The offshore and specialised ships markets
Offshore support vessels
Underwater construction and
installation ' IRM Market
The seismic market
Production market (surface
The year 2004 will remain unique in the history of the
oil and gas industry for two reasons: first, world oil
demand (excluding gas) reached its highest level ever
and second, the price of oil also registered a peak
at around $ 50 per barrel.
The offshore sector at last is feeling the initial
benefits of the surge in prices and oil companies are
again targeting to increase their proven reserves of
oil and gas. About $ 125 billion was spent on
exploration and oil production in 2004. This level,
comparable to that achieved in 2001, should increase to
$ 135 billion in 2005. This figure excludes Russian and
Chinese projects, but includes the Kashagan and
Kazakhstan projects in the Caspian Sea. This drive will
be a stimulus in the first instance to the development
of traditional offshore equipment in shallow waters,
but also to very deep-sea offshore equipment, which
comprise a number of drilling units used at the limit
of their capacities. Geophysical offshore exploration
will see a certain stability, even with some expansion
in India. The increase in offshore drilling expenses in
2004 illustrates the upward trend and the best
indicator of this growth being the percentage of
jack-up rigs operating, which has gone from 75 % at the
beginning of the year to 90 % at the end.
Port tug, delivered by President Shipyard in 2004,
operated by CMC Noumea (New Caledonia)
Offshore Support Vessels
Most of the major companies in this branch of the
offshore market decided this year to order a large
number of Platform Supply Vessels (PSV) as well as
Anchor Handling Tug-Supply (AHTS). The order pattern
' at the beginning of the year, for PSVs in the size
range of 3 000 tdw or more, ' for mid-size
AHTS, with 60 to 120 t bollard pull, dynamic
positioning and equipped with fire-fighting systems.
The majority of orders were placed with Far Eastern
shipyards, currently favoured for their cheap labour
costs as well as the weakness of the dollar. The other
significant trend of this market is the halt on the
ever-growing size of PSVs and of the engine power of
Our explanation for these phenomena is triple: there
are few orders coming from Norwegian owners as the
North Sea market has remained flat for most part of
2004, oil companies' needs have been concentrated on
production in deep waters and finally, owners are
following the general movement towards cost cutting.
It is worth noting an inversion of trend during the
course of the year for Norwegian shipyards, which have
filled their orderbooks, even though they were
limited by their Polish or Romanian sub-contractors
production capacities to build the hulls.
This general demand from charterers to reduce
'logistics' costs in the exploration/production
process, passed onto owners, has resulted in an effort
to standardise ships with more orders for series and
the research into more optimised designs coming also
from the Far East. In this respect, the diesel-electric
engine solutions mainly developed by Norwegian
manufacturers incorporate true advantages,
particularly in relationship with dynamic positioning
equipment compatibility, which is now a standard
feature on most new ships, for a reduced price.
The choice of diesel-electric propulsion, combined
with the installation of azimutal propulsion sets, has
also contributed to reduce construction costs by
simplifying the hull forms.
In 2004 both PSVs and AHTS delivered by the yards
found employment, even if charter rates were not always
at levels hoped for by the owners.
The North Sea market was the catalyst in the
recovery of the offshore market. As an example, an AHTS
of 200 t bollard pull chartered out on the spot market
at the beginning of the year at 15,000 $ per day,
obtained 45,000 $ per day in December. It was the same
for the Gulf of Mexico where the employment rates of
vessels finally saw an increase after four very poor
years. Egypt, the Middle and Far East also saw
chartering rates on the rise by employing more powerful
At the end of 2004 several important owners no
longer had any modern units to charter out, which leads
us to be relatively optimistic as to the market's
ability to absorb the large number of PSVs and AHTS
that are due for delivery in 2005.
There has been a rapid increase in the already
substantial fleets operated by Singapore owners. As an
example we can cite Jaya, which had 21 AHTS, 2 PSVs and
6 other ships under construction at the end of 2004.
Fleets that are in the hands of Middle East owners have
also seen a significant development with, for instance,
Maridive in Egypt which controls nearly 50 ships
including 7 under construction in India.
Western owners have started or boosted their fleet
Groupe Bourbon has ordered 8 PSVs (GPA 670 type) and
4 AHTS (Conan Wu type of 70 and 80 tons bollard pull)
in China. There are also 4 AHTS (120 t bollard pull,
Conan Wu design) with Keppel Singmarine in Singapore,
as well as 2 fast supply ships in aluminium based on an
innovative French concept (Mauric design) with the
Piriou shipyard. The Bourbon Group is continuing to
expand and hopes to conquer new markets.
Platform supply vessel, GPA design, 3,300 dwt, to
be delivered by Zhejiang in 2005, will be operated
by Groupe Bourbon Offshore division
We can mention the example of Tidewater, which has
ordered 8 AHTS, 4 PSVs and half a dozen of smaller
units. They have ordered these ships with the intention
of replacing some older units and thus avoid important
expenses to keep them in proper running condition and
getting them re-classified.
Edison Chouest Offshore has ordered 7 offshore
vessels and 4 fast supply ships.
In 2004, Seabulk Offshore contracted with Labroy
shipyard of Singapore 8 AHT/AHTS mainly for the West
Swire Pacific Offshore has 9 AHTS on order in the
Far East, of which 7 of the UT 780 type - 4,800 bhp
Delivery of new units ordered in Asia are spread out until 2006.
Beside these PSV and AHTS fleets, we have seen a
noticeable increase in the demand for fast craft, over
20 knots, built of aluminium, 40 metres long or more,
designed to carry dozens of passengers and some cargo
on deck. In the future, under deck bulk capacities are
also being envisaged. At last a new market has emerged
concerning small, specific units aimed at providing
security protection for offshore oil fields capable of
carrying armed men aboard.
In addition, several governments, particularly in
Europe, have launched programmes to renew or to
complete their fleets for assistance or intervention as
well as anti-pollution surveillance ships. These
building programmes are benefiting essentially European
The opening of the Russian market, giving access to the
Arctic, from the Barents Sea to the Bering Straits, has
stimulated orders for the offshore markets, but also to
serve the exports terminals of the 'on-shore'
Amongst these we can mention:
' Swire Pacific / Primorsk with an order for
three UT 758 of 90 meters, ice-breaker, at Aker Yards
for 500 million Norwegian kroner. ' Rieber Shipping /
Primorsk with an order for a ice-breaker / tug, at Aker
Langsten for 351 million Norwegian kroner. '
Sevmorneftegaz / Fesco with an order for two
ice-breakers at the Havyard Leirvik shipyard for 53
Underwater construction and
installation ' IRM Market (Inspection Repairs and
The year 2004 was characterised by a marked revival in
the underwater construction activity and also with the
happy resolution of financial crisis of Stolt Offshore,
who managed to transform its debts into capital and was
able to win contracts at more favourable conditions.
The Stolt Nielsen group sold its interests in Stolt
Offshore thus ending an historic participation in the
sector. McDermott has strengthened its presence with an
This industry has continued its consolidation of
which one of the stages was the repurchase by Siem
Industries Inc. of the remaining 50 % share of Subsea 7
previously controlled by Halliburton. It appears also
that Torch Offshore is in a particularly precarious
situation and is likely to dispose of a number of ships
especially the 'Midnight Express'.
European underwater contractors are in a better
shape than their American rivals, with the exception of
Cal Dive and Global Industries. The revival of
so-called traditional offshore activities in shallow
water in the Gulf of Mexico, should help contribute to
their improved situation.
The start of large installation projects in West
Africa, Egypt, and Brazil is helping to bolster
activity, to the point that some operators are
announcing that they have almost none of their main
ships available until 2008. The Far East, traditionally
in low profile, will also absorb some ships in 2005.
Subsea 7 has made a remarkable break-through in West
Africa, a market up until now shared essentially
between Technip Offshore, Saibos and Stolt Offshore.
The possibility to have the right vessel at the
right time is a key to success in the underwater
construction market, but it should be appreciated that
the fleet is ageing. In practice, with the exception of
several units coming into service at the initiative of
owners of supply vessels, such as the 'Boa Deep C 1',
the 'Normand Cutter' (a converted cable-layer chartered
to Sonsub) the barge-laying 'Jascon 5' and the
construction of the future 'Normand Installer' (a joint
project between SBM and Solstad), no major project has
been launched or realised in 2004.
Consequently 2005 should see the launching of
several significant projects by the Majors, namely
large laying and installation ships (150 m x 30 m or
more) capable of laying pipes of 16 to18 inches at a
depth of over 2,000 metres. The major concern will be
the response capability of the shipbuilding market,
which has never seen such a level of activity.
The recovery of the underwater construction market
both in the area of new developments and in the area of
the maintenance of new fields, has logically helped
sustain and stimulate the activity of supply vessels
such as the MPSV (Multi-Purpose Supply Vessels) fitted
with a strong lifting capacity (more than 100 tons at
sea-level). They are also employed in light
construction works and more generally in the IRM market
of which the main players remain the owners of supply
ships mentioned in the previous chapter.
The seismic market
The four principal operators, WesternGeco, Veritas,
Petroleum Geo Service (PGS) and Compagnie G'n'rale de
G'ophysique (CGG) have also benefited from a surge in
activity. Hardened pessimists have been obliged to
revise their opinion about the future of this activity,
which particularly suffered over the past four years.
CGG seems to have abandoned its ambition to merge with
PGS after its offer was declined by the latter's
shareholders. Nonetheless, a new consolidation would
benefit this sector. At the start of 2005, operators
are working already on the programme for 2006, which is
exceptional given the average duration of seismic
Technologies continue to improve the quality but
also the range of seismic work, since it is now
possible to detect oil or gas up to a depth of 6,000
meters. These gains will incite operators to improve
their marine logistics globally and probably to charter
more specific supply ships for longer periods.
The offshore drilling industry is undergoing a real
change in situation which began at the start of 2004,
with an increased level of utilisation of jack-up rigs
to drill in shallow waters.
At the end of 2004, few units of the 300 feet
jack-up rigs type remained available in the short term.
Freight rates for deep-water drilling rigs are heading
toward the $ 300,000 per day level. The second generation
semi-submersibles, which drill at 1,500/2,000 feet
depths, are benefiting from the rebound in the North
Sea market and obtain more than $ 100,000 per day for short
The industry continues to gravitate around the
fleets controlled by the six American majors, Pride,
Diamond, Ensco, GlobalSantaF' (GSF), Noble, Transocean
and by four competitors of substantially smaller size
namely Stena Drilling, Maersk Drilling, Atwood and
Rowan. By and large, the drilling companies dedicated
2004 to consolidating their balance sheets. Pride
should probably sell some supplementary assets, with a
view to be in a better position for new investments
over the coming 2005 / 2006 period. As to GSF, they
anticipated the change in the market and fixed four
units which are being completed in Singapore (2
semi-submersibles and 2 jack-ups).
Opportunities to convert, modernise and build new
drilling rigs will be possible as soon as the oil
companies offer long term charter opportunities. It is
worth mentioning the order of three jack-up rigs in
Singapore on a speculative basis by a group of
Norwegian investors, as well as another unit ordered by
the Norwegian Odfjell.
In this sector, the Keppel Fels group plays a
predominant part, which is based on its world-wide
network of yards for repairs and shipbuilding, on its
capacity to offer the market standard jack-up rigs,
also adaptable to specific needs for drilling, and
finally on its role as a speculative investor.
The Sembawang group for its part maintains a share
of the market due to the specific expertise of PPL
Shipyard. Finally Chinese builders, such as Dalian,
have emerged but remain principally concentrated on
their domestic market.
Production market (surface systems)
This year has seen Stolt Offshore shed itself of
engineering, construction project, and integrated
production systems by the sale of its affiliate
Paragon. The leaders, who are Saipem and Technip,
obtained some prestigious but high resource-consuming
contracts, linked to developments in West Africa but
also in the Persian Gulf (Qatar project) and the
Caspian Sea (Kashagan phase 1).
Despite the small number of contracts recently
awarded (of which SBM with Petrobras of Brazil and
Bergesen with Woodside in Mauritania), the number of
tenders open or due to come out in 2005 for leasing
FPSOs has considerably increased. These tenders are
primarily related to West Africa, Brazil, South East
Asia and Australia. These projects require storage ship
hulls of two million barrels, except for the last two
zones, which regularly require Suezmax size units. In
the second-hand market, which is somewhat overvalued,
it is obvious that the number of available ships has
become considerably reduced. In addition, oil companies
are more and more reluctant to accept hulls over 20
years old. As from now, charterers of FPSOs are
proposing either to use modern ships or to build new
hulls to meet their standards, in line with the order
placed by Modec (Mitsui group) and awarded to Samsung.
The dredging market
From the point of view of contractors, the sector has
continued to consolidate. 2004 saw the final absorption
of Ballast-Ham by Van Oord. Despite a difficult context
due to the halt of the huge Singaporian projects, a
revival in world demand in volume is expected for 2005.
Current projects in the Persian Gulf, China and the
Sakhalin Islands have continued to keep the contractors
Jan de Nul is pursuing his modernisation programme
and the expansion of his fleet. It's the only Major
that has built up his investments in an original and
audacious strategy, by ordering small sized dredgers in
China. These orders have demonstrated Jan de Nul's
know-how in engineering and project management.
In France, DTM has confirmed the order of a 2,200
cbm sand-dredger with the Barkmeijer shipyard in the
Netherlands, for delivery in 2005. GIE Dragages-Ports
has concentrated on restructuring and rationalising its
fleet. It should confirm in 2005 an order for a 700 cbm
grab hopper dredger fitted with a dredge pipe.
Finally, there has been the U-turn of the IHC group,
which has finally abandoned its shipyards, including
the famous IHC Holland, designer and builder of
dredgers. The expertise of Dutch dredging specialists
tends to be concentrated in the engineering work and
the manufacturing of dredging equipment.
Anchor-handling tug supply, delivered in 2004 by
Fels Setal, operated by Delba Maritima (Brazil)
A lot of uncertainty has been removed by the outcome of
the American elections. In addition the forecast is for
a new increase in world oil and gas demand.
Oil companies today possess very important financial
capacities. Exploration has been considerably reduced
these last few years, whereas the increase in proven
reserves is now a strategic target.
These circumstances augur well for the offshore
industry as a whole for the year 2005 and should apply
to all geographical zones.
Shipping and Shipbuilding Markets in 2004
I N D E X