Cabotage rules for offshore support vessels are strengthening across Asia, Africa and the Middle East making it tougher for fleet owners to find employment for their vessels. Governments are tightening restrictions on vessels and crew operating in their countries to protect their local economies.
This was the key trend that dominated regional round-ups at Riviera Maritime Media’s Annual Offshore Support Journal Conference in London on 8 February. Swire Pacific Offshore commercial director Duncan Telfer highlighted how cabotage rules in southeast Asia are increasing costs in operating anchor handlers and platform supply vessels (PSVs) in the region.
National authorities in Malaysia, Indonesia, Myanmar, Thailand and India are tightening local content and national flag restrictions on vessels and crews. This is despite there being an uptick in offshore activity and potential demand for support vessels.
As an example of offshore investment in the region, Capt Telfer said Thai national energy group PTTEP intends to spend US$3.1Bn in 2018 on offshore projects.
He highlighted the growing potential for more offshore vessel charters in India where “there have been significant discoveries and BP with Reliance are investing US$6Bn in the R-Series deepwater project”. However, there are “stringent cabotage rules” in India which means it is difficult to operate without a local partner.
In Africa there are also stringent cabotage rules and potential for more offshore investment. For example, capital expenditure in Nigeria could total US$56.8Bn over the period to 2025. There are also plans for new projects in Angola, Ghana and in Mozambique. However, there are tightening local content rules in countries around Africa.
These rules are becoming even tighter in the Middle East where geopolitical issues have resurfaced, leading to vessel charter terminations and nationalisation of industry. National oil companies are able to terminate contracts or pressurise vessel owners to cut rates, said Halul Offshore Services chief executive Vivek Seth.
“It is difficult to get approvals to work in local markets,” he told delegates, adding “markets are open to outsiders but strengthening towards cabotage regimes to protect local businesses – there is more in-country focus across the Middle East”.
There is potential for more vessel charters in the Middle East as “exploration and production activity is picking up with Abu Dhabi, Qatar and Saudi Arabia remaining the biggest employers for offshore fleets” said Mr Seth.
There are also technical restrictions to vessel chartering in the Middle East as charterers are requesting dynamic positioning class DP2 and vessels of less than 15 years old.
“Saudi Arabia is the biggest market for offshore support vessels, requires that they must be DP2 and is very demanding,” said Mr Seth. “National oil companies can put pressure on owners to reduce rates.”