subsea market


Subsea vessel owners urged to be selective


The subsea market is one of the fastest growing and potentially most rewarding sectors of the offshore oil and gas sector, but before shipowners rush to order, they need to attend carefully to what kind of tonnage the market needs


John Westwood of analysts Douglas-Westwood told delegates at


D the Annual Offshore Support


Journal Conference that around US$77 billion would be spent on subsea vessel operations in the period 2012-2016. “Vessel days will increase by 33 per cent,” said Mr Westwood,


noting that deepwater


operations are the big driver. However, as he also highlighted, the supply chain is highly fragmented with around 430 vessels owned by 83 different contractors, although the top three players control 60-70 per cent of the top tier vessel fleet, according to a recent report from HSBC. “Some sectors are saturated,” he warned, whilst others were experiencing good demand. Mr Westwood said the growth potential in


the next three to five years was “considerable”, particularly offshore West Africa, but the subsea market was not without its challenges – mega- projects in regions such as West Africa and Brazil were a potentially risky enterprise, made more risky by a shortage of skilled people. “Brazil remains an enigma,” said Mr Westwood, and whilst seeing long-term growth, the market “could be flattish until 2014”. Petter Dyring, a broker and director at


Fearnley Offshore Supply in Norway, told the conference that strong fundamentals give considerable reason for optimism. There was, he said, strong growth in exploration and production (E&P) spending and in predicted subsea capital expenditure (capex). “The oil price is at a level which makes advanced subsea developments viable,” he explained, noting that all of the major subsea contractors have solid orderbooks, thanks to the growth in floating production, a “pipelay bonanza”, and the move into deeper water (which provides new challenges for vessels). Overall, he said, there was a good supply and demand balance at the moment.


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Describing four important subsea indicators, Mr Dyring said contractors had a healthy backlog from recent discoveries. Extensive exploration drilling


Petter Dyring: there is room for newbuilds, but owners need to be selective


escribing a scenario expenditure on subsea in vessels


which will


increase significantly in the short term,


“The available deck area is never large enough and keeps growing,” he said. “Larger cranes are needed for deeper lifts, along with more accommodation and vessels need to comply with the IMO’s SPS code.” In addition to the above- mentioned, oil company-specific requirements are becoming increasingly demanding. The majority of the light construction vessels and offshore construction vessels that have been ordered are being built on speculation, rather than against firm contracts, and an increasing number are part-ownerships.


activity provides more reason to be


optimistic, he noted, and more subsea solutions – new technology, tiebacks and field life extensions – are coming to the fore. Turning to the deepwater market, he said approximately 54 per cent of new subsea equipment will be installed in water depths that exceed 1,500m. Looking at regional developments, Mr Dyring said there was strong growth in the Asia-Pacific region, and that Africa and South America were becoming the most important subsea regions. The North Sea and North America are important too, but have a lower overall market share. There is, however, “real growth in all regions”, he told delegates. Turning to the main subsea vessel trends, Mr Dyring noted that vessels are becoming larger and more technically advanced – and costly.


As highlighted above, demand for active heave-compensated cranes is growing and units of in excess of 500 tonnes capacity are now being sought by owners. Operations in deep water mean such cranes need 3,000m of wire or more. The crane on a construction vessel is the ship’s main tool, and “some cranes have caused costly delays”, he noted. Cranes also represent a major health and safety risk that owners need to take into account, and such is the number of cranes on order and fitted on new vessels that there is now a growing shortage of qualified crane drivers. “The lack of people could well be a bottleneck in the industry,” he noted, and costs were likely to rise. Financial constraints and banks’ unwillingness


to lend except to the highest


quality owners had acted as restraint on vessel orders, Mr Dyring concluded, noting that it was not out of the question that if more and more vessels are ordered, the vessel market could be in oversupply in 2016. “All of the many pipelay vessels coming into service will require support,” Mr Dyring noted, and floaters will need maintenance to risers and moorings. There is huge potential for growth in the inspection, maintenance and repair market, and room for some more tonnage, but owners should be selective, and ensure that they provide versatile vessel solutions. OSJ


Late 2012 and early 2013 saw several subsea vessels ordered


Annual Offshore Support Journal Conference and Awards 2013 I 15


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