At the recent Asia Pacific Maritime Offshore Market Analysis conference in Singapore, there was much discussion about the concept of charterers imposing an unofficial 15-year cut-off on offshore support vessels (OSVs).
The rationale is that, for the oil majors, the 15-year limit would bring OSV chartering inline with deepsea tanker chartering and limit corporate reputational risk in the case of an incident. (It is hard to justify to the general public operating 25-year-old vessels, no matter how well maintained.)
On the supply side, there is excess capacity of OSV tonnage. According to Captain Mike Meade of offshore vessel brokers 3M Marine, 1,200–1,300 OSVs are currently idle.
According to mapping, ship search and valuation provider VesselsValue, this equates to around 20 per cent of the worldwide fleet
According to VesselsValue data, the current OSV fleet has an average age of 16.4 years and a total value of US$43 billion and consists of 5,294 anchor-handling tugs (AHTs), anchor-handling tug/supply (AHTS) vessels and platform supply vessels (PSVs).
The peak age range in the OSV fleet is five to nine years old and makes up 27 per cent of the fleet. If the 15-year cutoff is applied to the fleet, it would affect over one-third (36 per cent) of the current fleet.
Furthermore, if the current OSV recession was to continue for as long as the one that has affected the deepsea shipping market (say another five years), the greater age of the fleet indicates that up to 45 per cent of the 2021 fleet would be over 15-years old.
Of course, this is a rather simplistic analysis, and it is unlikely the cut-off would apply on a global basis to all OSVs, unless this was imposed by an external body such as the IMO. It could be imposed by self-regulation through a cartel of owners.
However, once this discussion is in the public domain, there is also the possibility that an age limit could be imposed regionally, for instance by the US Coast Guard.
How would this affect the industry regionally? Owners based in the US have by far the largest fleet but also one that, on average, is over 15 years old.
Beneficiaries of an age limit are likely to be owners based in Norway, Singapore and Malaysia. The latter has an orderbook that is equal to just over 40 per cent of the current fleet.Is a 15-year age limit the solution to the overcapacity issue the OSV sector is wrestling with?
As Captain Meade pointed out at the Asia Pacific Maritime Offshore Market Analysis conference, there was a problem with overcapacity in the sector before the collapse of the oil price.
Despite the superb technological advances in the offshore sector, management appears to be deeply conservative, and the offshore industry seems to be stumbling towards the same cycle as has already occurred in the shipping markets, which collapsed in 2008.
The container ship market, in particular, went through a period of layup, but as soon as rates moved from below opex to above opex, idle vessels were reactivated, new orders were placed and the pain was prolonged. Five years later, container ships are being sold for scrapping in 2016 at just 14 years old.
With the greater transparency on the real market values that VesselsValue brings, the industry can now make reasoned decisions on whether to hold or scrap vessels.
Is the OSV market ready to take this step?
Source: Offshore Support Journal