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Offshore Support Journal

Seacor Marine Holdings: Embracing change and evolution

Fri 25 Jan 2019 by John Snyder

Seacor Marine Holdings: Embracing change and evolution
Seacor Marine wants to become the operator of the largest fleet of hybrid offshore vessels by the end of this year

Seacor Marine president and chief executive John Gellert’s willingness to adapt is transforming his company into the leading operator of hybrid offshore vessels

Just about a year and a half after spinning off from Seacor Holdings to head up the new Seacor Marine Holdings, Inc., president, chief executive and director John Gellert has plenty of evidence to support the claim that he has grown the business during a difficult period. Navigating a “frustratingly slow process of recovery” in the offshore market has required creativity, he said, readily acknowledging the limited capital the business had to work with at the beginning.

John Gellert (Seacor Marine Holdings): Winner: Annual Offshore Support Journal Awards 2019

“We did the Monto lift boat transaction which closed in February [2018], but we were working on it pretty much since even before the spin-off. We also did a joint venture (JV) in China with COSCO on eight platform supply vessels (PSVs),” he said.

“Rigidity is the enemy because it prevents people from making sound decisions”

In the case of the Montco lift boat transaction, LLC - a wholly-owned subsidiary of Seacor Marine and Montco Offshore - formed a joint venture. The deal helped Montco Offshore emerge from Chapter 11 bankruptcy. In accordance with the terms of the JV, Seacor Marine and Montco Offshore contributed certain lift boats and other related assets to Falcon Global Holdings LLC, which assumed certain operating liabilities and indebtedness associated with the lift boats and related assets. The transaction consolidated the 15 lift boats operated Seacor Marine and six lift boat vessels previously operated by Montco Offshore.

In January 2018, Seacor Marine announced the formation of SEACOSCO Offshore LLC, a Marshall Islands entity jointly owned by Seacor Marine and affiliates of COSCO Shipping Group. SEACOSCO entered into contracts to buy eight Rolls-Royce designed, new construction PSVs from COSCO Shipping Heavy Industry (Guangdong) Co., Ltd, an affiliate of COSCO Shipping, for US$161.1M, of which 70% was financed by the shipyard and secured by the PSVs on a non-recourse basis to Seacor Marine.

SEACOSCO entered into contracts to buy eight Rolls-Royce designed, new construction PSVs

This past January, Seacor Marine inked a deal to acquire three more PSVs from COSCO for approximately US$46M.

Shipbuilder COSCO Shipping Heavy Industry (Zhoushan) is expected to deliver the first of the three vessels on 30 September this year, the second on 30 January 2020 and the third on 30 April 2020.

The three vessels, which will be named Seacor Alps, Seacor Andes and Seacor Atlas, will all be of the Rolls-Royce UT771CDL design, with a dwt of 3,800 tonnes, a dynamic positioning class of DP2 and a firefighting class of 1. They are all capable of undergoing subsequent retrofits for battery hybrid power solutions. All three vessels will be Marshall Islands-registered.

Adaption is key

When Offshore Support Journal interviewed Mr Gellert for its OSJ Industry Leaders of 2018 last year, he also spoke about his more than 25 years’ experience in Seacor's various businesses. While he downplayed his wealth of experience, calling his resume “pretty boring,” Mr Gellert has effectively headed up the group’s offshore marine services arm for 13 years. Prior to that, he spent another 13 years in financial, analytical, chartering and marketing roles within the organisation, and all the while it seems he has been firmly focused on the numbers.

While frustrated by the slow pace of the recovery in the offshore vessel sector, Mr Gellert himself was not standing still. He has added focus to international operations while also doing a better job of adapting within local markets to what each of those markets, individually, has to offer.

“Seacor felt the fuel savings it could achieve through battery hybrid propulsion would give the company the boost it needed to stand out in the market”

“You need to adapt to the local market. What works in the local market in one place doesn’t work in other places, even if you are utilising similar assets. You have to listen to what the market is offering and adapt yourself to it. You can’t think you are going to be able to dictate the market or dictate what the market wants.”

A willingness to adapt is what forms the core of his leadership style. Rigidity is the enemy because it prevents people from making sound decisions, he said.

Mr Gellert’s determination to remain open and flexible in his thinking and to adapt to market conditions are behind the company’s increased focus on hybrid power options for its vessels and the role that automation will play in vessel operations in the future.

Positioning for the future
To position the company for the future, Seacor Marine took the bold step of embracing hybrid propulsion technology by converting two PSVs to battery hybrid power. Through Seacor's joint ventures in Mexico and China, the company will operate 12 battery hybrid-powered vessels, which includes four PSVs contracted to operate in the Gulf of Mexico and eight PSVs for worldwide operations.

Reflecting on Seacor's journey, manager of engineering, Tim Clerc emphasised that the decision for batteries was one the company carefully thought through. Seacor had been evaluating the benefits of battery hybrid propulsion and how to apply it for several years.

This evaluation led the company to take an active role in the 2015 DNV GL-managed joint industry project (JIP) “Opportunities and Barriers in Maritime for Hybrid Electric Power for Backup and Propulsion,” which aimed to solidify the next steps toward widespread utilisation of battery hybrid power in the offshore oil and gas sector.

Through its participation, Seacor validated the conclusions of the study on a cost-benefit basis for its operations. “We believed that we could significantly reduce fuel consumption using battery hybrid technology, and our basis for that was not only our work but the work we did jointly with DNV GL on the JIP, which used one of our vessels as a source of data. That vessel is now in service, and the savings we’ve seen so far are in line with the findings of the JIP,” said Mr Clerc.

The JIP concluded that savings in fuel and emissions are highly duty-cycle dependent; indicators for a good value proposition of a hybrid vessel are extended periods of low loads, or transient duty cycles that swing from very low loads to very high loads, similar to those of a PSV operating profile — especially during dynamic positioning operations. Over the engine maintenance cycle of 50,000 hours that was looked at in this study, the fuel savings result in significant reduction of CO2 emissions (19,600 tonnes for a PSV). Similarly, the total combined amount of NOx, SOx and CH4 emissions avoided is also significant at 1,970 kg.

Increasing competitiveness
Subject to shareholder pressure, Exxon, Shell, and BP have all announced initiatives to reduce emissions and have publicly adopted plans to report the risks climate change poses to their core businesses. These activities meanwhile have translated to an oversupply of OSVs and ship operators are seeing historically low charter rates and utilisation.

The price per barrel of oil has forced the oil industry to make dramatic changes in the name of efficiency, and now oil companies are feeling the heat of climate change as well. Seacor felt the fuel savings it could achieve through battery hybrid propulsion would give the company the boost it needed to stand out in the market.

“We are in the business of chartering ships. Lots of owners today have similar-sized, modern PSVs. So how do we differentiate ourselves? Fuel efficiency was the way we believed we could offer better value to our customers – hence the DNV GL notation for batteries,” stated Mr Clerc, as he shared insight on Seacor's thought process. “If we take our eight DNV GL-classed COSCO vessels, for instance, they were quite optimised already in terms of hull form, propulsion and power generation, which limits how much we might improve there.

We needed to utilise technologies that can reduce fuel consumption. When we look at emissions; there are after-treatment systems on the market and Tier-4 in-engine systems available, but the easiest way to reduce emissions is to simply burn less fuel.”

“You need to adapt to the local market. What works in the local market in one place doesn’t work in other places, even if you are utilising similar assets”

The Rolls-Royce Marine battery containers for the Seacor project have been surveyed and tested as complete units to the extent possible prior to shipment to the vessels. In a pilot project, DNV GL has issued product certificates for the complete containers, which includes the structure with fire insulation, certified components like batteries, chargers and transformers, electrical installations in the container and testing of the complete container as a component. This will reduce onboard testing and allow for a shorter commissioning time.

Though fuel efficiency may have been a primary driver for Seacor's  decision, the company does expect to earn other rewards; the full list of which is better understood now. “We look at it as our ability to offer a more efficient vessel foremost, but one with dynamic performance and with greater redundancy of systems,” stated Mr Clerc as he highlighted some of the safety benefits of batteries.

“During DP simulations, we see that we have an extended period during which we can safely disconnect from the rig. We have a far more robust system when it comes to blackout prevention and recovery in the event of a blackout.” Seacor also values this increased reliability because it appeals to charterers.

These elements combine to not only save fuel but also reduce running hours on equipment. “On paper, we see the savings in maintenance being considerable. Of course, that has yet to be realised, and we are only going to see that over time,” said Mr Clerc. He added that Seacor is making major investments to have crews trained on the new energy management systems, supplied to the two series of vessels by Kongsberg and Rolls-Royce respectively.

Automation and crewing

“Like any innovative technology on board, just how much savings we will see from it will depend a lot on the crew. They are excited about it though, and it is refreshing to see their enthusiasm about being on board and part of something that is cutting edge. As our crews gain more experience with the operation of these systems and, importantly, as they learn to trust in their reliability, I think we will see greater savings come out of it. For example, generators won’t be running needlessly.”

Though there is a learning curve with operating these systems, the crew on board will benefit from their use right from the beginning. “Electric power minimises noise and vibration because the generators are loaded more evenly,” said Mr Clerc. “We already build our vessels to Comfort Class, but the crew will have an even more comfortable working environment with this. We want to do what we can to improve life on board, and we want our people to be well rested before they go on watch so that they can stay alert while they’re carrying out their duties.”

While Seacor's  current retrofit projects will bring 12 energy-efficient and cleaner vessels to the market, Mr Clerc said the company is just getting started. “We’re not going to stop innovating, we will do more.”

Seacor's decision to invest big and early in hybrid technology, Mr Clerc believes, is an advantage and makes a statement about Seacor's outlook to the future. “We see greater interest from charterers, with some specifically asking for hybrid power now, particularly those in the North Sea. You can never stop moving forward and Seacor is not a company that rests on its laurels,” he said.

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