Offshore

Shifting

Throughout 2020, offshore oil and gas services markets were exposed to continuous weak demand and tonnage oversupply. The late-2019 increase of utilization rates and the optimism that arrived with it were derailed by the short- term commercial impacts of the Covid pandemic whilst operating costs increased owing to very tough logistics. Optimism did not totally fade away in 2020 and 2021 opens on some renewed pockets of traction, even more so with the renewable scene rapidly filling with mature projects.

CONNECTOR Offshore construction and power cable-lay vessel, sold by Ocean Yield to Jan de Nul.

Photo: Christopher Petersen

101 deep staff cuts. Over the short term the effects were devastating, contracts were been settled and 2021 should see increased activity and PRODUCTION AND DRILLING terminated early or canceled and idle rigs had no visibility for future work. In FLOATING PRODUCTION deliveries. The much-anticipated DUA PFLNG total, 77 contracts were canceled and only 298 signed. This equated to a 250% which was delayed is set to deliver its first commercial gas increase in cancellations and 45% decrease in the number of fixtures compared this year and the Coral Sul is expected to be launched. with 2019. Over the medium term, the much-anticipated consolidation will be Likewise, Shell’s Prelude is set to restart exporting LNG After a prolonged downcycle, players in the space were able to commence after restructurings are complete. Floating production was not spared by last year’s turbulence. Initially it was again early in 2021. starting to see an upturn in day rates and the utilization of set to be a good one for operators with numerous projects set to be awarded For years we have highlighted the oversupply in all asset categories, and the their fleet. At the beginning of 2020, total utilization was in Brazil, Guyana, and West Africa. Alas, the first half of the year saw a brutal biggest owners have taken it upon themselves to retire assets at a decent close to 75% on the jackup side and towards 70% on the halt to decision making in the wake of plunging oil prices which hit project pace. The peak of retirement was reached in 2018 with 63 rigs retired but SUBSEA floater side, with contracts being signed at healthier levels economics. The second half of the year was more positive and the gridlock at that time the market was carrying a lot of very old tonnage (70s and early than those seen in many years. Major rig owners were of many projects was resolved. Other decisions have been pushed back to 80s built units). With the spectre of further impairments and restructuring, bullish on their near- and medium-term prospects and 2021 but with projects of this size, delays remain the norm with delivery lead this phenomenon saw a large uptick in new retirement last year as 40 units The subsea market has hardly fared better than other eagerly awaiting an uptick in activity. Alas, the opposite times often exceeding 4.5 years. As of early 2021 there are about 164 FPSOs were sent to the recyclers. Even more interesting than the sheer number of segments during this tumultuous year. Projects of all sizes developed as the global crisis unfolded. Weakened by in operation with almost as many leased as owned. Meanwhile, an additional retirements is the quality of the tonnage that is being sent to the recycling yard. have been postponed, except in Brazil where the demand years of meagre incomes and increasing financial costs, all 15% of the fleet is on order. Indeed, many units not even ten years old were put on the chopping block. for subsea support was increased with the development but one of the publicly listed participants in the industry Over a quarter of the units in the world operate in Brazil and it remains the of its deep-water fields. entered restructuring. Market forces destroyed hundreds of millions of dollars in hard assets in such largest growth market. In late 2020 announced its plans to bring 12 a short amount of time on the premise that an idle unit is a major liability. A On the asset side, there were several significant By end-2020, the same total utilization figures were below FPSOs online by 2025. It further confirms Brazil’s determination to continue rig that does not work costs money to store and would necessitate anywhere transactions. took delivery of the Wartsila-designed, 66% on the jackup front and below 60% on the floaters. to develop its oil & gas reserves together with the contribution of private from 20 to 100 million dollars in expenses to reactivate should the contractor 2010-built, derrick lay barge DLB Norce Endeavour from These figures do not take into account the removal of partners including Total, , Shell and Perenco. All told, 9 out of the 12 win a contract. Current contracting rates do not support such an investment, Solstad Offshore, this has been newly christened as the 4% of units from the total fleet in 2020. Day rates fared FPSOs will be deployed for the pre-salt Buzios, Mero and Marlim fields. Six of and with no prospects of generating any profits for years to come, it is sounder Saipem Endeavour. Luxemburg-headquartered Jan De no better, a reduction of 10-20% was seen across the these units are already under construction. in an oversupplied market for owners to simultaneously reduce their running Nul acquired the 2011-built offshore construction and board, not leaving much of a buffer between revenue and expenses, cut their financial commitments, and hope for a better market balance Guyana was again at the forefront of the production news, with ExxonMobil power cable-lay vessel Connector from Ocean Yield ASA. operating costs to owners. going forward. potentially adding one FPSO a year over the next decade and an astonishing took delivery of the Seven Vega from Royal IHC West Africa, long a part of the global landscape, had fewer projected expenditure of $50 billion over the same time period. The Stabroek in the Netherlands, a reel-lay vessel, and ZPMC eventually Looking to the future, the industry remains optimistic with drilling campaigns rigs working at one stage during the year than had been Field, the latest major discovery, is estimated to contain more than 8 billion launched the JSD6000 deep-water heavy-lift vessel, that have been delayed but that will eventually be awarded. Adding to this seen in decades. Northwest Europe, seen as a relatively barrels of oil equivalent. Exxon’s dedication to oil & gas exploration in the formerly ordered by at its facilities in China. are the developments of emerging regions and new high-profile wells that promising and lucrative region by the end of 2019, also country has stayed steadfast. will be drilled. If 2021 shall be modestly better than 2020, an upturn can be McDermott successfully completed its restructuring saw a 10% decrease in marketed utilization. contemplated in 2022 and beyond. In a foreboding of the difficult year that would come for the sector, Shell’s process whereas TechnipFMC resumed activities toward In many ways this turbulence was the coup de grace Prelude FLNG had to be shut down in February due to several electrical its expected partition into two publicly, independently for companies who had been by many accounts slowly breakdowns. For other projects, by mid-year, force majeure clauses were traded companies: TechnipFMC and Technip Energies. marching towards restructuring. It is hard to understate levied to either delay deliveries of newbuild units or were used to explain the We expect the backlogs and utilization in the segment the operational challenges faced by all, adding to years of inability to pay the charter. By end-2020 most of the disputes or delays had to continue to steadily rise over 2021.

102 Picture: ENSCO DS-6, Drilling unit, built in 2012, sold to recycling yard. BRS GROUP - Annual review 2021 BRS GROUP - Annual review 2021 Picture: NOBLE BULLY II, Drilling unit, built in 2011, sold to recycling yard. 103 OFFSHORE OFFSHORE LOGISTICS AND MOBILITY - OSV ENERGY TRANSITION

An escalating offshore wind market offers some hope to local owners with LOGISTICS AND MOBILITY - OSV several having units committed for Taiwanese developments. Not only does it ENERGY TRANSITION allow the deployment of assets, but it also creates an opportunity to learn and A severe structural develop new skill sets and experience. The largest windfarms are expected to As with other sectors, 2020 started with some optimism in the OSV space. be developed in China while interest in countries including South Korea and The oil and gas fleet has started to follow the current trend oversupply persists However, following the pandemic the upbeat sentiment quickly dissolved. The is rapidly increasing leading to ambitious plans for the next decade. towards decarbonisation and cleaner propulsion. The will market once again contracted leading to reduced activity and low rates. The Demand in the Middle East remains steady for OSVs with long term commitments is there, but sadly, the severe market conditions and low with more than one wave of restructuring and consolidation continued. Some owners completed in Saudi Arabia, Qatar and the UAE. Several Southeast Asian owners have also day rates make owners unable to allocate enough capital their restructuring process such as Bourbon (France), Solstad (Norway), and started to place the bulk of their fleet in the region following the increase in to upgrade their units with more fuel-saving and emission- third of the global Hornbeck (US). Throughout these processes all have been divesting their non- demand from the oil & gas and logistics sectors. Some companies including reduction technologies. core assets, aiming to stabilize and rationalize their business. Britoil and Lanpan have enjoyed the fruits of their labour. Since relocating OSV fleet currently In January 2021 Eidesvik announced their award of a A severe structural oversupply persists with more than one third of the global units to the region in 2015, they have experienced higher fleet utilization for 5-year contract with Equinor for their Viking Energy fueled fleet currently cold stacked. A significant portion of this cold stacked fleet shall spot charters. cold stacked by carbon-free ammonia. Across the total OSV fleet there never return to the market, as these units have been inactive for too long. In addition to demand from oil companies, contractors including Saipem and are only 7 LNG-fueled PSVs and less than 30 hybrid vessels. With less than 3% of the fleet recycled last year, the retirement of OSVs had MacDermott have greatly contributed to the increasing demand for OSVs in the Ship builders such as Ulstein are developing hydrogen little to no effect on the market imbalance. Only 20 newbuild vessels were Middle East Gulf. In some instances, companies turned to the resale market for fuel-powered OSVs that could be exploited for short sea delivered during 2020 with a significant number of finished undelivered units newer units and to the yards in the Far East to procure new assets for long-term operations with bunkering infrastructure located nearby. stranded in the yards. contracts, proving that owners remain confident about the growing demand in Along with new designs and layouts, digital innovation the region. Considering that some projects were postponed to 2021 and the is also occurring apace. These innovations are welcomed Almost a dozen OSVs from the home fleet were moved out of the current workload, we expect demand in the Middle East Gulf to remain steady. traditional supply segment to gain new life in other markets such as the fish by owners, and charterers as they present a unique farm industry or survey vessel space. Brazilian demand for OSVs has increased significantly with Petrobras pursuing advantage in maintenance and supervision abilities, its exploration and production projects especially in the large deep-water helping to curb both costs and negative environmental The two predominant trends for OSV owners are to move towards being FPSO fields. Term utilization for the category has been higher than 60%, and impacts as well as by increasing uptime. more integrated logistics providers and increasing the digitalization of their there were some shortages in the high specification PSVs or powerful AHTS fleets. Integration increases the presence of OSV owners along the value chain. during the year. In turn, this enabled the mobilisation of a few units from Digitalization improves operational performance and reduces operating costs. the North Sea. With a significant number of floating units under construction, This is in response to a prevailing demand from charterers for connectivity the outlook for offshore supply vessels remains better than expected. , and smart ships to further permit the monitoring of vessels from ashore. Guyana and Surinam are following this trend with expected additional drilling In the North Sea, owners suffered from reduced rates, financial challenges projects in the near future. and charter cancellations. Adapting to the harsh realities of the offshore oil In the crewboat market, the major deal of the year saw CMB (“Compagnie & gas industry, proactive owners decided to explore new opportunities in Maritime Belge”) buy Seacor (US)-owned Windcat Workboats and their 46 growing markets such as offshore wind. For example, a traditional PSV can crew transfer vessels. With the market amiss,Hermitage (US) was forced to sell be converted into a dedicated service operation vessel (SOV). The demand for its offshore fleets. This saw its 11 crewboats going to Tidewater (US). pre-lay moorings and turbines’ tow is set to grow in the future and may benefit the larger anchor handling tug supply (AHTS) segment. On a positive note for the region, the oil & gas supply market might be boosted by the introduction of a temporary Norwegian tax incentive to encourage investment in the sector.

The West African market seems to have bottomed out after an impressive 30% decrease in utilization rates over the course of the year. Piracy and armed robbery rose by almost 40% in the Gulf of Guinea compared with 2019. Cutting costs has more than ever been the motto among oil companies. To that end they have been considering switching from helicopter transportations to crew- boats. Newcomers arrived in West Africa to improve comfort, consumption, safety, and autonomy. Some owners placed newbuilding orders to balance the global erosion of the current fleet.

Last year saw more spot OSV fixtures in Asia Pacific. However, day rates remained low. Although there are oil & gas projects going ahead, stringent national cabotage rules have upheld entry barriers in many countries. OSV owners/operators have turned their focus to countries with less access constraints, but more competition, such as Myanmar. Companies aggressively compete by offering cheap daily charter rates. In addition to the traditional Singaporean and Malaysian players, Vietnamese and Indonesian owners are also vying for a piece of the same pie. In recent years, these local companies have expanded their outreach to not only to compete in their home as they see more opportunities overseas.

Pictures: ENA WIZARD and ENA ENDEAVOUR, offshore support vessels owned & operated by Eastern Navigation. Photo: Piet Sinke; 104 Right side: KEIZERSBORG, Newbuilding resale PSV from Chinese shipyard Wuhu converted into a Walk to Work vessel by Wagenborg. BRS GROUP - Annual review 2021 BRS GROUP - Annual review 2021 105 Vietnam, Japan and South Korea, respectively, are aiming to install 5.2, 7.2 Despite the impression of numerous orders for WTIV vessels, unless turbine OFFSHORE WINDFARM and 10 GW of capacity by 2035. Some projects are in association with an IOC manufacturers eventually qualify some of the new heavy lift monohull tonnage such as Korean Donghae's offshore floating windfarm which is managed and to perform heavy installations, a future shortage of vessels able to lift current Conclusion operated by Shell. To enable this growth, a Japanese JV ordered a Gusto design and future generations of massive wind turbines is anticipated. As of early 2021, despite the ongoing pandemic, one can The offshore windfarm industry is steadily increasing its Wind Turbine Installation Vessel (“WTIV”) equipped with a 1,600 ton crane to be With regards to foundations installation, some oil and gas heavy lift tonnage has note two major trends: Firstly, that energy transition role in energy production. The perceived opportunities in operational by 2023. been available. For example, the Heerema-operated monohull heavy lift Aegir policies have had a significant impact on the investment the sector are attracting a growing number of maritime and was chartered this year by JDN to install the pin piles of the Changhua Phase In the US there are only 5 turbines which are all currently turning offshore decisions as well as on the organization of large energy shipping companies to the business. This is in sharp contrast 1 project in Taiwan. However, this trend may not last long as these vessels Rhode Island., However, 23 GW is planned to be installed by 2030. Coastal corporations. Secondly, that the traditional oil and gas with traditional oil & gas exploration and production. will soon be needed in the always busier platform decommissioning market. In States in the Northeast are investing heavily in infrastructure to adapt their industry is set to experience a rebound in activity in addition, these units were not designed to repeat numerous liftings over a short IOCs (International Oil Companies) and NOCs (National Oil ports. Most of the fabrication, logistics and installation links in the supply chain 2021 and beyond. The demand for oil and gas remains period and are thus less efficient than dedicated ships. Companies) are positioning themselves for the energy need to be built from the ground up. This will take time, but the projects are strong even as existing fields are depleted. Furthermore, transition, becoming ‘energy’ companies rather than ‘oil’ ambitious. In Japan, American company Dominion Energy announced the order On the maintenance side, whether for existing or future windfarms, the need the capacity of the offshore services sector has been companies. Some companies such as Equinor (Norway) of the first locally built Jones Act WTIV at Keppel Amfels US. The Gusto designed for Service Offshore Vessels (SOV) is growing. OSV owners are also finding their drastically cut by almost seven years of downturn. The stand at the forefront having heavily invested in the unit will be equipped with a 2,200 ton crane. It will be managed and operated new role here outfitting some of their vessels with compensated gangways for steady and lasting increase in oil prices appears to be a offshore wind industry over the last 5 years. Besides this by Seajacks. walk to work (W2W) services. There is now a fair number of established players signal that improvement is on its way and with cleaner Norwegian player, others such as France’s Total are under balance sheets there will be the opportunities for In Europe, owners and contractors continue to support the growth in the in Europe. These companies are trying to grow their home market share as well growing pressure from investors to further diversify away owners and contractors to perform greener and more number of projects and increasing size of the turbines. Some vessels only five as capitalize on their experience to participate in new markets such as the US from oil and gas. The whole offshore ecosystem follows profitable operations. years old are already perceived as being outdated for several new projects, as and Southeast Asia. For example, MOL has appeared as an SOV player in Taiwan. this trend, and it is rare for shipowners today not to have they are not able to install heavier turbines. In late 2019, Jan de Nul confirmed That side of the market has also seen a wave of newbuild purpose-built vessels a dedicated renewables department. the order of their monohull heavy-lifting and installation vessel, Les Alizés at with some designs that boast exceptional efficiency ratings and environmental At the end of 2020, total global offshore wind turbine CMHI in China carrying a Huisman 3D compensated 5,000 ton, 36 metre crane. friendliness. For example, the Norwegian owner Østensjø Rederi has ordered capacity reached 30 GW and it is on course to reach 235 GW On the Norwegian side, in 2020, OHT announced an order at CMHI in China of four of those SOVs in Spain. Altogether, the ranks of purpose built SOVs (20) and by 2030 according to the Global Wind Energy Council. This another two Gusto-designed NG14000XL-G WTIVs, each equipped with a 2,500 W2W (about 35) are set to grow rapidly over the next decade. Equinor tendering Opportunities in will include today’s emerging floating wind turbines. ton crane and capable of operating in 65m water depth. for the chartering of 4 new SOVs represents a $225m investment opportunity. the offshore wind Europe, including the UK, is still the leading region for Following an unprecedented divestment move, Monaco-based Scorpio The offshore wind sector has years of growth ahead with more confirmed offshore wind power generation. Asia and North America announced in August its intention to totally exit traditional dry-bulk shipping developments, and more economically viable projects. Players expect that sector are attracting should catch up over the next decade. China plans to install and dispose of its fleet so that they can firm up a pair of Gusto designed WTIV this will contribute to a solid increase in rates and returns on invested capital. 52 GW by 2030, followed by Taiwan where the offshore units to be built by DSME capable of operating in 70m water depth and equipped Technological innovation and the positive public perception will continue to fuel a growing number wind market is booming (installation of 5,5 W by 2025, with a 1,500 ton leg encircling crane. the development of this major offshore energy source. with an extra 10 GW by 2035). of maritime and shipping companies

106 Picture: OCEAN RESOLUTION, Gardline multi-role survey vessel, converted from a PSV. BRS GROUP - Annual review 2021 BRS GROUP - Annual review 2021 Picture: KAZANIN EXPLORER ex BOURBON BORGSTEIN, Offshore support vessel, bought by Sevnor and reactivated. 107