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Offshore Support Journal

Offshore Support Journal

Gas fuels Australia’s OSV activity

Tue 15 May 2018 by Paul Gunton

Gas fuels Australia’s OSV activity
Shell’s Prelude and other major projects have created LNG-related work for OSVs (credit: Shell)

Speak to anyone involved in offshore support operations in Australia and the talk soon turns to the country’s LNG extraction work and its knock-on benefits to a diverse fleet of support vessels. The contrast with New Zealand is stark, where the coalition government has decided not to issue any more offshore exploration licences

Australia is the world’s second-largest LNG exporter after Qatar and could move into first place once two new LNG extraction projects come on stream: Inpex’s Ichthys project will start production in June and Shell’s Prelude will follow towards the end of the year.

As a result, LNG’s significance is recognised and accepted in Australia. MMA Offshore business development manager Australasia Stuart Edgar provided some additional context when he mentioned two other schemes to OSJ, saying that “Chevron’s decision to proceed with the second stage of the Gorgon expansion and Woodside’s Scarborough development plans are testaments to its importance.”

He also remarked on the potential for LNG as an alternative fuel for OSVs, describing it as “a space of growing interest” that “we are in constant conversations with our clients over.” This could also offer potential new business opportunities for the company, he suggested, which operates 33 OSVs. “Local operators [are] exploring small scale LNG bunker vessel solutions [and] these are markets MMA Offshore is following closely, as we see significant growth potential in the medium to long term in the Australasian region,” he said.

Last year, Shell’s Prelude FLNG spawned a new type of OSV, called an infield support vessel (ISV) and based on Robert Allan’s advanced rotor tug ART 100-42 design, incorporating Robert Allan’s RAstar hullform and three azimuth propulsion units – two astern and one amidships. Three of these units were built by ASL Marine Holdings for KT Maritime Services Australia, a joint venture between Kotug International and Teekay Shipping Australia.

More details of the project were included in OSJ last year, when KT Maritime Services commercial director Osman Munir explained that the ISVs assist LNG tankers berthing alongside the FLNG’s manifolds to take on cargo. Two of the ISVs, sailing stern first, will establish a towline connection, one at the bow and one at the stern. As the tanker is brought alongside the FLNG, the ISVs will act as pusher tugs to hold the tanker against the side of the FLNG. This protocol is not new, but standard stern-drive tugs can only do this in good weather conditions, the operator said.

Another offshore vessel owner looking at FLNG is Swiber Holdings, which signed a non-binding agreement about a proposed acquisition of Australia’s Interlink Power & Energy that could see it enter this market.

Swiber has been under judicial management since October 2016 and, at the end of March, it was granted an extension to this arrangement until 30 June by the Singapore High Court, where Swiber is based. At the same time, the company announced that discussions with Interlink “remain ongoing and the parties have … agreed in writing to extend the current long-stop date … to 30 September 2018.” Swiber has previously said that this deal “could be a step towards reviving the company as a going concern.”

Turning the focus away from LNG, reveals a less optimistic mood. Australia’s offshore support sector “is awash with restructuring, renegotiations and consolidations,” Mr Edgar told OSJ. “Many operators are still heavily geared, so we anticipate this to continue into the near future,” he added.

Offshore Australia founder and managing director Henk Merbis echoed his concerns. “The tide is still going out,” he said. “The industry is picking up on hype only.” Contracting and pricing “are very difficult as the big boys know the smaller guys are merely surviving and will take any work at any price to boost utilisation rates,” the consultant told OSJ.

He spoke of vessels being brought out of cold stacking speculatively, prompting others to do the same; ‘speculating on the speculation’, he termed it. Operators are in financial difficulties and one has ‘handed vessels back’, he said. “The big unknown factor is how patient banks will be with vessel valuations,” he warned. “Hopefully, vessel prices will pick up soon, as many companies have inflated balance sheets due to historic vessel valuations.”

A lot of developments need to happen to produce a sustainable new market boost he said, but “the surviving operators are ready; it is just a matter of when”.


New Zealand backs away from oil and gas

New Zealand’s coalition government will not issue any more permits for offshore oil and gas exploration. In a statement issued on 12 April, the country’s prime minister Jacinda Ardern said the move was “an important step to address climate change and create a clean, green and sustainable future for New Zealand.”

All 22 existing offshore exploration permits will continue – some of them extend until 2030 – and Ms Ardern spoke of “a just transition to a clean energy future”. She said that all three parties in the coalition “are agreed that we must take this step as part of our package of measures to tackle climate change.”

Climate change policies were part of an agreement to bring the New Zealand First party into the coalition and Ms Ardern noted its support in “ensuring the transition away from fossil fuels protects jobs and helps regions equip themselves for the future”.

New Zealand’s opposition National party described the decision as “economic vandalism that makes no environmental sense.” Its energy and resources spokesman Jonathan Young said it was “devoid of any rationale”. It will mean fewer jobs and will not affect climate change, he said. “Gas is used throughout New Zealand to ensure security of electricity supply to every home in New Zealand. Our current reserves will last less than 10 years [and] when they run out we will simply have to burn coal instead, which means twice the emissions.”

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