This month Keppel O&M and Semb Marine had announced orders of US$770mil and US$1bil respectively. Keppel was awarded FLNG and liftboat orders while Semb Marine was awarded a Heavy lift Semi-Sub Crane Vessel. For the two leading O&M companies in Singapore, these are orders after some very quiet 2015 so far when order intake is concern.
The last time Keppel O&M announced order intake was in January this year when they were awarded a S$265mil contract to build an ice class vessel and S$65mil contract to build an Anchor Handling Tug and providing of technical services for the construction of a liftboat. As for Semb Marine, the only other order for the year was a FSO conversion contract worth S$56mil.
The number of Oil Rigs required is closely related to the capital expenditure (Capex) programs of Oil companies. Due to the low oil price, capex and other exploration works on new fields all come to a halt. So SGX listed O&M rig builders such as Keppel O&M, Semb Marine, Cosco etc will continue to feel the pressure of NO Rig orders.
With oversupply of oil rigs, Offshore Support Vessels (OSV)’s demand also dropped in parallel drastically. OSVs typically include vessels such as Anchor Handling Towing Supply Vessels (AHTS) and Platform Support Vessels (PSV) etc. Similarly, we will also see less offshore construction work, due to the low levels of new oil field developments.
So as alternative, yards will be counting on specialized vessels. What are specialized vessels, and why are they still in demand?
Operational & Maintenance activities Ramped Up
To compensate for the low oil price, production of oil has to increase. Therefore specialized vessels are employed to support the operational/production and maintenance side of the oil and gas value chain.
Floating Production Storage Offload (FPSO) vessels will store and process the extracted crude oil of existing oil wells, before the processed oil is transferred to a shutter tanker. Then there will be Pipelay vessels that lay offshore pipes to transfer oil and gas from one place to another. With almost little or no new developments of oil fields, older oil fields will need maintenance or well stimulation to increase production. Liftboat, Well Stimulation Vessels, Diving Support Vessels or Multi-purpose vessels will then be needed.
Some ship owners may also take this opportunity to renew their older fleet at an attractive price. This is the case for Hereema when they awarded the US$1bil contract to Semb Marine just this month, mentioned earlier.
Anyway, I have included below some of the specialized vessels and their typical contract value.
Disclaimer: The values of these vessels provided below, are very rough indications use as a guideline only. The actual values vary depending on the specifications of the vessels and the complexity of the main equipment installed onboard.
FLNG / FPSO / FSO conversions
FLNG conversion ~ US$700mil
FPSO conversion ~ US$100mil and above
FSO conversion ~ US$100mil and below
FPSO (source: Modec)
Heavy Lift Crane / Pipelay Vessel
~ US$300mil to US$1bil
Heavy lift Crane / Pipelay Vessel (source: Hereema)
Reel Lay Vessel (source: Technip)
Flexible Pipelay Vessel (source: SapuraKencana)
~ US$60mil and above
Refer to Rolf Suey’s article “LiftBoat Lifting Expectations?”
Cablelay Vessel (source: Van Oord)
Windfarm Installation Vessel
Windfarm Installation Vessel (source: Deme-group)
Multi-Purpose Support Vessel
Multi-purpose Vessel (source: Bourbon)
Well Stimulation Vessel
Well Intervention Vessel (source: Island Offshore)
Diving Support Vessel
~US$80mil and above
Diving Support Vessel (source: Subsea 7)
Even if there is still demand for specialized vessels, it is inevitable that the numbers of vessels required will be greatly muted in the current pessimistic O&G environment. Furthermore, profit margins will be squeezed since there will be so many shipbuilders chasing for the so little newbuild vessels projects.