Category description

A liftboat is a type of vessel that is self-elevating and self-propelled, and used for a variety of purposes in offshore marine industry, be it oil and gas or windfarms. Some call them as jack-up barges, self-elevating liftboats or lift barges. A liftboat has legs to lift itself, propulsion to move, accommodation, deck space and cranes. When it comes to the oil and gas industry, the main usage (approx. 70%) of liftboats is operations and maintenance (OPEX) related activities, with c. 30% being CAPEX and large projects related.

Liftoboats are incredibly flexible and versatile vessels catering to a range of offshore needs, to support:

  • Additional accommodation
  • Well intervention work such as coiled tubing, wireline, snubbing and enhanced oil recovery techniques
  • Drilling support, completions and testing
  • Greenfield platform construction, hookup and commissioning
  • Brownfield maintenance, repair and expansion
  • Well abandonment and decommissioning

The biggest advantages of using lifeboats (self-propelled) is its mobility and safety, i.e. it can move on its own (without any tug vessels) and once the legs are settled, it is very stable. Once the liftboat is moved to a location, a preload operation (filling tanks with water and jack up just above the wave heights) is conducted to ensure that the pads on the legs are settled in the seabed (can take a few hours), after which the water is dumped and the lift boat is elevated to the required height.  Generally, a seabed site survey is conducted prior to a move, to ensure that the proposed location is free of debris and obstructions, and the topography of the location is known, to avoid can holes and pipelines.

Liftboats could be 3-legged and 4-legged. The former is cheaper to build and operate, whereas the later is costlier. Yet, a 4-legged liftboat is quicker to set up (by approx. 4 hr) than a 3-legged one. In addition, it is widely recognized (although questionable sometimes) that a 4-legged lift boat is safer and more stable. Over 10 year ago, the large majority of the fleet (more than 90%) consisted of 3-legged vessels. Yet, this ratio is changing, as more preference is given to 4-legged liftoboats, with majority of new build being 4-legged. As of mid-2018, 75% of the global fleet is 3-legged and 25% is 4-legged. This 3-leg vs. 4-leg is particularly evident in the Middle East region – most of the liftboats and requirements in the region are 4-leg.

Lifeboats are generally differentiated by classes and types. Class size in ft used to express the length of the legs and subsequently operating water depth. Classification starts at Class 65’ all the way up to Class 335’. As a rule of thumb, the higher the number, the larger the liftboat is.

When it comes to types, there are 3 major types:

  • Self-Elevating unit, non-propelled
  • Self-Elevating unit, self-propelled
  • Self-Elevating unit, self-propelled with DP2 or DP3 capabilities 

Supply & Demand Dynamics

Demand

The demand for lift barges support a wide range of oil and gas CAPEX and OPEX operations - from greenfield construction, hookup and commissioning, brownfield maintenance and repair to well service activities - and are affected to some extent by the cyclical spending patterns of oil and gas companies. Demand in the Middle East continues to remain strong, due to ageing platforms and high spending on greenfield project in Qatar, UAE and KSA. The market is South East Asia is robust as well, due to a large number of ageing platforms. Markets in the Middle East, SEA and Africa are much less penetrated than the Gulf of Mexico or North Europe.  

Average global penetration as follows (Source Triyard Presentation & Daleel estimates).


 

Supply

As of mid-2018, globally there are circa 200 liftboats operating ( and 10 under construction), with 122 being in the Gulf of Mexico, 43 units in the Middle East, 25 in Northern Europe, 6 in South East Asia and up to 4 in West Africa. More than 70% of the units are operating within oil and gas industry only, 25% being flexible and used both oil and gas and wind industry, with c.5% of units used only by the wind energy industry.

Utilization levels of liftboats are increasing with a potential to show fairly high improvements in 2018.  

Middle East

  • 2016 – 50%-55%
  • 2017 – 60%-65%
  • 2018e – 80%-85%
  •  

South East Asia 

  • 2016 – 75%
  • 2017 – 50%-75%
  • 2018e – 75%-90%

Largest operators/owners of the liftboats in the Middle East are GMS and Zakher Marine, controlling around 50% of the regional market. This is followed by Ezion Holding / Teras Offshore.

Global supply of liftboats by POB size and region of deployment. What is noticeable, the primary user of liftboats with high POB number ( 150+)  is the Middle East.    

REGION0-50 POB50-100 POB100-150 POB150-300 POBTOTAL
Gulf of Mexico11732-122
Middle East 1343543
Western Europe 778325
South East Asia -1-56
West Africa2--24
TOTAL 127141444200


Key Players

The following companies currently operate lifeboats around the world:

  1. GMS
  2. Ezion Holding ( Teras Offshore)
  3. Zakher Marine
  4. Overseas Marine Logistics
  5. GDI
  6. Milaha ( Halul Offshore)
  7. Navtech Marine
  8. Jack Up Barges
  9. Mike Mullen Energy Equipment Resource
  10. Eversendai
  11. Falcon Global ( JV between Montco and Seacor)
  12. Seafox
  13. Thong Young
  14. AMC liftboats
  15. Montco Offshore
  16. Offshore Marine Contractors
  17. Trinity Liftboat Services
  18. Seacor
  19. EBI
  20. All Coast LLC
  21. Mitchell Liftboats
  22. Baoham International
  23. White Sea
  24. Ziton
  25. Mitchel Lift Boats
  26. OOS Energy

External Scanning

A five forces analysis reveals the competitive forces acting on the market. The liftboat / jack up barge  market is characterized by a supply and demand imbalance, a fairly high degree of standardization in specifications resulting in relative ease in switching to alternatives. In the present market environment power sits with the buyer



 
Buyer's Power is High
  • Few buyer's with the majority large NOC's or IOC's
  • Buyer is likely to represent a significant portion of Supplier revenues
  • Assets are generally fairly standardised
  • Cost of switching is low



 
Supplier's Power is Low
  • Multiple Lift Boat operator globally
  • Lift Boat market is highly flexible - covers wide range of activities, can move regional locations easily, and also works in other industries 
  • Supplier is in control of the majority of major cost inputs. Although these have decreased over the past few years high utilization is still required to cover costs.


Competitive Rivalry is High
  • Supply outweighs demand
  • Competition is strong to secure utilisation 
  • Growth has slowed since the 2016


Threat of New Entry is Medium
  • Due to the downturn CAPEX investment required for new build Lift Boat has decreased significantly
  • A number of OSV Owners & Service Companies have taken the opportunity to enter the market due to the lower CAPEX costs.
  • Some entry restrictions - track record


 
Threat of Substitution is Low
  • Jack-up drilling rigs can do much of the work that and more (they can drill) a Lift Boat can do however are typically much more expensive - both in terms of hire and AHTS support required to move the rig.
  • Cost of switching is high


 

Portfolio Positioning


Cost & Price Analysis

Low oil prices placed a significant downward pressure on hire rates and day rates, which went down from $50k-$90k per day in 2014 to $25k-$50k in 2017, depending on the class and location. Indicative average charter rates in the Middle East (Source: GMS company report). This may vary depending on the owner, yet this represents the market and its competitive dynamics.

  • Small Class - $ 25,000 per day
  • Mid-size Class - $ 41,000 per day
  • Large-size Class - $ 52,000 per day 

At the end of 2018, there might be an upward pressure on day rates, due to 1) Increased well intervention activities; 2) Higher fleet utilization and 3) Revival of projects. South East Asia is expected to see a 15%-20% increase in hire rates (Source: The Edge)

Work scope is an important consideration when deciding self-propelled vs. non-self-propelled as the former is typically more expensive. Non-self-propelled units may be used where movement is infrequent and AHTS's or tugs can support re-positioning in the field.

Total Cost of Ownership

It is common practice to procure the services of liftboat / jack up barge , both short and long-term, using a standard time charter. Additional costs will be assumed by the Buyer, other than the hire rate, based on standard time charter practices. These shall include:

  • The cost of mobilization and demobilization (to/from home port to work location port).
  • Structural alterations as required for the operation and the re-instatement of the vessel back to its delivered condition at the end of the hire
  • Accommodation and meals are charged at an agreed rate as stated in the contract (on a per night and per meal basis) for the Buyer's personnel on board
  • Maintenance Days are accrued by the supplier at a rate of 24 hours per 1 month of operational service. Should the supplier wish to leave the field to carry out maintenance, subject to having accrued enough days, the buyer would be required to pay the hire rate during this period. As well at the end of the charter the Buyer is responsible for paying the hire rate for each unused maintenance day
  • Fuel - The Buyer is responsible for the provision of fuel oil that will be consumed throughout the vessel operation. The fuel efficiency of the vessel can have a significant effect on the overall cost of ownership. In calculating the fuel consumption consideration must be given to the typical operating conditions, vessel specific fuel consumption during those conditions and the cost of fuel.
  • Other items - All lubricants, water, port charges, expenses related to cargo are for the Buyer's account and may need to be factored into the TCO.

Where the liftboat / jack up barge  of choice is not self-propelled the buyer should also consider the cost of additional tug support as required for movements between port, and in and around the work field.

Strategy

Procurement Strategy

In the current market environment buyers are in a dominant position. Lift Boats are generally over supplied due to the lower CAPEX and OPEX investment and the regional mobility of the Lift Boats. Buyer’s should look to take advantage of this position securing cost reduction, higher specification vessels (operational flexibility, capability), and maintaining a degree of flexibility to switch. In summary the strategic objectives should be focused around:

  • Cost Reductions
    • Maximise competition - Actively seek the best deal in the market with long term tenders. Ensure firm but fair pressure is applied to the market to leverage the competitive market environment.
    • Market Intelligence - Ensure that you have the latest market intelligence covering utilisation and day rates
    • On Hire Flexibility - create flexibility in the on-hire date to allow a larger selection of available lift boats
  • Operational Flexibility
    • Capability - Seek higher specifications of vessel to allow more to be done with less or operations to be carried out more efficiently.  This may include looking for i) increased crane capacity, ii) tanks to store well chemicals, iii) increase accommodation, iv) structural alterations to support heavy well intervention v) higher spec positioning system, vi) larger deck capacity. 
  • Maintain Flexibility to Switch
    • Global Market Intelligence- Buyers should actively maintain market intelligence both regionally and globally on Lift Boats availability with a view to taking advantage of any lows in other regional markets and/or any availability that provides the most economic solution based upon planned work (this must consider mobilisation etc.)
    • Hire Periods - Mid to long term commitments should be made (3-5 years) with full flexibility to terminate for convenience at no cost on 90 to 120 days notice. This ensures a degree of flexibility should opportunities emerge. 

Technical Insights

Jack up vs. Lift Boat

The below video gives a generic example of what it takes to move a Jack Up barge vs. a drilling rig on to location.