The Offshore Market:
Bumpy ride, silver linings

	Several large anchorhandlers have been added to the North Sea fleet, like “Normand Master” of Ulstein’s A101 design to Solstad Offshore ASA in March. PHOTO: HARALD M VALDERHAUG

For once, the pessimists were proven wrong. The North Sea offshore market has been far more vibrant than imagined four months ago with rates for large anchorhandlers touching the level of GBP 20,000 per day. This has happened even though the gloomy predictions of slowing exploration activity have come true and more vessels have flocked to the spot market. Yet the market appears to be finely balanced, where the number of available vessels fluctuates from day to day, depending on the volume of requirements.
Now that spring is here a number of vessels have been fixed for term charters hauling pipes or supporting survey and construction work. We are now eyeing the end of this building boom, although there is still a number of newbuildings in the pipe-line. Owners should be prepared for fluctuating rates in a sensitive market, much like last year.

Better than anticipated
A year ago there were 101 drilling rigs in operation in European waters, according to Baker Hughes’ Rig Count. Today there are just 79. This contrasts with the worldwide trend, where the total number of active rigs have picked up by more than 30 per cent, helped by the strong oil prices. The greater share of the increase, of course, is in North American waters, but also Brazil, the Middle East and Far East markets are up, although more marginally.
Last year the number of spot vessels in the North Sea remained rather stable as units left for the Mediterranean, West Africa, Brazil and Mexico. This leaves a fleet of about 200 supply vessels working in the North Sea, supporting exploration programmes, construction projects and production facilities on the Dutch, British, Danish and Norwegian shelves. In addition, there is a great number of specialized craft like emergency response/rescue vessels, survey, subsea construction, seismic research, etc.
Of the 200 supply vessels – roughly 105 platform supply ships and 95 anchorhandlers – about 60 are presently working in the spot market out of Aberdeen and Bergen/Stavanger – available for rig moves, cargo runs and other jobs. The number of anchorhandlers is roughly the same as a year ago, whereas the fleet of PSVs (Platform Supply Vessels) has increased from nine to 32 vessels.

Larger units
The demanding conditions in the North Sea, and indeed the Norwegian Sea and the North Atlantic, with the drive for exploration and production in deeper waters, have brought out classes of larger and more powerful vessels. A large anchorhandler of 1980 vintage would have an engine power of 8,000 bhp; the largest units today are of the 23,000–24,000 bhp category, with a bollard pull of 300 tons. Much of the same goes for platform vessels, where larger units prove to be more economical for the field operators. The larger PSVs offer cargo decks in the region of 900–1,000 square meters, and the numerous UT755 class of 620 sqm has established something of a mid-size category.
The larger vessels have largely replaced the smaller to the extent that there is today just three anchorhandlers of less than 10,000 bhp and only two PSVs smaller than 500 sqm. The smaller vessels have largely migrated to other markets where they may still be adequate for a long time.
In a slack market, the larger vessels tend to be preferred for many jobs, although the owners may not always be fully compensated for their advanced vessels. But then the rate level is not the only valid parameter – minimal downtime between jobs is just as important.

Consolidation
The North Sea market is dominated by Norwegian and American companies, with Maersk Offshore, Swire Pacific and a handful of European operators for the balance. Most of the British, Dutch and German operators have been taken over by the large American companies in a global consolidation of the offshore supply business.
Also Norwegian groups have been swallowed by Americans: Sævik Supply by Trico and Brøvig Supply and Sea-Truck by GulfMark. This year Tidewater has formed a joint-venture with Remøy Shipping of Norway, and the French SURF has acquired the majority in Havila Supply.
Shall we see further consolidation amongst Norwegian companies? True, these are mostly smaller ventures, and last year saw the merger of Viking Supply Ships and BUE, both mainly involved in standby/emergency response vessels. At the time TFDS Offshore is in the process of being sold to a local group of investors. But the main characteristic of the Norwegian supply ship sector is that it is still largely driven by entrepreneurs. Each company is controlled by an entrepreneur owner working out of a local foothold.
Rather than mergers, cooperation on specific projects may be expected, such as seen between Solstad and DOF in Brazil, Farstad with P&O in Australia and Petroserv in Brazil, between Eidesvik and Møkster in offshore logistics.
Per Sævik, the entrepreneur from the fishing community of Fosnavåg near Ålesund, has twice built up sizeable stock-listed supply companies through the consolidation of local owners, first in Sævik Supply in 1995/96 and secondly in Havila Supply in 1998. In both instances Sævik did not hold sufficient control which exposed the companies as takeover candidates. They were in turn swallowed by Trico in 1997 and SURF this year.
Mergers and acquisitions have been an excellent way to get market access and modern equipment, experienced personnel and organisations. But to a large extent, the main American actors in the North Sea – Tidewater, GulfMark and Trico – have sought a fairly conventional business with straight anchorhandlers and platform supply vessels.
The Europeans, i.e. Maersk, Sealion and the Norwegians, have sought a different path – to develop vessels and technology for the more demanding tasks – more powerful vessels for deeper water and larger PSVs as platforms for subsea construction work, as well as branching out to related activities like total logistic services and cable-laying.
The European companies may be smaller, but tend to be more innovative. They are largely run by entrepreneurs, whereas the Americans are headed by vice-presidents of large corporations. The Europeans appear to be more inclined for advanced vessels at higher costs, while the Americans make do with standard vessels.
Many European owners have had to adapt their strategies to a larger market where Brazil, West Africa and partly Mexico may offer new opportunities. However, despite the slow-down the North Sea market is not yet finished; exploration and field development will move north and east into even more demanding waters.

//Dag Bakka Jr

Back to SSG 10, 16 May