MPSEV's, or lift-boats, are self-elevating vessels typically used during the development and production stages of the oil and gas lifecycle. MPSEV's feature large hulls and a number of legs (typically 3 or 4) that are deployed at location raising the hull out of the water and providing a stable platform for the work to be performed.
MPSEV's typically feature; i) large open decks, ii) accommodation to support numerous personnel, iii) craneage for the movement of equipment, goods and materials, and iv) heli-deck. MPSEV's may also be self-propelled, capable of moving around the field using its own propulsion system. 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.
MPSEV's are incredibly flexible and versatile vessels catering to a range of offshore needs. Accordingly MPSEV's are used 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,
Supply & Demand Dynamics
MPSEV's 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. Following the fall of oil price in late 2014 MPSEV rates were slow to react due to the imbalance in supply and demand. Particularly in the case of self-propelled MPSEV's demand was much greater than supply and Owner's, to a certain extent were able to protect margins.
Whilst low oil prices place some downward pressure on hire rates, due to the increased volatility in the market, this is limited by the limited market penetration of MPSEV's.
Globally there is fewer than 100 MPSEV's operating outside the North America (around 250 operate in North America). The number of operating vessels is relatively evenly split across MENA, NW Europe and West Africa (circa 25-30 MPSEV's in each location) with South East Asia operating fewer than 10 although is continuing to develop as a growth target. Of the available vessel work days it is estimated that fewer than 25% are consumed by MPSEV's, the majority of demand being met by drilling rigs that come at a much greater expense. In the long-term key growth areas of MPSEV demand can be expected in South East Asia, who have numerous aging offshore fixed platforms, as well as North West Europe who have a similar aging infrastructure however also a rapid expansion of offshore wind turbines.
MENA currently has around 700 offshore fixed platforms 65-70% of which are 20 years plus. This coupled with the aging reservoirs, providing opportunity for well service and EOR work, and the general oil expansion targets across UAE and Saudi Arabia means supply is unable to keep up with the high levels of demand within MENA as well as across the globe.
A number of new build programs are nearing completion with an expected 9 additional MPSEV's expected to enter the market by 2016. Despite this and despite the low current oil price MPSEV's demand still largely outweighs supply.
The following companies currently operate lifeboats around the world:
- Gulf Marine Services
- Gulf Drilling International
- Zakher Marine Services
- Montco Offshore
- Trinity Liftboat Services
- Offshore Liftboats
- Offshore Marine Contractors
- Seacor Marine
- AMC Liftboat
- Ezion Holdings
- EBI Elevating Boat
- Hercules Offshore
- Millenium Offshore
A five forces analysis reveals the competitive forces acting on the market. The MPSEV 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 MPSEV's operator globally
- MPSEV's 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 MPSEV 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 MPSEV 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
Total Cost of Ownership
It is common practice to procure the services of MPSEV's, 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 MPSEV 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.
The sub-category analysis carried out presents a case for the development and/or maintenance of a collaborate relationship thus reducing the supply risk in the market place. Over dependence on any one supplier should be avoided and a degree of flexibility to switch should be maintained or developed within the relationship given the balanced power position.
There are a number of ways in achieving this;
- Increase and Maintain Collaboration
- Cost Initiatives - In an effort to develop and maintain collaborative relationships buyers and suppliers should engage in cost improvement initiatives that would reflect in saving for both parties. MPSEV initiatives may centre upon the following areas i) manpower reductions/review, ii) subcontractor costs, iii) fuel consumption. Both buyer and supplier should work collaboratively to reduce costs associated in these areas.
- Performance and Efficiency Optimisation - As part of the increased collaboration clear performance measures should be agreed and tracked. These may include i) Health and Safety performance, ii) Non-Productive Time, and iii) Cost. In addition to this continuos improvement campaign should be developed to enhance performance performance in these areas. It would be also preferable to agree risk and reward criteria that would affect the hire rate based upon the KPI's agreed and achieved.
- Capability - Buyers should encourage Supplier to invest in both their MPSEV as well as the marine crew making both more tailored to the operation. Modifications to the MPSEV may include i) increased crane capacity, ii) modification of tanks to store well chemicals, iii) increase accommodation, iv) structural alterations to support heavy well intervention. All modification should be driven toward delivering added value to the Buyer and the performance of the operation.
- Maintain Flexibility to Switch
- Global Market Intelligence- Buyers should actively maintain market intelligence both regionally and globally on MPSEV 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.)
- Long term plan visibility - Given the high demand and limited availability of MPSEV's long term planning is essential to avoiding the addiotnal cost associated with non-availability of vessels. Sourcing events can be planned to capitalise on vessels availability in the market and long term commitments can be made based upon campaigns that have been planned and budgeted for,
- Approaching the Market - Given the limited availability of MPSEV's in the market unplanned competitive tenders should be avoided. Suppliers should be approached and directly negotiated with based upon availability of suitable specification MPSEV's.
- 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,
In general the sub-category strategy is focused upon a developing a more value adding relationship whilst maintaining a degree of flexibility to take advantage of significant shifts in the market.