Category description

Emergency Response and Recovery Vessels (EERVs) form part of a Emergency Response Plan ensuring effective arrangements are in place to recover and rescue individuals who have evacuated or escaped from an offshore installation and take them to safety. They also may be required to support helicopter ditch response and man overboard situations. An ERRV's main duties are:

  • Rescuing/recovering people from the water and providing medical aid,
  • Providing a “safe place”,

ERRV's typically feature accommodation to temporary support recovered/rescued individuals, fast rescue crafts (FRC) or a daughter craft - small, agile, fast boats capable of quick rescue and recovery from the water - firefighting and oil recovery facilities.  

Where tanker operations occur in the field higher specification ERRV's may be required where they are also capable of anchor handling and towing, heading control and emergency towing in addition to the other ERRV responsibilities detailed above.

Often EERV's will be converted/upgraded from PSV's and AHTS vessels.

Supply & Demand Dynamics

The demand for ERRVs, and offshore service vessels (OSV's) in general, continues to be driven by the world's increased energy demands.  Although over the long term global energy consumption will see a significant shift away from oil and gas, oil and gas remain a major source of consumption representing more than 50% of market share. Gas growth is expected at 1.9% p.a. and oil 0.8% p.a. through to 2035. Furthermore it is anticipated that a greater reliance on offshore resources will be seen as onshore production declines and technologies open the door to more difficult offshore resources.

The ERRV market is highly cyclical. Utilization and rates are quick to react to oil price due to the influence oil price plays on E&P spending patterns (see Rig Count). As of mid 2017 with oil prices stabilized around US$50 per barrel the short to mid term is likely to remain challenging for vessel owners as new investment levels remain low and offshore rigs continue to be stacked. Without a sustained period of stability at higher oil prices increased activity is unlikely.


Demand Outlook

ERRV demand remains dampened by the oil price volatility which has seen prices move to 12 year lows of US$26/barrel settling around US$50/barrel more recently. The current prices have left many oil and gas project uneconomical and it is expected that E&P spend will decline a further 20% in 2017 from 2016. Without robust oil price increases no substantial increases in offshore activity is expected and thus an increase in ERRV demand is unlikely.


Supply Outlook

On the supply side vessel suppliers continue to suffer from the huge supply glut following multiple years of aggressive new-build programs. OSV’s out number rigs 8:1 as of early 2017 (160% increase from 2008), utilisation has dropped in some areas 40% and rates have sunk as much as 60% since the oil downturn. If demand begins to pick up newer vessels will most likely be the first to see service during recovery. 

Circa 24% of the global existing fleet is 20+years in age and not expected to work again. Unfortunately these numbers are offset by a continued new-build program estimated at 8-12% of existing OSV’s. Based on these economics vessel owners remain locked into challenging times for the foreseeable future. Given the ease at which OSV's can be converted to ERRV's there remains a large over supply likely to remain for the foreseeable future.


Regional Heat Map

All regional markets have suffered similar fates during the oil downturn. See below for a snap shot of the latest trends in each region:


Key Players

The OSV market is highly fragmented. With a global fleet of circa 3,500 vessels the top 11 owners represent just less than 32% of the market. The remainder of the market is taken up by some 400-500 vessel owners with an average fleet size of 4-5 vessels. The below chart depicts the vessel split between the main AHTS & OSV suppliers.


In addition to the companies identified above there are a number of ERRV supplier who specialise in this area. These include:

Region
Companies
North SeaAtlantic Offshore, ESVAGT, North Star Shipping

External Scanning

A five forces analysis reveals the competitive forces acting on the market. From here we are able to determine where power sits in the marketplace. In the present market environment power sits firmly with the buyer. 




 
Supplier Power is low
  • Lots of alternative vessels and suppliers,
  • Easy to switch vessel and supplier,
  • Suppliers are almost exclusively reliant on oil and gas industry,
  • High utilization is required to cover cost


 
Potential of new entry is high
  • Market has high degree of standardization
  • Chartering practices make it relatively easy for companies to manage vessel with bareboat charters
  • Vessels can move across regions easily


Competitive Rivalry is high
  • No one dominant company within any region due to similar specifications and number of suppliers
  • High fixed costs


Threat of Substitution is low
  • No further substitution options are available,


 
Buyer Power is high
  • Few buyers
  • Cost of switching is low,
  • Lots of alternative and options of similar specification available


 


Portfolio Positioning


Total Cost of Ownership

Parameter
Service Cost
Fuel Cost
Performance Cost
Cost Visibility
High
MediumMedium
Description
The rates and charges agreed in a contract for the performance of the service
The cost of fuel used by the vessel in performance of duties
The cost of inefficiency in performing duties

Cost Driver
  • Daily Hire Rate
  • Type of operation
  • Type of propulsion
  • Fuel Consumption
  • NPT (breakdown)
  • Learning Curve
  • Quality of work (response, drills)
Commercial Impact
HighLowHigh

Strategy

Procurement Strategy

In the current market environment buyers are in a dominant position. The huge oversupply of ERRV's, the regional mobility and low demand place power firmly in the buyers hands. Buyer’s should look to take advantage of this position securing cost reduction and higher specification vessels (fuel economy, capability & safety). Where possible Buyer's should look to aggregate spend to further improve leverage. In summary the strategic objectives should be focused around:


When approaching the market DALEEL recommend the approach outlined below:


In preparation for any tender or negotiation Buyer's should ensure they have:

  • The latest market intelligence in the region including utilisation and indicative rates
  • The latest supplier intelligence including vessel availability, utilisation and rates
  • Information on other regions vessel availability and rates. Given ERRV's are highly mobile Buyer's should look globally and try to take advantage of lower demand in other regions.

Contracting Strategy

Typical oil field ERRV's operations are managed via a Time Charter. Below is a summary of the avialble contacting methods, where responsibilities lie for each and how payment is calculated:

ParameterTimeBareboat
DescriptionPer day or duration of timeVessel hull & machinery only
Operational PreferencePreferredNot preferred
Vessel Owner ResponsibilityVessel
Crewing
Maintenance
Insurance
Vessel Only
Charterer ResponsibilityPort Charges
Cargo Loading & Discharging
Bunkers
Crewing
Maintenance
Insurance
Port Charges
Cargo Loading & Discharge
Bunkers
Calculation of ChargesDaily hire rateMonthly lump sum payment
Standard Form Contracts (BIMCO)SUPPLYTIMEBARECON

Technical Insights

ERRV Features

Take a look at the video below to get a better idea of the features and operation of a typical ERRV.