The North Sea offshore support vessel market is showing ‘clear signs of heating up’ in 2018, with tendering activity at the highest level since at least 2008, measured by the number of vessel requirements in the market
According to Clarksons Platou Securities there are currently requirements for 29 vessels, with 15 of those representing incremental demand. In addition, 14 rig tenders for work beginning in 2018 have no associated offshore support vessel (OSV) tenders at the moment – typically each rig would require two OSVs.
Moreover, as Clarksons Platou Securities’ managing director, equity and credit research, Turner Holm, explained, campaigns in Russia and the Mediterranean are expected to utilise North Sea tonnage, so there could be a net exodus of vessels from the North Sea into other regions, adding to potential supply tightness.
The high tendering activity comes on the back of an improving demand profile for the North Sea. Demand fell 35% from mid-2014 to H1 2017, but the market returned to a normal seasonal pattern in 2017. “The market has returned to annual growth, and we expect further increases in 2018 based on current visible demand,” Mr Holm said.
In 2017 day rates rose despite historically low demand levels. Spot rates improved 33% year-on-year in 2017, and term rates rose 27% with the latest fixtures suggesting further increases are on the way for term work.
Mr Holm said that availability of vessels that are not cold-stacked and have valid surveys (class certifications) is probably not sufficient to meet expected demand.
“Hence we expect vessels will need to be taken out of cold-stack, which will carry a cost for owners of ~US$400,000 to US$1.5M (or higher), depending on whether the vessel needs a special survey or other remedial maintenance,” he said.
“Results from our global OSV survey published in September 2017 indicate that most owners will require day rates and contract terms sufficient to pay back reactivation costs in order to take a vessel back into service.
“This requirement will act as a mechanism for rates to see further increases. To reactivate a vessel that requires a special survey, an owner would need a rate of US$11-12,000/day on a one-year time charter.”
As to which companies will benefit most from improved demand, Clarksons Platou Securities sees low-cost companies such as SD Standard Drilling who have been active in the secondhand market over the last 18 months, GulfMark Offshore which has restructured and emerged from bankruptcy, and is now well-capitalised and Nordic American Offshore.
Martin Nes, chairman of SD Standard Drilling,and Quintin Kneen, president and chief executive officer at GulfMark Offshore, are both speaking at the 2018 Annual OSJ Conference, Awards & Exhibition in February.