5 Innovation Lessons from the Oil Crisis and OSV Market Downturn
It may be difficult to see, but the current offshore turmoil has a positive side. As is often the case, some of the breakthrough technologies set to revolutionise the industry have come about during the past downturn. Innovation is yet again rebuilding the confidence of a disheartened industry, ready to make a major difference once the market rebounds, and offering invaluable lessons on how to prepare for the future.
#1. Timing is Everything
Ongoing wells require vessels. No matter how deep the market goes, vessels age and there is always a need for replenishing while struggling to comply with constantly changing regulatory requirements and client needs. The bar is relentlessly being raised and if you want to remain in the business you have to play along. Timing is everything and the downturn provides a good soil for companies that have the means to make use of great innovations that can help to differentiate themselves from the competition going forward.
#2. When Everyone Gets Out, You Jump In
Ultra Deep Solutions (UDS), that currently builds approximately 40% of the world’s diving support vessels (DSVs) on order, have timed well and taken the downturn to start expanding. “When everyone gets out, you jump in”, says Sheldon Hutton, CEO at UDS.
"WE’RE GETTING A 30% REDUCTION ON BUILDING SHIPS AND IF YOU’RE NOT BUILDING RIGHT NOW, YOU’RE MISSING THE BALL THAT COMES INTO PLAY."
Currently the low newbuilding prices allow us to build the best assets so that “when we do come out of the downturn, we have the best quality out there at the cheapest rates ever”, he says. UDS speculates on the future market gap given that approximately half of the world’s current DSV fleet is more than thirty years old, and oil companies will eventually be requesting DSV vessels that are less than twenty years old. “We see it [happening] now for 2017/2018 bids”, says Hutton. Similarly, charterers will start recognising that they need quality and cost effective vessels. “We created a very cost efficient vessel balanced with [meeting] Tier III [environmental] emissions [requirements] at a great cost”, he adds.
#3. Be at Your Most Efficient
Wintermar Offshore’s President Director, Sugiman Layanto, agrees that going green will continue, but given the current downturn it will take on a much slower pace. We don’t see a ‘big push’ for fuel efficiency and a move to gas fuel engines in this low oil price environment, but we all know that gas is the future, and oil companies will inevitably want more. “Innovation has to have a big impact and a very substantial saving to move ahead”, says Layanto.
The price of fuel has come down but “I can guarantee you that oil majors are still looking at fuel consumption in detail and if you are not measuring up to other vessels in their fleet it is highly unlikely that your charter is going to be renewed”, says Philip Chamberlain, COO at Thome Offshore Management. Make sure that “you are operating in an efficient way”, he advises. There are several ways to save fuel while monitoring consumption, and procedures need to be in place in order to do so.
#4. Keep a Focus on Sustainability
Some owners seem to have taken the sustainable route. UDS for instance is currently discussing LNG and battery-operated power supplies for their project, and despite the significant cost here, Hutton explains: “It’s necessary for all of us to go down this route” because emissions are “going to kill us” in the long term. Finance, however, is presents a huge barrier but owners might be able to fetch support through export credit finance under renewable energy, or by partnering up with classification societies that are keen to keep such projects rolling and so actively investing.
DNV GL also sees people becoming more interested in alternative technologies to differentiate themselves in the market. If battery prices are continuing to go down, “we can buy a much cheaper battery with a better capacity and performance” compared to what is currently installed on vessels, says Arnstein Eknes, Segment Director, Special Ships at DNV GL. According to Eknes, the 18-20% fuel reduction that these systems can produce can be quite significant amongst players.
#5. Use Technology to Your Advantage
Sophisticated and integrated vessel designs are the future with a stress on enhanced DP and propulsion systems to reduce fuel consumption. The future is bright for dual fuel engines that are preferably LNG-driven. Siem Offshore has been recently awarded a charter contract for an LNG-diesel dual fuel PSV design (VS4411) to operate for Woodside Energy in Australia upon completion in early 2017. This is the first vessel of its kind to be used in Australia, but other areas such as Indonesia are pushing for LNG, according to Andrew Loh, General Manager, Sales at Wärtsilä Ship Design. He also sees a trend towards making Offshore Construction Vessels (OCV) multipurpose, enabling operators to carry out “everything with one vessel”, but there will be compromises to be made “when you try to squeeze so many things on board”.
Advanced technology also allows owners to look at other innovative tools in the marine space to enhance efficiency and reduce costs. Making use of ‘big data’ to optimise design of the hull form is one option. “Big data gives us lot more options to be able to choose a particular design” that fit operators’ operational needs, says Kaushik K Seal, Business Development Leader, Solutions at DNV GL. Big data also allows you to look at how your fleet operates and performs using advanced analytics. Other tools based on condition monitoring can help to reduce and minimise downtime of an asset, anticipate maintenance and manage costs. Of course, these are not magic tools, but with smart use they can result in operational efficiency and in turn cost reduction, presenting a very desirable reality for many, now more than ever.
Farkas is a Singapore-based freelance maritime writer. She previously worked with IHS Maritime and Trade, specialising in offshore, regulation, risk and maritime commerce. Veronika won the Seahorse Newcomer of the Year Journalist Award in 2014 for the best data-driven insight related to the gas tanker market. She graduated with an M.A. from the University of Plymouth, majoring in international shipping. Follow her on LinkedIn.