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Offshore Operations

‘Survival of the Fittest’: 4 Tips for OSV Operators

Posted by on 22 June 2016
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By Jacelyn Loo

‘Survival of the fittest’ is a running theme of our Offshore Vessel Connect events. The Darwinian Theory was continually repeated at the conference’s many discussions on the current state of the OSV market, with many turning to Darwin’s popular quote for direction:


And with so many others seeking guidance on how to take charge on the recovery front, here are some valuable tips to take on board.

#1. Restructure, Reinvent and Drive

The industry consensus is that the offshore market is in for a longer ride through this down cycle before we see some form of recovery. Oil price will only increase when demand rises in tandem with supply, and until that happens, industry players will have to sharpen their abilities to compete, respond to change and survive. While the current downturn is one of the most severe since the 1980s, offshore players can take this opportunity to restructure, reinvent new business models, and drive innovation through collaboration.

#2. Find New Ways to Collaborate

OSV operators will need to assess practical strategies to preserve cash, manage balance sheets and costs while servicing clients. Technological innovation is one of the key areas for companies to explore and focus on as a potential boost for the industry, where technology improvements will help stakeholders better compete on value and scale. While looking to build their competitiveness, businesses should also find ways to collaborate in the move towards operating profitably in a cost-sensitive market.

#3. Tighten Up on Crewing Costs

Balancing tighter control of crewing costs with talent retention in difficult times is another aspect that vessel owners need to focus on as massive layoffs will lead to a shortfall of talent and potential capability gaps. Crewing costs are a main component of operating expenses (OPEX) as highlighted by Thameem Ansari, Marine Personnel Manager at Farstad Shipping. The measures that OSV owners can take in order to maintain profitability include operating with leaner crew on-board with longer rotation periods, reviewing crew sourcing strategies, renegotiating crew salaries, and implementing a different salary structure for standby and operational crew. It is also imperative to maintain high levels of competency, safety and welfare while reducing crewing costs as having a pool of skilled, sustainable crew will in turn lead to a sustainable business.

#4. Brace Yourself for the New Wave

The OSV orderbook has been shrinking since the dip in oil price, and while set to continue, excess capacity across all offshore segments makes recycling and scrapping the ultimate solution to lower supply and allow the OSV market to head for correction. While OSV builders anticipate more standardisation as opposed to specialisation where high-end specification vessels are built according to operator's’ requirements, oil majors, vessel owners and shipbuilders will have to work hand in hand to reduce the addition of newbuilds to the swelling supply pool of OSVs. Chinese yards have essentially been turned into ‘parking lots’ for idle newbuilds that have had their deliveries repeatedly delayed as vessel owners continue to negotiate for extensions to existing delivery contracts, and the stacking of vessels across the globe is just a temporary solution to the supply issue. Industry experts present the problem as ‘kicking the can down the road’, and doing a huge disservice to the OSV industry.

More consolidations in the still-fragmented industry are expected, in what is described as a ‘bloodbath’ by David Palmer, CEO of Pareto Securities—there are too many companies, too much equipment, and insufficient cash flow to attract new capital. OSV players will need to weather the storm, but those who manage to hold out until the market rebounds will be on course to take advantage of the upturn.

Like what you’ve read? Join us at Offshore Vessel Connect Europe to find out more about the future of the OSV market.

Jacelyn-Loo-200x200_229253110914132432Jacelyn is responsible for tracking vessel and contract activities, reporting and analysing on the offshore supply vessel market for Asia Pacific, with a focus on the Far East and Indian Ocean regions. She also contributes to Offshore Marine Monthly (OMM) and Global Supply Vessel Forecast (GSVF), a bi-annual publication that provides supply, demand and utilisation forecast for AHTS and PSVs. Jacelyn holds a Bachelor of Business degree (Honours) from Nanyang Technological University.

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