Minimising opex has been a key objective for owners trying to ride out the downturn in the offshore vessel industry, but laying up vessels in order to do so is more complicated than a simple cost-cutting exercise and how it is done matters in the long-term
Everyone understands that large numbers of offshore support vessels are laid up, but owners are often reluctant to disclose whether they are in warm layup and ready to return to work, or cold layup, a state that would require significant work, and time - and money - to bring them back into operation.
It is also clear that owners are taking different approaches to laying up vessels – there is no one size fits all approach. Where vessels are laid up will affect the amount of work required to bring them back into service. Owners with vessels laid up in warm water – such as offshore West Africa – could find that they are ‘trapped’ by the amount of work, time and money needed to reactivate vessels and deal with issues such as hull fouling.
What is generally understood is that the longer a vessel had been in cold layup, the more expensive and time consuming it will be to bring it back into service, and the less likely it is to be reactivated, particularly if ship is out of class, needs a special survey and significant amounts of money spent on it. Owners, brokers and specialist providers of services for vessels in layup all say that it is important that owners consider a vessel’s eventual fate after layup – its age profile, on-board systems that might require specialised preservation, where it might return to work, what level of demand there might be for it, and its potential scrap value, if any – before choosing how to lay it up.
Wherever a vessel is attention also needs to be paid to hull fouling; particular attention also needs to be paid to a ship’s dynamic positioning (DP) system. Class societies such as DNV GL recommended that, if possible, the power on a DP vessel should be on whilst it is in layup. Another issue is where to reactivate a vessel - will drydocking be required and how much capacity do yards have?
Børge Nakken, vice president – technology and development at Farstad in Norway told OSJ that, from his point of view, there are actually three main modes of layup, not just ‘warm’ and ‘cold.’ In warm layup, he says, a vessel remains fully crewed, ready for immediate operation, often at anchor in sheltered waters or alongside in a quiet location; then there is manned layup, in which a reduced number of crew members collectively look after a number of vessels, typically one person per vessel but working as a team, running critical equipment regularly so that a vessel is ready for operation in a week or so; and cold layup, with everything shut down, no personnel on board except for a watchkeeper, after which it may take quite a while to get a vessel ready for operation.
“Farstad has a few vessels idle in warm layup/waiting for work, but we try to keep this to a minimum,” Mr Nakken told OSJ. “We don’t have any vessels in cold layup for the time being. We have a number of vessels in manned layup at Humla close to Aalesund, which is a quiet spot where we have rented a cost-efficient wharf and the local electricity company has upgraded the power supply so that all of the vessels are on shore power, with no generators running. This setup is fully managed by Farstad and no broker or specialized company involved. We also have a number of vessels in manned layup in Galang, Indonesia, where a few vessels are moored together at anchorage, with one vessel used as living quarters for the personnel with the same vessel running a generator providing power to the others.” Mr Nakken said there are also specialized companies taking full responsibility for vessel layup in Indonesia.
Tim Anderson, managing director of broker Chart Shipping told OSJ that he was aware that a lot of vessels are laid up in Carena in Abidjan, Côte d’Ivoire and offshore Douala, Cameroon. In northwest Europe vessels have also been laid up at Dundee and Perth. “Requirements governing layup are largely an internal management procedure, especially as many laid up vessels are out of class,” he told OSJ. “I also know that the distinction between what constitutes warm and cold layup is very fuzzy and difficult to define,” he said.
Another broker, Peter Döring of Mercers Offshore, told OSJ that there isn’t much of a consistent pattern between owners on how they handle layups and “very blurred lines” between definitions of warm and cold stacking. In Africa hubs for lay-ups are Abidjan and Walvis Bay, driven by low costs for anchorage and proximity to the two principal drydocks in the region. Mr Döring told OSJ that he estimates that there are approximately 50 vessels in layup in West Africa currently, mainly in Abidjan, Pointe Noire and Walvis Bay. In the warm waters off West Africa, fouling is going to be a major problem when it comes to reactivating vessels, he suggests.
“The majority of owners are very guarded about the process,” Mr Döring said. “Often the way that they are handling the process isn’t clear, and differs from company to company.” He explained that, from the point of view of a broker handling requirements for vessels, this lack of clarity has made it difficult to assess the status a vessel offered for a requirement. In response, Mercers Offshore is issuing owners with a questionnaire to enable it to determine the true state of a vessel. Mr Döring cited the recent example of a requirement for a trio of PSVs to support drilling work: “We were inundated with vessels, some of which were in warm layup, others not; in a situation like this you really need to know when a vessel last worked, for whom and for how long. If a vessel has been in work recently, it stands a much greater chance of picking up a fixture. A lot of owners have turned off the lights and walked away.” Mr Döring says some owners have “given up” and anecdotal evidence suggests that vessels known to be in the region “have dropped off the list” with their beacons turned off and cannot be found on AIS.
He says a two-tier market has developed in which a number of vessels that are trading regularly are available at short notice with a large number of others that have not worked recently increasingly unlikely to pick up work. “There is no sign of improvement. It’s a desperate situation for many owners with vessels effectively trapped in the region,” he said. He also suggests that when the market eventually picks up rates for offshore vessels could skyrocket. By the time the recovery comes, fewer and fewer vessels will be active and available, an effect likely to be compounded by the fact that there are only two drydocks in the region that can handle vessels being reactivated.
Owners uncertain about the best way to approach layup can turn to advice issued by class, not least DNVGL-RP-0290, ‘Recommended practice, lay-up of vessels for ship and mobile offshore units,’ (February 2017), from DNV GL. This updated guidance document includes preservation recommendations for special equipment such as drilling equipment and offshore cranes, a new section addressing statements of compliance for lay-up service providers, another addressing rules and regulations about layup of vessels with regard to the ISM and ISPS codes, flag administrations and port authorities, and another, important new section, about insurance requirements for layup of vessels. Recent knowledge and experience of lay-up, preservation and re-commissioning of mobile offshore units is included. The objective and scope of the document is to provide recommendations on a systematic and cost-effective approach for preparing a vessel for layup and maintaining it in a safe and cost effective condition during layup. It is applicable to ships and mobile offshore units. If a vessel is laid-up in compliance with the recommendations given, DNV GL may upon a successful verification, issue a lay-up declaration and lay-up preservation declaration respectively stating compliance with the requirements.
DNV GL describes hot layup as a process in which a vessel is typically taken out of service for up to 12 months; however, exceptions have also been observed where a vessel is put in cold lay-up for up to 12 months. In hot lay-up, the machinery is kept in operation for the sake of fast recommissioning. However, measures may be taken to optimize various operational costs, such as reducing manning to below trading limit. “This option is ideal for quick market recovery, as the vessel is kept in a fully functional state and ready for employment. Hot layup is best for a duration of up to 12 months,” it says. “In cold lay-up, the machinery is taken out of service and the vessel is kept electrically dead. Many vessels in cold lay-up use a deck generator or utilize shore power, which means even the emergency power is off. Only minimum manning covering fire, leakage, moorings and security watches is maintained. This option involves more complex measures compared to hot lay-up, such as steps to prevent corrosion and ensure protection, the draining of systems and pipes, and more. “Cold layup is more common for a duration of more than 12 months, but the duration depends naturally on the owner’s needs,” says the class society.
“When choosing to take your ship out of service, it is important that you also take additional points into account, apart from duration. These include operational cost savings; recommissioning time and cost; the vessel’s next intended destination after re-commissioning (normal trade, repair yard or scrap yard); and the age of the vessel and recycling value. For both hot and cold layups, re-commissioning time depends on the level of preservation and maintenance during layup. “Re-commissioning time can vary from one week for hot layup to one month for cold layup, or even three months in the extreme scenario of a vessel being laid up for more than five years,” says DNV GL.
Specialist companies are also providing owners with assistance. An example is Schneider Electric, whose ShoreBOX is designed to meet the requirements of vessels requiring continuous power supply. The company suggests that shore-based power supply is advantageous for a number of reasons, not least that it is more environmentally friendly than running generators, with reduced air emissions and noise, and because it can ensure continuity of power supply to a vessel. “There is no need for opex-intensive on-board gensets to be used,” the company notes, thus preserving the lifetime of machinery. The ShoreBOX provides a ready-to-use, all-in-one voltage and frequency conversion station, with embedded control and user interface which has been manufactured and tested in a controlled factory environment that complies with IEC standards.
Coatings specialist AkzoNobel told OSJ that layup and recovering vessels from layup requires careful attention to fouling prevention and to the preservation of hull coating schemes during a period of layup. “This is essential to ensuring the safe, efficient and cost effective lifecycle performance of vessels,” said the company. “When preparing for a period of lay-up there are a number of factors ship owners should consider. For example, during a long period of layup a biodical hull coating may be the optimum choice to minimise fouling. Typical biocidal products suitable for extended layup would be different to the normal deep sea antifouling coating by the fact that they would be designed to have a faster polishing rate, even under static conditions with little water flow and an optimised biocide package for these conditions. Duplex schemes can be designed to combine the normal deep sea antifouling with a top coat of the faster polishing system so that when the vessel returns to normal active service it is protected from fouling by the traditional deep sea product.”
However, for these benefits to be realised a vessel will need to be dry docked to apply a new coating, which in itself has time and cost implications. This would also require knowledge of the static period in advance so that the scheme could be applied during a dry docking event. An alternative strategy would be a proactive program of dive inspections and cleaning when needed to ensure that fouling is kept to a minimum.
Another option is for ship owners to relocate their vessels to cooler waters or waters where the fouling risk is reduced. However, owners considering relocating their vessels should weigh up the cost of fuel for the journey versus the cost of leaving the vessel in its current location and absorbing higher fuel bills caused by heavier fouling when the vessel returns to active work.
As AkzoNobel also noted, offshore support vessels operate on relatively short routes in comparison to deepsea vessels so there is less time to complete on board maintenance while the vessel is sailing or at port. “Layup therefore presents an opportunity for the crew to complete thorough maintenance such as deck, hatch cover or hatch coatings replacement,” it says.