Multi-purpose Support Vessels (MPSV's) are designed with flexibility and versatility in mind. They are capable of performing a range of activities including: supply duties, lifting operations, ROV and survey activities, platform and SPM maintenance, diving, light well intervention and accommodation support.
To ensure flexibility MPSV's may feature: a dynamic positioning system, heli-deck, cranes, a large open deck area, tank capacity for liquids, large accommodation and walk to work gangway systems.
MPSV's can be broadly split into high-spec and low-spec. Low-spec MPSV's operate in waters of less than 150m and are typically smaller and with lower crane capacity. High-spec MPSV's feature much of the latest technologies and are capable of handling larger loads at greater depths and greater environmental demands. Typically high-spec MPSV's operate in deepwaters or where a scope requires higher capabilities (crane, DP-2/3, ROV, accomodation etc)
Supply & Demand Dynamics
The demand for MPSV's, 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 MPSV market is highly cyclical. Utilisation 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 stabilised 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.
MPSV 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. MPSV demand is heavily dependant on work scope and without robust oil price increases deepwater demand on new projects is likely to be limited. The Middle East shallow waters show a more positive outlook with increasing rig count, projects and well intervention campaigns.
On the supply side vessel owners continue to suffer from the huge supply glut following multiple years of aggressive new-build programs. High-spec MPSV's continue to suffer from additional new build programs and few work opportunities. Shallow water (low-spec) MPSV's have suffered from the low technical demands on the vessel and the ease at which small to mid size PSV's and AHTS's can be converted to support the MPSV role. This has impacted the market with a drop in utilisation and rates of up to 50% in some regions.
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.
Regional Heat Map
With the exception of the Middle East, most regional markets have suffered the same fate during the oil downturn. See below for a snap shot of the latest trends in each region:
A variety of suppliers own MPSV's - from the big OSV supplier, the small one or two vessel suppliers, to the marine construction contractors. Since the oil price downturn an increasing number of traditional vessel owners are providing additional services such as ROV and well intervention in an attempt to diversify their vessels which are otherwise very similar to others in the market. Some of the main MPSV suppliers are shown in the table below:
|MPSV Supplier||Fleet Size / Location|
|Hornbeck Offshore Services||10 x high-spec MPSV's / Americas|
|Bourbon Offshore||12 x high-spec MPSV's, 4 x low-spec MPSV's / Global|
|Harvey Gulf||4 x high-spec MPSV's / Americas|
|Oceaneering||7 x high-spec MPSV's / Global|
|Island Offshore||4 x high-spec MPSV's / North Sea|
|Bibby Offshore||5 x high-spec MPSV's / North Sea|
|Topaz Marine||3 x high-spec MPSV's , 7 x low-spec MPSV's / Middle East & Caspian|
|POSH||2 x high-spec MPSV's, 4 x low-spec MPSV's / Middle East|
|Swire Pacific Offshore||3 x high-spec MPSV's / Global|
|Maersk||8 x high-spec MPSV's / North Sea|
|Zakher Marine||8 x low-spec MPSV's / Middle East|
|Solstad Farstad||28 x high-spec MPSV / Global|
|Siem Offshore||5 x high-spec MPSV's / Global|
|Halul Offshore||6 x low-spec MPSV's / Middle East|
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 suppliers and alternative vessels
- Easy to switch vessels and suppliers
- Suppliers rely very heavily on the oil and gas industry
- High utilisation required to cover costs
Potential of new entry is high
- Chartering practises make it relatively easy for companies to manage vessels with bareboat charters
- Vessels can move across regions easily
Competitive Rivalry is high
- No one dominant company
- High fixed costs
- Markets are in decline
Threat of substitution is low
- No viable cost effective alternative
Buyer Power is high
- Few buyers - typically large NOC's, IOC's or Contractors
- Switching costs are low
- Spend in the category is typically a significant portion overall buyer spend
Cost & Price Analysis
Due to the low oil price and the competitive nature of the MPSV market, and the OSV market generally, owners are operating at close to breakeven with most recording loses since the downturn.
Costs are highly dependent on customer work scope and the ancillary equipment and services required onboard (includes ROV's, accommodation modules, cranes and walk to work gangway systems). Low-spec MPSV costs may vary between US$5,000 to US$15,000 per day depending on the region and work scope. High-spec MPSV's vary more dramatically and are significantly more expensive given the larger size and higher purchase & operating cost. Costs in this category could be as low as US$20,000 per day to as high as US$50,000 per day.
Prices in the category have faced significant downward pressure since the oil price depression. With competition in the market buyer's can be certain that owner's prices are close to breakeven.
Total Cost of Ownership
|Parameter||Service Cost||Fuel Cost||Performance Cost|
|Cost Visibility||High||Medium ||Medium|
|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|
In the current market environment buyers are in a dominant position. The oversupply of MPSV'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 (equipment & safety). The work MPSV's carryout have high value generation potential thus Buyer's should focus closely on the Total Cost of Ownership. 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:
- Clarity on work scope and charter/contract duration
- 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 MPSV's are highly mobile Buyer's should look globally and try to take advantage of lower demand in other regions.
Typical oil field MPSV operations are managed via a Time Charter or Marine Construction Contract. Below is a summary of the avialble contacting methods, where responsibilities lie for each and how payment is calculated.
|Parameter||Time Charter||Marine Construction||Bareboat|
|Description||Per day or duration of time||Per day, duration of time or work scope||Vessel hull & machinery only|
|Operational Preference||Preferred - generally not suitable for subsea work||Preferred particular where subsea work involved||Not preferred|
|Vessel Owner Responsibility||Vessel|
|Subject to agreement however may include:|
Cargo Loading & Discharge
All ancillary equipment and services
|Charterer Responsibility||Port Charges|
Cargo Loading & Discharge
All ancillary equipment and services
|Subject to agreement however may include: |
Engineering & design documents
Cargo Loading & Discharge
|Calculation of Charges||Daily hire rate||Daily hire rate or lump sum price||Monthly lump sum payment|
|Standard Form Contracts||BIMCO SUPPLYTIME||LOGIC Marine Construction, IMCA Marine Construction,|
IMCA ROV Services
As previously mentioned MPSV's are built with flexibility in mind to be able to carry out a range of activities. A technology and designs advance MPSV's are becoming more and more flexible and now capable of performing heavy lifts, well intervention, subsea installation, ROV services, cablelay, pipelay and more. Checkout the below video from Ulstein that shows the flexibility of the vessels:
Whilst awarding a contract to the right supplier is important measuring, analysing and managing performance ensures the expectation set at the outset are achieved. Below is a snapshot of where both suppliers and buyers need to focus to ensure success as well as some indicators that help identify if you are on the right path.