand for better port facilities and plants, berthing facilities which are offshore appropriate and more of them. It all plays into a cycle – the further the offshore operations are from land, the larger the drilling unit required. Bigger drilling units need bigger vessels to support it; in turn they need larger and better equipped ports to support them. The bigger ports need larger fluid and dry bulk plants which need more trucks for transportation and so on. It all boils down to infrastructure and the very pressing need to get it up to the standard needed.,
The larger drilling units in particular need more materials like drilling and completion fluids and this will drive the change in demand for logistics resources – including the demand for offshore support vessels. In addition, the shortage of adequate port infrastructure means these vessels need to provide storage for the materials in addition to their transport function.
This move towards increased capacity per vessel, as opposed to increased number of vessels is somewhat new. Although Brazil has dominated the global UDW scene, it was only about five years ago that Petrobras started searching for PSVs > 3.000 dwt. What we see now is a preference for vessels up to 4.500 dwt – and this will only increase. Moreover, the lOCs are on the same path. That being said, we are not predicting the demise of the smaller PSV in the Brazilian market, far from it. The future for PSVs up to 3.000 dwt seems steady, slightly increased for those around 3.000 dwt but the real growth is in the larger segment of the market – vessels of 4,500 dwt and above.
The future is less easy to predict for the AHTS. Reason being, although the demand is related to the water depth, it also depends on the type of rig – moored or DP. Most operations carried out in water depths of 1.000 to 2,000 meters in Brazil have been done with moored semis – in excess of 80%. The AHTSs in this niche have ranged between 160 tbp to 195 tbp.
For operations in deeper water, larger vessels are needed. Petrobras for one has chartered several vessels in the 21,000 class and Shell Brasil has awarded contracts to two Maersk L class vessels (260 tbp). Therefore, although deeper operations may at first sight be perceived as a predominantly DP-rig market. In Brazil this is not the full story. There is a balance between DP and moored units in the market and the country counts on the presence of a number of mooring specialists working in such water depths. We expect the demand in the AHTS market to remain strong for 160tbp- 195tbp, perhaps increase slightly. And for the >200tbp we expect to see a steep increase, mainly due to the fact that the activity is new and therefore the number of vessels on hire at the moment is low.
Written by Westshore Shipbrokers AS‘ Staff
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Offshore vessel market has been one area of the business that has had little to do with vessel scrapping. It was notable therefore that in the first quarter results for US-owner Tidewater that an announcement was made regarding the intention to scrap eleven vessels from its large fleet. Tidewater is arguably the largest offshore support vessel owner in the world, but the fleet is an ageing one so it is perhaps unsurprising that the news comes from this particular source.
Moreover a significant part of its fleet is already laid up in areas of the world where the standard of vessel is generally lower and older than anyway what’s seen in the North Sea.
When we take a look at the oldest vessels still in existence around the globe the majority of those over 30 years are AHTS vessels of an average of 6,300 bhp and are located largely in the Middle East, South East Asia and West Africa. About half as many are PSVs with an average of 1,200 dwt and are largely sitting in the US Gulf of Mexico.
Despite the deluge of older tonnage sitting in ports around the world owners are reluctant to send these old girls to the scrappers. An industry wide increase in required operating standards of vessels – even in regions such as the Middle East where traditionally these vessels could find employment, has seen a diminishing need for this older tonnage. Moreover the order books for new vessels is swelling again and as these brand new and higher spec vessels deliver everything else gets pushed further and further to the back of the queue.
Vessels that were scrapped over the last couple of years were largely 60s and 70s built and very much at the end of their useful lives. In addition many had been working in the US Gulf where a post-Macondo industry is at long last showing an increased focus on safety and this extends to the support vessels. It’s easy for an analyst to sit and look at the figures, around 15% of the global AHTS fleet is over 30 years old and 13% of PSVs – so let’s get the burners out and keep the fleet in renewal. But it’s rarely as simple as that, as this older tonnage is fully paid up, cheap to run and in depressed markets often the only ones that can go low enough to get a charter, for an individual owner there’s simply no need to remove them. Moreover remuneration for the scrap of a vessel is calculated on the weight of the steel (light deadweight tonnage) but unlike tankers for example, the value of an offshore vessel is in its equipment and capability rather than the volume of steel that could be melted down. For the time being, arguments for not scrapping your older vessels may outweigh those for doing so, but in an increasingly safety and environmentally conscious industry that will soon change.
Written by Inger Louise Molver, Offshore Analyst at Westshore Shipbrokers AS