Don’t Miss the Boat in the Subsea Vessel Market

The supply/demand balance in the subsea vessel market is shifting as activity levels rise markedly across many of the sectors these vessels support. Operators and contractors need to be decisive in securing the assets they need, according to Jonathan Lints of broker Clarksons Platou (Offshore), or they might find their ship has sailed…

The opening months of 2021 have witnessed markedly positive trends in the global subsea market, as evidenced by recent increases of up to 35% in day rates for some vessel types and a doubling of vessel fixtures between January and April compared to the corresponding period last year—much of which predated the COVID-19 crisis.  

It reflects one key strategic trend: activity growth not in one or two core markets, but in multiple segments internationally. These include decommissioning and alternative energy, but also extend to inspection, repair and maintenance (IRM) campaigns and deferred oil and gas industry projects which are now back on the agenda.

It’s all creating elevated levels of demand among operators, major contractors and subcontractors for assets ranging from survey ships to diving support and construction vessels.

The 2021 trends also demonstrate that the subsea sector, in line with the broader offshore industry, has adapted quickly to the implications and constraints of COVID-19: rigorous policies and procedures are now firmly in place for managing everything from crew changes to potential outbreaks of the virus, eliminating many of the issues that had impacted activity and instilling confidence among operators that work can be safely and efficiently executed.

Our analysis suggests the first quarter of 2021 has been extremely busy from a tendering perspective across all the segments mentioned above.

Renewables is of course a burgeoning sector but we’re also witnessing a great deal of previously-delayed oil and gas work returning to activity sets and larger construction projects earmarked for 2022 and beyond moving forward into initial preparatory stages.

These are international trends, encompassing a growth in activity levels in areas ranging from Mexico, the U.S.—where east coast windfarm developments are rapidly growing in number—West Africa and Brazil.

Put all these factors together and you’ve got a fast-reviving subsea vessel market. It’s been some years since the market was busy to the extent that charterers were under pressure to secure vessels quickly before they were off the market, but there’s some sense of that scenario returning with some vessel types. Around 80 vessels were chartered for North Sea projects in the first quarter of this year and the current scarcity of construction vessels with a 250t crane gives an indication of the challenges that lie ahead.

It’s of course common practice for charterers to take vessels on a project-specific basis, but what we may also see this year and beyond is charterers taking greater control of their own destiny and securing vessels for an entire season.

There’s a speculative element to that approach, but if they have the confidence to commit to longer charters then they’re not in danger of quite literally missing the boat—while potentially creating a competitive edge. Beyond the option of sub-letting the vessel as part of their risk mitigation, subsea contractors are positioning themselves to pursue further short-term opportunities given the scale and diversity of current activities internationally.

With a longer-term charter, they’re equipped to present a fully packaged solution to other prospective clients beyond their already-confirmed scopes. They’re not saying they can secure a vessel; they’re saying they have a vessel—and that gives clients the confidence they need about delivery. It’s a risk and reward strategy, certainly, but one built on more robust foundations given the prevailing conditions.

This market realignment—and the fast-paced nature of it—means it’s more important than ever for prospective charterers to be fully across vessel availability. As brokers with a global outlook and an understanding of the factors that influence availability, rates and timing, we’re supporting charterers to help ensure the gangway doesn’t go up before they’ve got the resources they need.

It’s why we’re investing to expand our subsea and renewables teams so we have the resources in place to keep ahead of trends and developments in an ever-changing industry. It’s also why we’re investing in digital technologies to bolster our market intelligence capabilities and offer streamlined solutions to clients.

For brokers, it’s now critical to go beyond conventional service provision and apply specialist technology to validate every factor that informs client decisions—not just about availability, but intelligence on topics such as the project history and geographical track record of individual vessels.

Chartering a vessel will always be one of the biggest project-related decisions an operator or contractor makes. At a time of big market change, they need the right support and advice to make sure they’re getting the right vessel on the right terms—and firmly anchoring their project on solid commercial ground.

The author
Aberdeen-based Jonathan Lints is Divisional Director Subsea with Clarksons Platou (Offshore) Limited, which provides offshore ship brokerage services internationally. Its 1,600 staff operate from 53 offices across 23 countries around the world.