diplomarbeit 20daniel 20tanner 20offshore

THE OFFSHORE SUPPLY VESSEL MARKET

The Offshore Industry, its markets and prospects

What are the offshore vessel sector’s perspectives for the future?

Diplomarbeit

zur Erlangung des Grades eines Diplom-Wirtschaftsingenieurs für Seeverkehr (FH) An der Hochschule Bremen Fachbereich 6: Nautik und Internationale Wirtschaft Studiengang Nautik Vorgelegt von: Daniel Tanner Matrikel Nummer: 116 173 Aus: Bürgerstrasse 1B 27619 Schiffdorf +49 (0) 4706750138 Referent: Prof. Kapt. Peter Irminger Korreferent: Dipl-Ing. Lars Bremer Schiffdorf, den 22. März 2008

Tanner Daniel Hochschule Bremen 1


THE OFFSHORE INDUSTRY, ITS MARKETS AND PROSPECTS: WHAT ARE THE OFFSHORE VESSEL SECTOR’S PERSPECTIVES FOR THE FUTURE?

TABLE OF CONTENTS:

TABLES OF CONTENTS 2 LIST OF ANNEXES 6 ACKNOWLEDGEMENTS 6 INTRODUCTION 7 PART I: COMPREHENSIVE INTRODUCTION TO THE OFFSHORE OIL

INDUSTRY CHAPTER 1: HISTORY OF OFFSHORE INDUSTRY 8 CHAPTER 2: STAGES OF OFFSHORE ACTIVITIES: 14 CHAPTER 3: PREPARATIONS FOR OFFSHORE OIL PRODUCTION 15 3.1 Petroleum geology: 15 3.2 Offshore exploration: 17 3.3 Well owner / operator and its contractors: 19 3.4 Exploratory Drilling: 21



CHAPTER 4: OFFSHORE STRUCTURES 23 4.1 Fixed steel structures 23 4.2 Concrete gravity base structures 24 4.3 Tension leg Platforms 24 4.4 Semi-submersible vessels 25 4.5 Floating production systems 27 4.6 Self-elevating Jack-ups 30 4.7 Single point moorings 31 CHAPTER 5: OFFSHORE DRILLING OPERATIONS AND RIGS EQUIPMENT 32 5.1 Introduction: 32 5.2 The well construction: 34 5.3 Drilling equipment: 35 5.4 Drilling mud: 36 5.5 Drilling hazards: 37 5.6 Deviated wells: 38 CHAPTER 6: OFFSHORE SUPPORT VESSELS 39 6.1 Introduction 39 6.2 Offshore vessel’s design 41 6.3 Offshore vessel’s propulsion means 43 6.4 Anchor Handling 44 6.5 Offshore barges 46 6.6 Offshore vessel types and their duties 47 6.6.1 Multi Purpose Supply Vessels 47 6.6.2 Anchor Handling Tug Supply Vessels 47



6.6.3. Platform Supply Vessels 48 6.6.4 Terminal Tugs 49 6.6.5 Crew boats 49 6.6.6 Stand-by Vessels 50 6.6.7 Well Stimulation Vessels 51 6.6.8 Pipe Laying Vessels 52 6.6.9 Seismic Vessels 53 6.6.10 Shuttle Tankers 54 CHAPTER 7: OFFSHORE’S SPECIAL FEATURES 55 7.1 Introduction 55 7.2 Dynamic Positioning: 55 7.3 The specifications of Dynamic Positioning 56 7.4 The X-Bow 60 CHAPTER 8: THE CONCLUSION TO THE FIRST PART 62 PART II: OFFSHORE VESSEL MARKET ANALYSIS AND FORECAST

CHAPTER 9: INTRODUCTION TO PART II 63



CHAPTER 10: INFLUENCES AND EVOLUTION OF OIL PRICES AND THEIR CONSEQUENCES ON OFFSHORE BUSINESS IN THE PAST AND IN THE FUTURE 65 CHAPTER 11: THE OFFSHORE OIL PRODUCTION AREAS 68 CHAPTER 12: MOBILE RIG MARKET AND ITS FORECAST 73 CHAPTER 13: CURRENT OFFSHORE VESSELS MARKET AND ITS FORECAST 74 CHAPTER 14: WHICH ARE THE OVERALL PROSPECTS FOR THE INDUSTRY? 80 ANNEX APPENDICES GLOSSARY INTERVIEWS RELEVANT DOCUMENTS REFERENCES 81



Sub presidium tuum, gloriosa mater Dei

ACKNOWLEDGEMENTS

Thanks are due to my parents, first of all, without whom I would not have had the opportunity to start studying and pursue my studies so far. To my wife: for her lovely support. And – of course – many thanks for the great help and support from both my experts Messrs Professor Capt. Peter Irminger and Capt. Lars Bremer.

I also acknowledge with thanks the following people for their contribution and cooperation in the preparation of this diploma thesis:

- Mrs Ursula Steinhoff - ABC Maritime, Nyon. - Mr Jérôme Personnaz – Bourbon Offshore Greenmar, Nyon. - Mr Bruno Sallavuard - Barry Rogliano Salles, Paris. - Mr Olivier Sénéchal - Total, Paris.




INTRODUCTION

Mankind history is full of incredible events and astonishing works. Already in early years has humanity been witnessing titanic venture. The holy bible relates the amazing enterprise of people trying to reach kingdom of heaven in building a huge tower. Later in mankind’s history the historian Herodotus (484 BC–ca. 425 BC) and the scholar Callimachus of Cyrene (ca 305–240 BC)1 made a list of the world’s most incredible works. This list went into history as the “seven wonders of the world” and contained the most spectacular man-made construction at that time. Middle-age offers maybe even more astonishing man-made works facing the lack of wealth, knowledge and human resources. With churches, cathedrals and monasteries which still nowadays make most of European cities’ pride.

What in ancient world was built for king’s or pharaoh’s glory or Zeus’ worship was constructed under faith’s impulse in middle age. Before the so-called civilised world replaced faith in God by extreme patriotism – the latter eventually gave way for capitalism. It is sorrowful and amazing at ones what mankind is capable to build nowadays – not for glory, not because of faith or to leave marks in History but – for money and profit. The offshore2 industry is one of the best examples for that.

Despite its recent history, the offshore world managed several remarkable achievements – some of them can be even ranked as “Marvels”. Merely the sector’s progress and expansion can be regarded as marvellous: In sixty years history passing from a single “mobile offshore drilling unit” which drilled in water depth of only 6 meters – in calm waters - to an armada of more than half a thousand of mobile and most of time “giant” units – excluding fixed platforms. Some of them being able to drill in water depths of more than 2’000 meters – 3’000 meters mark having been already reached. Achieving “taming” one of the world’s most harsh sea environments: The North Sea. Pushing its triumph up to making out of the murderous sea a spring from which depend hundred of thousands of people’s income. It spreads its exploitation all over the world challenging storms as well as hurricanes or drifting icebergs.

In fact the “Seven Wonders” weren’t called in ancient times “wonders” but “theamata”, which translates closer to “must-sees”3, the first goal set by this dissertation is to bring its readers nearer to the offshore world by over flying it and showing why it deserves to belong to the modern “must-sees”.

1 Source: http://en.wikipedia.org/wiki/Seven_Wonders_of_the_Ancient_World 2 When there is any mention of “offshore”, it is only with reference to the oil offshore industry. 3 Source: http://en.wikipedia.org/wiki/Seven_Wonders_of_the_Ancient_World


As the present dissertation follows a double purpose, thus it will be divided in two

distinctive parts:

- A comprehensive introduction to offshore’s world, followed by

- Its market analysis.

The first part will introduce the reader to offshore’s sphere, drawing in a non-technical manner its functioning and allowing him - with this basic knowledge - to have access to the second part. The second half of this dissertation will be dedicated to economical aspects. Trying to determine which are the opportunities and prospects for the offshore market – at present and for the future.

In order to help the reader to go through this reading, a glossary can be found as annex at the end of the present dissertation.

I hope you’ll enjoy the reading of this humble document. 1st March 2008 + In Hoc Signo Vinces + Daniel Tanner



CHAPTER 1: HISTORY OF OFFSHORE INDUSTRY

The eventful year, 1947, marked a giant step in the oil industry: The offshore world was born, when on October 2nd Kerr-McGee Oil industries completed its historic Ship Shoal Block 32 well - in south-eastern Louisiana. It was at about four meters water depth; the well itself was drilled at a depth of little less than 750 meters. The field – named Creole field by the partners - expanded and the completion of ten additional wells. Its production lasted for three decades and brought big profit to the Company with nearly four million barrels of oil produced. It was a sufficient proof that the offshore industry was profitable.

Post World War II United States population and especially the demobilized soldiers – after years of depression due to both economical crisis and war – were looking for enjoying life and urged to travel. The lowering car prices permitted to numerous American to own one. The increasing demand for oil and the therefore growing oil prices encouraged investors to put money in the newborn sector – allowing the offshore business to grow at an astonishing rate. Between 1945 and 1950, the gasoline consumption nearly doubled in the USA; even exceeding coal in energy needs. The Oil companies were seeking for bigger oil reserves and were keen to invest into sea exploration and exploitation, as their means grow as well as the demand for oil. The Gulf of Mexico was an ideal place for offshore’s début: It had a shallow and gently slopping seabed.

While the first generation of offshore drilling and exploitation units were converted US navy barges or ships from the post war naval surplus, the following generation were already purpose built and designed. It is very interesting and nonetheless astonishing to notice that modern offshore fleet comprised of same rig types as in the 1950s. Offshore exploitation exploded and more than one hundred mobile offshore units were available in 1957.

History witnessed in 1954 the first open water submersible rig, the legendary Mr. Charlie. Designed and built by Alden Jan Laborde, this unit showed both mobility and flexibility skills. Although it was able to drill only in 13 meters water depth, it worked until 1990! The great innovation of this drilling rig was its ability to flood several compartments and thus allowed Mr. Charlie to lay itself down on the seabed, while the workstation remained above water. If oil was discovered a platform could be build, if not the rig could pump water out and pack out and move on to a new location. In this way much money could be saved. The new concept was so successful that more than 40 submersible units were build until 1958. A relevant anecdote was the confession of Mr. Laborde himself: “Only when I went inland to people totally unfamiliar with the ocean environment was I able to convince anyone of the technical and commercial possibilities of my proposed gamble.”



First years of offshore history were really marked by pioneers like Laborde. The concept of those new mobile drilling units was clearly segregating well drilling from well exploitation. This also allowed making out of offshore oil a viable business. The newly born industry turned out for many investors to be a bonanza. But not only was private sector taking advantage of it, states too benefited from the emerging industry. So could the US government claim to have as second most important income revenue source the offshore oil and gas exploitation taxes.

A further evolution in offshore drilling was the arrival of the jack-up: A barge with legs attached to it. Once the jack-up has arrived on location it jacks its legs down to the ocean floor and raises the barge above the water. The jack-up rig can “boast” having the former president George H. W. Bush among its pioneers. Whatsoever the jack-up rig provided the big advantage of drilling in much deeper location than the submersible rigs were able to. This first generation of jack-ups could manage to drill in water depth up to 25 meters.

But before offshore’s evolution reached so far and even before the first offshore well was drilled, Kerr-McGee Oil industries performed a primitive seismologic underwater research. Small boats with seismological equipment on board were sent on location. They recorded with this equipment the sound waves generated by dynamite blasts reflected back by underwater formation, thus they collected information which was analysed ashore. Eventually leading Kerr-Mc Gee to drill successfully the offshore’s first well. Still in the first days of offshore history seismic data was quite unreliable: Only an estimated one in fifteen wells produced oil.

Numerous technologies used for offshore were originated in onshore exploitation – being sometimes even already applied and used on lakes where oil well drilling and exploitation has already been known. So that the roughly the same technologies were used for drilling offshore and ashore.

Without any solid information about wind and waves strength in the Gulf of Mexico, oil prospector and their rigs were vulnerable to disasters. The losses resulting therefrom didn’t prevent oil companies from daring to leave shallow waters for deepwater. The first mobile deepwater unit was financed by the CUSS group called so because it was composed from Conoco, Union Oil Co. of California (Unocal), Superior and Shell. For this purpose the group purchased a surplus navy YF barge, on which they positioned a full-size rotary drilling rig directly over a hole built through the vessel’s hull (Somebody quickly nicknamed it the “moon pool,” which it’s still called today). The unit was christened CUSS I and contained distinctive equipment. The drilling equipment was adapted to follow the vessel’s motion through vertical guides preventing the travelling block from swaying dangerously. It was also equipped with blow-out prevention equipment. This non-self propelled barge was capable of drilling in water depths to 110 meters. It was also able to easily withstand the roughest storms the Pacific Ocean could offer.

CUSS I entered in the offshore history for further reasons: In 1963, when the CUSS group disbanded, the historic drilling barge served as the first vessel of a new offshore



contractor: Global Marine Drilling Co. CUSS I was involved in a government which intended to analyse the earth’s crust in a short lived project named Mohole. The drillship was fitted for this purpose with four steerable propellers in an attempt to drill the first Moho well. It was possible to keep the ship in position above the well off La Jolla, California, at a depth of 948 meters. After this, off the coast of Guadalupe, Mexico, five holes were drilled - the deepest at 183 meters below the sea floor in 3’500 meters of water - while maintaining a position within a radius of 180 meters. The ship's position was determined by radar ranging to buoys and sonar ranging from sub sea beacons. It wasn’t a real Dynamic Positioning vessel yet, as it was kept in position manually, still it should be considered as a forerunner of the DP system.

In the same year Shell launched the drilling ship Eureka that had an analogue control system interfaced with a taut wire, making it the first true DP ship. The Dynamic Positioning System was a real revolution for the offshore world as it allowed mobile rig units to become emancipated from anchoring or any direct contact with sea bed to stay on position, thus permitted offshore units to extend their action range to deep waters.

Fifteen years after offshore’s exploitation first steps, in 1962, Shell joined with a new drilling contractor, Bluewater Drilling Co., to develop an existing submersible rig into a ballasted, column-supported structure called a “semi submersible” drilling unit which - when partially submerged - offered superior stability for deepwater drilling. This first “semi” into which the submersible was modified, was the Bluewater No. 1.

Aside the design of new mobile drilling, exploitation and exploration units, the offshore industry searched for new ways to improve both efficiency and profitability but also safety of the drilling and exploitation of offshore wells. Shell invested lots of money in research and its engineers and scientists also spent considerable time investigating seafloor wellhead systems, wellhead re-entry, and the use of both fixed and buoyant, remotely operated vehicles (the so-called ROVs) to help accomplishing those and other sub sea tasks. This pioneering work resulted in a lot of highly dependable sub sea production equipment that is used offshore today. Another milestone was the arrival of computer technologies, which permitted a better processing of seismic data. Today, thanks in part to improved seismic information, an estimated one in four wells drilled produces oil.

While the first offshore oil platforms were partly made of wood, showing little resistance to stormy weather, the next generations were made completely out of steel. In the early days of exploiting oil or gas wells it was necessary to build a complete platform. The platforms – no matter the size - are still constructed the same way today as they were built by the pioneers. Since 1947, more than 6’000 platforms were installed offshore in more than 55 countries. The next step in oil exploitation was to move on to floating production units into deep and ultra deep waters. Whatsoever, fixed platforms remain nowadays important production facilities, after more than 60 years of offshore activities.

Since the end of World War II, consumption of oil increased in a tremendous way: Oil consumption in the United States tripled, while the one of Europe is fifteen times bigger



than in 1945 but record holder in this enormous increase remains Japan whose oil consumption has increased a hundred and forty-seven times! The world discovered for first time how much it was depending on oil supply when in the 70s millions of cars ran out of gasoline. The rise of OPEC (Organization of Oil Exporting Countries) and the embargo in 1973 and 1974, gave the oil producing nations authority and power to set the price and the level of oil production – this was a dramatic change in the history of the industry. The high oil prices permitted huge investments in offshore business and the construction of dramatic and titanic platforms. All what was needed to conquer the North Sea.

Offshore engineering wasn’t only doing marvels of ingenuity by inventing new means for offshore exploitation, it also showed great ability in solving problems – the Ekofisk field is one of the best examples for it: In the late 70s, Philipps Petroleum Company discovered a giant oil field in Norwegian waters; a discovery which resulted in the construction of the Ekofisk platform complex. The field was composed of several platforms and more than a thousand employees were working and living on them. In 1984, engineers realised that the ground, due to rock loosing feet at 300 meters depth and compacting itself, was subsiding, letting the whole field sink into water. To realise the whole magnitude of the problem, it should be mentioned that the complex is more than one and a half kilometre long from end to end of the field. This comprised platforms, crew quarters, production equipment, separation facilities and storage tanks, totalising twenty-five platforms of all types, connected between each other with steel pipes. “No one would think something like this is feasible” Jim Bowles – Phillips Petroleum Company

Yet it was feasible: After ensuring themselves that subside of ground wouldn’t go any further, workers and engineers – with the blessing of the stockholders – would start jacking up six of the nine sinking platforms and four of them at the same time, jacking them six meters up. In 1987, with the world watching, workers installed one hundred hydraulic jacks with a lifting capacity of 700 tonnes each. The foot leg sections were cut by welders and after the platforms were jacked up, replaced by new sections. The three and a half billion dollars operation stands since then as a unique operation, never attempted before or since in history of offshore drilling.

In 1979, another large reserve has been discovered by Hydro, in more than 300 meters of water, 65 kilometres off the coast of Norway. The reserve was estimated to 1.25 trillion cubic meters of gas, enough to supply thirty million homes with energy for fifty years! Shell build for the exploitation of this giant field a platform which was proportioned to it: Troll, the world’s heaviest platform. Made out of concrete, the platform was reinforced by enough steel to build fifteen Eiffel towers. Its base is as wide as four football fields, giving the platform enough stability to withstand the world’s worst cataclysm. Beside this, the large



columns are able to store very large volumes of crude oil. The ten world’s most powerful tugs had to slowly move the largest structure ever moved by mankind, from the calm waters of the fjords to the tumultuous North Sea. Once on location, engineers started to flood the huge ballast chambers, needing four days to reach the sea bed. The tugs kept the platform in position while it was gradually sinking. Once operating, Troll delivered about 600’000 barrels of gas per day, fulfilling 25% of Europe’s gas needs up to the year 2010. And last but not least: Troll is one of the few manmade structures visible from space. “That’s the exciting part of the stuff: We do things, people never thought it was possible to do” Rich Pattarozzi – CEO, Shell Deepwater Development Inc.

In its sixty years of existence, the offshore industry claimed successfully its rights to the world’s most hostile environments and politically risky areas, drilling at amazing depths, in ultra-deep waters. Answering the question: As the world’s energy grows, how deep are we willing to drill offshore for more oil? Regarding to what performances the industry has shown up to nowadays, how couldn’t we agree with Rich Pattarozzi’s conclusion? “I don’t think we know how far we will drill. The determining factor at the end of the day will not be the technology; it will be the economics. Can you justify from an economic standpoint to go out there? The fascinating part is, mankind will always figure out how to technically do it – it’s just, can you afford it? And I think this will be the ultimate question.” So, Shell Deepwater Development CEO.



CHAPTER 2: STAGES OF OFFSHORE ACTIVITIES:

Before we go any further into the subject, it would be good to make a kind of overview of the different stages of activity we’re going to talk about. At a later point of the reading the reader may have the possibility of consulting this table and find himself again in the path of the present thesis. The sequence of the development of production, from search to delivery, is as follows:

Item Activity Vessel / unit in operation

1 Searching for petroleum

Seismic surveying Seismic survey vessels

2 Finding it Exploration - Jack-up drilling rigs - Drilling vessels - Semi-submersible drilling units

3 Building the production facilities

Construction and installation of the production platform / unit

- Crane vessels - Offshore barges - Heavy lift carrier

4 Developing the field

Drilling and completing the production wells and interconnecting the production wells with the production facility

- Jack-up drilling rigs - Semi-submersible drilling units - Pipe laying barges or pipe laying vessels

5 Getting the hydrocarbons to the surface and processing at the surface

Production Depressurization and separation into oil and water fractions

- Fixed platforms - Tension leg platforms - FPSOs, FSO - Production jack-ups or semi-submersibles - Subsea installations - Other types, like SALM, Spar or SPM

6 Bringing petroleum or gas to shore

Transportation - Shuttle tankers - Pipelines, laid on the seabed by pipe laying vessels.




7 Support - Supply and services - Maintenance and repair - Watch keeping

- Anchor handling tug supply vessel - Crew boats - Diving and Multipurpose support vessels

Source: Ship knowledge – Klaas von Dokkum, 4th edition – page 70.

CHAPTER 3: PREPARATIONS FOR OFFSHORE OIL PRODUCTION 3.1 Petroleum geology:

In order to understand the industry, it seems important to understand what the whole thing is about: Oil. It is at the same time the mean financing of further exploration and exploitation and the aim of all offshore operations. In fact “oil” isn’t the right term for the extracted product; geology speaks about “petroleum”. The etymological meaning of the word is a combination of the Greek word “petra” and the Latin word “oleum” – what literally translated means “rock oil”4. But what is petroleum made and composed of and where can it be found?

Petroleum – in its natural state; called “crude oil” in the industry – is a complex mixture of chemical compounds called “hydrocarbons” and “non-hydrocarbons”. Basically we could say it is a result between a chemical and bacterial action, on organic substances, taking place in marine sedimentary rocks (like but not only: sandstones, dolomites and limestones). The precise origins of petroleum aren’t completely and universally defined, as geologists and other scientists have differing theories about its formation. Like coal, petroleum is a fossil fuel.

As petroleum is lighter than water, it has a natural tendency to migrate upwards through the pores of any permeable rocks. This migration takes place usually very slowly, moving maybe a few centimetres each year. Still it can be accelerated through geologic phenomenon like the rubbing between several tectonic plates for instance (resulting in what we call “earthquake”). In the end, there are only two possible issues for petroleum: Either it reaches the surface of the earth and seeps out, or it is trapped underneath an impermeable coat, which it couldn’t pass.

4 Nouveau Petit Robert Dictionary, 2.1 version.


Geologists classified, so called “hydrocarbon accumulations” in three types. Those

“hydrocarbon accumulations” are merely petroleum traps. It should be noticed that they are usually composed of several coats, from the heaviest to the lightest, they normally contain: water, petroleum and gas. But let’s have a look at them:

- Anticlines (see figure 5): It is the most common form of trap. It consists of a formation with an upwardly folded structure, looking kind of a hummock, with an impervious rock coat above it.

- Fault traps (see figure 5): Fault traps can be found where there are

sideways displacements of great sections of subsurface rocks. Millions of years ago great stresses caused sections of the earth’s crust to crack, and the two split, or “faulted”, faces have been forced to slip across each other and thus resulted in formations which were no longer lined up with each other.

Occasionally, it happened that oil went through a former impermeable layer, which became, due to the splits, permeable but was eventually sealed by an impermeable coat. A fault trap was thus formed, any petroleum accumulating in it being prevented from escaping by the barrier of the impermeable layer. The existence of fault traps doesn’t represent a warranty that oil is trapped in it. This explains why so many “dry holes” are drilled after a fault trap has been accurately located by geologists. Large petroleum accumulations in fault traps have been found in the Niger Delta, the US Gulf coast and in South East Asia, as well as in the North Sea. Anticlines and fault traps represent by far the majority of known offshore reservoirs.

- Stratigraphic traps: Those are oil traps that form a sealed trap within an

impermeable rock. Stratigraphic traps are harder to detect than faults or anticlines, and many of the discoveries in them too date have been kind of accidental.



Unconformity traps (see figure 5) should also be mentioned. Even if they are usually regarded as Stratigraphic traps; but they are in reality structural features. In an unconformity trap the reservoir rock is slanted up towards and cut off by impervious rock that lies across its end, resulting in a wedge-shaped reservoir. Several important North Sea oilfields, as well as the North Slope of Alaska are over unconformities, but they are relatively uncommon compared with other trap types.

3.2 Offshore exploration:

Before any costly drilling is being undertaken, oil companies first consider their chances of a successful exploratory drill. Even if seismic survey costs are very expensive, they remain a relatively small part of the overall exploration budget of the oil company. Often those surveys are financed by several oil companies and are ordered for large areas. In spite the geologic structure revealed by surveys look promising, there is still no certainty that oil is present and only exploratory drilling can prove whether or not the located traps contain oil.

Despite that nearly only seismic surveys are performed, all three offshore exploration techniques should be explained:

- Magnetic surveys: It measures the effect of the magnetic properties of rocks on the earth’s magnetic field. For this purpose, an aircraft carries an instrument called “magnetometer”. Oil-bearing rocks are usually non-magnetic and detecting those areas gave a good idea of which exploratory blocks may contain oil traps and which not. As this method doesn’t offer very detailed images, there are very few surveys of this type, if any.

- Gravimetric surveys: This survey is based on the principle that subsurface

rocks exert different strength degrees on the gravitational force at the surface. It is measured with a “gravimeter”. However, this method provides no detailed information and is therefore obsolete nowadays.

- Seismic surveys: It is by far the most accurate survey method and by far

the most widely used as well. Its principle is based on the fact that each rock type responds to shock waves with different absorption and reflection characteristics. Those surveys are being performed by specialised vessels, capable of both generating energy waves and recording their reflections.




In the early days, a stick of dynamite tossed at the side of the boat, provoked this shock waves, nowadays this shock is being generated by an array of many different sized compressed-air guns, which require a very powerful compressor on board. They are capable of producing extremely strong sonic pressure wave for a very short duration, when all fired at the same time. The pressure wave travels then down through the water and into the underlying sediments and rock structures, thousands of meters below the sea bed. A part of the energy wave is reflected from the rock layers, while some is refracted as it enters or leaves a layers returning to the surface. Recording cables are towed just below the surface and are fitted with numerous sensitive hydrophones which detect the returning pressure waves. Transducers convert the pressure energy into electrical impulses; a conversion which allows the interpretation and storage on computers. The instruments basically measure the time taken for each energy pulse to return and make a picture – thanks to very powerful computers - of the sub sea geology. In early days, those data were recorded on magnetic tapes and send to a processing centre ashore. Nowadays most of seismic vessels are fitted with powerful computers, which enable interesting “lines” to be re-shot without delay. Whilst first surveys were made with 2-D technique and are obsolete by now, 3-D surveying is standard in areas outside the North Sea, while “4-D” technology is getting standard by replacing 3-D surveys – and is already standard in the North Sea area5. The 4-D surveys is merely a time elapsed 3-D: An array of hydrophones on cables buried just beneath the sea-floor are installed. By shooting over the array with a seismic vessel each half a year or year, the operator will be able to monitor any changes to the seismic wave character throughout the field life and to actually see the oil draining from the rock, thus facilitating an accurate study to indicate the areas of the field where oil is not being produced efficiently.

Historically the oil industry has been very inefficient in exploiting the offshore reservoir: Only about 30 to 35 percents of oil / gas of the total amount contained in the reservoir are being extracted. This is due partly to the fact, that reservoirs cannot be properly located, and partly because they aren’t produced properly: At some places it is pumped too hard and on other emplacements not hard enough. The seismic sector is hoping to get the reservoir production efficiency in an order of 60 to 70 percents by locating the optimal drilling place. The exploitation of many “dry wells” or non-profitable wells has been reconsidered after 4-D surveys have been performed. The second way of optimising wells’

5 Michael Tang, Robert Ross, and Robin Walker: Lessons through time in 4D seismic – page 79, first break volume 25, December 2007.


exploitation is the one using well stimulation methods – this will be dealt with Chapter 5 “Offshore vessels”.

3.3 Well owner / operator and its contractors:

Even if theoretically anyone can own an oil or gas well, most of them are owned by big companies or important investors. Unlike in the United States where about 80 percents of all the land wells are financed by independents, offshore wells are majority owned by oil majors. It is interesting to notice that only the fewest wells are owned by a single investor. Ownership of a well is very often a consortium of investors; most of the cases dominated by the one which is the biggest shareholder of the investment group. A consortium can for instance be composed as follows:

Oil major A: 16 % Oil major B: 14% Oil independent C: 10% Chemical Company D: 7% Insurance E: 3% Oil major F: 50%

In this case the operator will most probably be oil major F.

Some consortia last for years, while some others fall apart after a while with very little drilling activity to their credit.

The ownership of a well by one single company makes out of the owner also the operator, because it would also operate the well during its production phase. In the case of a consortium, there will be one of the partnership companies designated to be operator; usually the company devoted to this function is also the one with the largest equity ownership. The operator acquires the rights to drill on a location and hold the various licenses required. He is also liable for safety of the hundreds of personnel and endorses on a huge responsibility.




Recently the offshore industry saw a new type of ownership grow: Several companies put themselves together to found a new company which is organizing the design, financing, constructing and operating the infrastructures for production. To set an example: The Shtokman field6 - located in the Russian sector of the Barents Sea – whose development will be financed and operated by the Shtokman Development Company. This company will be owned 51% by Gazprom, while Total will have 25% and StatoilHydro 24% of shares. It will be owned by those three companies but the operating part will be completely independent from them.

The operators are often regrouped in associations representing and defending their interests in dealing with the governments and the authorities like UKOOA7 being of them.

Another kind of ownership and, maybe the most spread one, is the one based on Production-Sharing Agreements (PSAs). Under a PSA the state as the owner of mineral resources engages a foreign oil company (FOC) as a contractor to provide technical and financial services for exploration and development operations. The state is traditionally represented by the government or one of its agencies such as the national oil company (NOC). The foreign oil company acquires an entitlement to a certain part of the produced oil or gas as a reward for the risk taken by the FOC and the services rendered. The state remains, however, the owner of the petroleum produced subject. The PSAs are spread all over the world with the exception of Western Europe where only Malta offers this type of contract8 . The individual PSAs differ more or less from each other, depending on the state’s policy in this matter and which stage(s) of the oil production the contractor has to carry out.

In the early days of offshore industry it was common for oil companies to own drilling rigs and drill their own wells, nowadays almost all operators prefer engaging contractors and sometime even the well’s production. Contractors can as well perform drilling, production, as supply the rigs and structures or give assistance in marine operations. Usually big drilling companies like Transocean Company own their own supply and tug vessels.

The contractors can be divided into two work groups: The mobile drilling units (MODUs) and the offshore (supply) vessels.

A third class of contractors should be mentioned and although they aren’t involved in drilling or production they are nonetheless vital to the industry: They perform gas and oil

6 It is also called Stockman field. It is named after the Soviet geophysicist Vladimir Shtockman, descendant of German immigrants. The field is told to be the world’s largest natural gas field and its reserves are estimated at 3.8 trillion m3 of natural gas and more than 37 million tons of gas condensate. The investment is as huge as the potential gain: Solely the development costs are estimated at 15 to 20 billion dollars (according to the Norwegian website www.oil-and-gas.net. ) 7 United Kingdom Offshore Operators Association 8 Production-Sharing Agreements : An Economic Analysis, Kirsten Bindemann, page 1



transportation or are involved in laying up the pipelines bringing the produced oil or gas ashore.

Sometimes if the contractor can not anymore perform by himself the work or isn’t able to do it, he may engage – with the operator’s agreement – a sub-contractor. Usually the latter is a short-term one and the employed mobile unit or vessel has been found on the spot market.

Contractors are also represented by associations like the IADC9 for the mobile drilling unit owner or the IMCA10 representing a vast majority of contractors.

3.4 Exploratory Drilling:

When a potential hydrocarbon site has been found, a mobile drilling unit is contracted to drill a so-called wildcat or exploration test well. That is the only means to prove the existence of a hydrocarbon reservoir and a success rate of only one in four wells gives some indication how much the operator spends money until he finds a well which is found to be deemed for production. Regarding the facts that it takes approximately eight weeks and costs up to 25 million dollars (this figure is even several times higher in Artic regions), nowadays, it really doesn’t pay to have too many failures.

Whether it is hired from a contractor or owned outright, the largest cost to the operator is invariably that of the drilling rig or vessel. Normally the operator starts paying for the rig’s hire as soon as it has completed its previous contract, and the cost of relocating is one of the major considerations made by the operator in the choice of the drilling unit. It is a great advantage of drill ships over the majority of jack-ups and semi-submersibles having an own propulsion. Usually the non-propelled mobile rigs are being towed but they can also be moved on location aboard special semi-submersible heavy lift ships, usually operated by Dutch or Norwegian specialists; it is sometimes chosen in preference to prolonged, difficult and risky ocean towage.

9 International Association of Drilling Contractors 10 International Marine Contractors Association


The time of hire and thus the overall costs of drilling will depend on the time spent by the contractor to drill the well. This depends on several factors, one of which and not the least one, is the weather. The meteorological conditions are playing an essential role in areas like the North and other hostile areas. Wells in the calmer waters of the southern half of the North Sea may be drilled in less than 60 days; while a well of the same depth in the Northern part of the North Sea might take 100 or more days to be drilled. Other factors are problems in the hole, such as lost and irretrievable equipment necessitating a deviated hole being drilled round the problem zone. Finally a well planned for being drilling within three months may easily be completed only after five months.

Beside the costs for the hire of tugs and the drilling unit, the operator will have to bear all the other operating costs during drilling. Like the expenses for supply boats, anchor-handlers, helicopters, materials such as pipes, casing, mud and chemicals, fuel and water. Specialised operations like mud logging and well logging, which are carried out by specialists are also to be accounted in the final bill. To a certain extent, the exploratory drilling is a gamble game played by the operators. Like in the casino, the players with considerable wallets can afford playing it numerous times without going bankrupt, while small operators’ existence is sometimes highly dependent on the success of those exploratory drills.

For the well drilling explanation, please refer to chapter 4: Offshore drilling operations and rigs equipment.




CHAPTER 4: OFFSHORE STRUCTURES11

The offshore industry is complex and the ways extracting oil or gas are numerous. Furthermore there are many different types of rigs / vessels designed for this purpose. The backbone of the offshore industry remains the fixed steel offshore installation. The various rig / vessel types can be divided as follows:

1. Fixed steel structure 2. Concrete gravity base structure 3. Tension leg platform 4. Semi-submersible vessel 5. Floating production systems 6. Self-elevating jack-up 7. Single point mooring

4.1 Fixed steel structures

The traditional offshore installation utilises a welded steel tubular framework or jacket12 to support the topside facilities. The topside can vary depending on whether its production will be oil or gas. It will be equipped with hydrocarbon process equipment, power generation, a heli-deck and accommodation as well as hotel services to cater the employees working on it.

It should be noted that the heli-deck and accommodation facilities are situated as far as

possible from the potentially dangerous area. Further the installation may consist of any number of bridge linked jackets with modern designs tending to favour segregation between the accommodation / heli-deck jacket and the one designed for production. Those multi-jacket installations tend to be restricted to shallow water due to the cost factor.

Its future seems to be restricted to the development of large fields located in intermediate water depths and where a substantial return on the capital invested will be guaranteed. Generally speaking the tension leg platform (TLP) or the floating production

11 The frame and content used for this chapter is based mainly on the book from Mather, Angus: Offshore Engineering: An Introduction 12 Jacket: Steel support framework used to support platform topsides


system (FPS) will be preferred for the development of deep water reserves. The FPS used in conjunction with sub-sea wells also represents the most cost effective solution for the exploitation of smaller and more marginal fields.

4.2 Concrete gravity base structure (GBS)

Whilst the vast majority of fixed offshore platforms employ a tubular steel jacket to support the topside facilities, a number of installations have been constructed using a base manufactured from reinforced concrete.

The first concrete structure that had been installed in the North Sea was constructed by the Norwegians in 1973 in the Ekofisk field. The Norwegians were not only the pioneer in building those structures, a great number of Norwegian production fields are based on GBS. The Troll field, which stands in 350 metres of water, is currently the largest offshore oil and gas field in Europe and at 1’270’000 tonnes, the structure is the largest concrete platform in the world.

The advantages of those installations are the void spaces permitting a great storage capacity for those structures prior to transferring the product to a shuttle tanker. This is particularly convenient for structures built in areas difficult for pipeline access, uneven seabed or endangered by icebergs.

It should be noticed that not all gravity base structures are made out of concrete: Some of them are made out of steel such as the steel GBS of the Maureen field and owned by Phillips Petroleum Company. Its storage capacity is up to 50,000 barrels.

4.3 Tension leg Platform (TLP)

The tensions leg platform concept was devised by Conoco Oil Company as an alternative to the fixed steel structure and floating production system (FPS) for the development of deep water oil and gas fields. The first TLP showed up in 1984 and was used to develop the Hutton field in the North Sea area.

The TLP consists essentially of a floating production facility which is tethered to the seabed by a number of tensioned legs which are typically constructed from large diameter (250mm to 750mm) steel pipes or wire ropes (125mm diameter). The legs are secured in



foundation template piled into the seabed whilst the other end is connected to a tensioning winch within the floating superstructure. This rigid assembly restricts vertical movement and permits the use of fixed installation type wellhead and rigid steel conductor-riser assemblies, which avoids the disadvantages of floating production systems in terms of installation costs and maintenance availability.

The TLP fulfils a role midway between the fixed offshore installation and the floating production system. Its advantages are to combine initial cost saving benefits and the operational benefits of the expensive fixed offshore installations, while remaining able to be used in much greater depths. In 1999 the depth record was breached with Shell’s Ursa development reaching a depth of 1’200 metres.

Tension legs Platforms are flexible and show a great spectrum of advantages and it’s quite odd that the oil companies haven’t been investing more in those platforms.

4.4 Semi-submersible vessel (semi-sub)

A semi-sub is essentially an enormous box section barge supported on twin hulls. It has a colossal capacity to consume water ballast and with minimal water plane area and displacement of up to 170,000 tonnes, presents an immovable object to wave action withstanding all waves but the ones rising from the most severe weather conditions.

Due to design the semi-subs do not permit the installation of an effective main propulsion plant so that most of them have to depend heavily on the assistance of support ships for towage and deployment of anchors (typically eight). Nowadays nearly all new buildings are fitted with computer controlled azimuthing thrust units guided by satellite navigation systems which allow an accurate manoeuvring capacity. This permits the semi-subs to hold position in water depths in excess of 650 metres where anchor laying may be impractical.

The semi-sub’s advantages are its ability to stay in position even in rough weather, its stability due to large ballast and the small weather attacked surface and its capability to operate in deepwater.



Depending on the equipment fitted on it, the semi-sub may perform following tasks:

1) Heavy lift Semi-subs are often encountered in their role as heavy lift and used for the installation of offshore platforms. The most recent vessels can lift up to 15,000 tonnes. The strength of the semi-sub in this task is its capability to rapidly counter ballast heavy weights lifted.

2) Accommodation Where the labour forces are numerous as for some repair works, the semi-subs are able to offering hundreds of sleeping berths. Its capability to prove stability even in the North Sea during winter time ensures that the workforce sleeps soundly. Transfers between the workplace and the semi-sub may be by bridge as well as by helicopter.

3) Drilling exploration vessel Differently to self-elevating jack-up which are limited to operate in water depths of up to approximately 120 metres or monohull drill ships showing worse behaviour in bad weather conditions, the current world record in depth drilling stands at 2,250 metres at a field in the Gulf of Mexico.

4) Pipelay barge Sub-sea pipeline laying is a non-stop operation. A modern vessel can lay between 2 and 4 kilometres of pipeline a day. Units with azimuthing thrusters may give up anchor spreading and are able to work in very deep water areas. The pipelines vary in diameter from 3” to 42” with 30” and 36” lines being favoured for main transmission routes. They are supplied in 12 metre lengths. Prior being lowered into the water, the pipes are being welded two by two and sometimes already covered by concrete. The completed pipeline may be trenched (buried) or rock dumped (covered in rocks) to protect it from fishermen’s nets and ships anchors. It may as well also rest on the sea bed.




5) Floating production facility Please refer to the next section.

4.5 Floating production systems (FPS)

A floating production system is in fact a floating oil rig. It is mainly used to exploit moderate to deep oil fields and fields which are isolated.

The major advantage of floating production systems lies in the fact that they can simply lift anchors when the oil production reaches unprofitable level. The conventional FPS can be built in two manners:

- Monohull vessels: Presenting the advantage to be more suited to cope with strong winds and tides than semi-submersibles. Further advantages are ample storage capacity on board, the convenience to unload into shuttle tankers, no support vessel is required.

- Semi-submersibles: Have more stability and the number of riser13 (up to 100) is

considerably greater allowing a greater production than monohull vessel.

Monohull floating units have been preferred in the North Sea and in seas West of Shetland to semi-submersibles, whilst in Brazil for instance Petrobras, the national oil company, has favoured the semi-submersible vessels.

Even if FPS means floating production system, it designates any vessel engaged in the oil production or oil storage. Including:

13 Riser is the vertical portion of a sub sea pipeline (including the bottom bend) arriving on or departing from a platform.


A floating, storage and off-loading unit (FPO or FSU) is most of the time a storage tanker into which processed oil is pumped from an oil production platform without an own storage room. The stored oil is then further off-loaded from the FSU into shuttle tankers. A floating production System (FPS) is a production vessel which is connected to a sub-sea pipeline, rather than one capable of unloading into shuttle tankers. A floating, production, storage and off-loading vessel (FPSO) differs from the FPS because it is linked ashore with pipelines. Extracted oil is stored prior to being off-loaded into shuttle-tankers. A floating, production, drilling, storage and off-loading vessel (FPDSO) is the latest development in the FPS family. The improvement since the monohull FPSO is the ability to do the drilling works by itself. It is for the time being only providing advantages for compact fields whose wells are being too far apart for drilling to be carried out from a single location in many cases. A Production Storage Vessel (PSV) was developed by British Petroleum. With its unique design its purpose is to exploit small fields which are located in moderate water depths. It combines the functions of a floating production system and a shuttle tanker. The PSV remains above the well thanks to a dynamic positioning system. Once the vessel’s storage tanks are full (after about 20 days of production) the vessel disengages from the wellhead and processes to a shore terminal to unload the cargo.

Principle features of a monohull FPSO:

An FPSO may be equipped with gas compression and water injection systems, in addition to oil processing equipment. The processing stabilises crude oil and is stored in the ship’s cargo tanks before being transferred into shuttle tankers via a mooring hawser and hose, reeled from the stern of the vessel. The produced gas is normally used as combustible for the gas turbine powered electricity generators. The exceeding gas can also be re-injected into the formation or flared.

All equipment used on an FPSO must be designed for a viable long term use and therefore designed to a higher specification than those of a conventional tanker or offshore structure.




When having a look on the number of FPSOs ordered it seems that the predictions made 10 years ago are being fulfilled. The ongoing increasing deep water exploration and production seems to promise a golden age to FPSO units.

1) Hull The hulls are built in accordance with rules provided by ship classification societies and are designed to remain on station for a period of up to 20 years without dry docking.

2) Topsides The topsides oil and gas processing equipment is designed and built in accordance with offshore platform specifications and recommendations, such as those produced by the American Petroleum Institute (API), the American Society of Mechanical Engineers (ASME) and the British Standards Institute (BSI). In addition to this the vessel’s motion – increasing considerably the forces working as well as improving seriously the effect of fatigue on the equipment - should be taken into account. In order to protect it, the processing equipment is being pre-assembled into skids14 which are mounted on a framework or pillars 3 metres above the main deck of the vessel, ensuring - this way - some protection from “green water”.

3) Turret

Turrets are large diameter (16 – 32 metres) vertical cylinders which sit within the hull of the vessel. Being fixed by mooring wires and the flexible sub-sea risers, the turret is prevented from rotating. The vessel is thus free to weathervane15 around the fixed turret repositioning itself depending on the influence of wind, waves and current.

4) Mooring

A spread of 8 to 14 anchors ensures that the FPSO remains on location. The anchor spread is typically a combination of wires and chains which are tensioned

14 Skid: Steel framework used to contain equipment that may be transportable. 15 Weathervane: rotation through an angle of typically 270°


by winches within the turret. For ultra deep waters fibre rope mooring systems have been used with up to 711 tonnes braking strength. This allows securing an FPSO in 1,400 metres of water depths.

5) Risers

They allow the FPSO to move both vertically and laterally. Risers are connected to the sub-sea wells and designed to absorb any wave induced motion which might affect the vessel’s position. The hydrostatic collapse of risers is one of the major obstacles for the development of ultra deep FPSOs.

4.6 Self-elevating Jack-up:

The self-elevating jack-up is the eldest movable production unit in the offshore industry; its history started 70 years ago in the muddy swamps of Louisiana.

It consists of a triangular shaped (sometimes rectangular) box section barge fitted with three (sometimes four) moveable legs allowing the jack-up to stand in water depths of up to 120 metres. Due to its design the jack-up has no own propulsion means. Usually transportation is done under tow of tugs or anchoring handling vessels and for long sea passages on the back of a submersible heavy lift ship.

Jack-ups can be employed as support vessels even if their primary function is the drilling operation. In its latter function it can accomplish two different types of works: The majority of jack-ups are used for exploration purposes. Still some are employed in the drilling of wells for permanent installations.

The latest trend seems to see emerging a new generation of Jack-ups being designed to operate as process facilities for the development of marginal oil fields using both conventional and sub-sea wells. The evolution shows also installations being able to operate in deepening waters and harsher conditions.



4.7 Single point mooring (SPM)

The original concept was found to be a solution to the problem of transferring crude oil from an onshore reception facility or refinery into VLCC (Very Large Crude Carrier) tankers. The tankers are moored to a large buoy located at some considerable distance from the coast, often several miles; the buoy is secured by a spread of anchors.

Following single point mooring buoys as well as its variants can be found:

- Catenary anchor leg mooring (CALM) buoys

- Buoyant or submerged turret loading (STL)

- Single anchor leg mooring (SALM)

- Articulated loading platform (ALP)

All of them attempt to provide a safe mooring whilst the tankers load oil in wind speeds of 80km/h and wave heights of 5.5 metres.

The connection systems to the pipeline can be subdivided in two parts:

- The disconnectable connections where the connection to the pipe is made from the vessel

- Permanent connections, where the connection is made from the mooring point.



CHAPTER 5: OFFSHORE DRILLING OPERATIONS AND RIGS EQUIPMENT:

5.1 Introduction:

There are numerous different types of rigs and many variants of environments as well as geological undergrounds, still the main features of drilling methods remain the same. Those three main actions are:

1) The lowering into and hoisting out of the hole of tubulars and tools

2) The rotation of a drilling bit in the hole and

3) The forced circulation of a fluid between the rig and the bottom of the hole.

This concerns all types of drilling platforms and wherever they operate, be that in the creeks of West Africa or in deep water amongst the icebergs off North-East Canada, the drilling rig will always be comprised of certain fundamental operations. Additionally the equipment is basically common to every one of the thousands of rotary rigs in existence in the world, both on land and offshore. But from one rig to another there will always be differences in the drilling procedures used and the sequence in which equipment is run, depending on factors such as the type of rig, the operator’s standard practice, the water depth, the presence of shallow gas pockets, etc. On fixed platforms and jack-up rigs, for example, some equipment is not installed on the seabed, as with semi-submersibles and drillships, but on the rig itself.

Because of these variations, the main operations in drilling a typical offshore well can perhaps best be illustrated with the aid of a hypothetical exploration well programme for a semi-submersible operating in the central part of the North Sea. The depth in which this well is to be is 4’000 metres, and it is to be tested for production, in case some reservoirs are discovered.




The main features of the well programme and the timescale involved are as follows16: Operation Days Cumulative

days Move rig, run anchors & rig up on location 2.0 2.0 Drill 36” hole to 160’ below sea bed 1.0 3.0 Run & cement 30” casing 1.0 4.0 Drill 26” hole to 1500’ true vertical depth (TVD) 1.5 5.5 Run & cement 20” casing 1.0 6.5 Run 18.75” BOP & riser 1.0 7.5 Drill 17.5” hole to 7003’ TVD (7219’ measured depth [MD]) 10.0 17.5 Run electric logs 1.0 18.5 Run cement 13.375” casing 1.5 20.0 Run gyro survey 1.0 21.0 Drill 12.25” hole to 12150’ TVD (12636’ MD) 19.0 40.0 Run electric logs 2.0 42.0 Run & cement 9.625” casing 2.0 44.0 Displace hole to oil base mud 0.5 44.5 Drill & core 8.5” hole to 14203’ TVD (14686’ MD) 20.0 64.5 Run electronic logs 3.0 67.5 Run & cement 7” liner 2.0 69.5 Test well (3 zones) 28.0 97.5 Plug & suspend well 3.0 100.5 Allowance for contingencies & waiting on weather 20.5 121.0

The four months drilling operation is realistic, regarding the figures quoted in the previous chapter mentioning the period of time of three to five or more months for a well completion. 16 Introduction to Marine Drilling, Malcolm Maclachlan, pages 202-203


5.2 The well construction:

Once on location the drilling rig is anchored, or maintained with other means in place, it will have to drill several thousands of metres in depth to reach some reservoirs. Most of them are located between the depths of 2’100 to 3’500 metres although the discoveries of the one located above those depths are becoming more frequent. To drill a hole at such a depth, it is necessary to divide the drilling operation in several stages and reinforce the hole to provide resistance against external pressure created by the rock formation. The drilling of a hole has some similitude with the digging of a tunnel, but the hole has additionally to be reinforced to withstand internal forces generated by reservoir pressure

In order to allow the rig to reach such depths, the well must be “constructed” i.e. reinforced. At first sight, the first whole construction could be considered as Russian dolls: At first, only the biggest hole is visible but the deeper you explore the well, the more, smaller holes you will discover in the primary one.

The drilling operation commences with the installation of a large diameter steel pipe known as a conductor. Its diameter is typically 30 to 36 inch (0.75 metre) and provides the foundation for subsequent drilling operations and a support mechanism for the intermediate casing strings – which are the steel pipes (casing) set in the hole as the drilling progresses to line its wall. The conductor is usually driven till a depth of 60 to 240 metres into the seabed.

The real drilling commences in earnest when the second hole, which will reach a depth of 600 metres, will be drilled. After this second drilling has been completed, the drill string – the name given to the assembly of components used to drill a hole - will be removed and a casing head is lowered into the hole and cemented in place. A casing head is then mounted above the starting head to support and seal the top of the casing and provide a temporary home for the Blow-Out Preventer (BOP) stack.

The number of subsequent holes drilled and parameters such as their depth and diameter will be determined by the geological properties of the rock formation and the depth in which the reservoir is to be found. During its various stages and very broadly speaking the hole will be reduced in diameter every 900 to 1’800 metres. At each phase of the drilling the hole has to be reinforced and in case the hole threats to collapse or drilling mud may be lost into the formation, an intermediate casing string has to be installed. After the drilling of the hole is done and its reinforcement has been completed, the drilling is resumed with a smaller diameter drill bit.

When finally the drill bit has reached the hydrocarbon reservoir, the drill string must be carefully removed to permit the completion of the well. For this purpose the casing is run to the bottom of the hole to allow its cementing. Another variant is the installation of a liner thus permitting a considerable saving on casing in making the casing or liner extends from the base of the previous casing and not returning it to the surface. It is installed on the end of




a drill string attachment and is finally to be cemented. The third possibility is the open hole completion which refers to the practise of leaving the hole near the reservoir uncased, the casing being terminated at the top of the hole.

The second last operation prior to the beginning of production is the installation of the production tubing and Christmas tree.

5.3 Drilling equipment:

Every mobile offshore drilling unit (MODU) carries its own basic outfit of drilling equipment. The basic equipment comprises generally of a drill pipe, a heavy-wall drill pipe, drill collars, tongs, slips and elevators for these tubulars and casing handling as well as running tools. Almost all of them must be in conformity with the standards of the American Petroleum Institute17 (API).

The spearhead of the whole drilling system is the “drilling bit”. During the well drilling operation many different types of bits are used, the choice of a bit depends mainly on the well depth and the formation encountered. As the tripping – the process of pulling the entire drill string out of the hole and then running it back down again – is a big loss of time and of course loss of money, the right drilling bit must be chosen. The choice of a good bit is the compromise between a good rate of penetration and a good longevity.

The drilling bits are available in various types but the “rolling cutter rock bit” is by far the most popular. The drill bit consists of three rotating cones which are fitted with hardened steel; carbide tipped or diamond edged teeth. The life of a drill bit depends on the type of formation being drilled but a life of 10 to 72 hours can be expected unless specialised diamond tipped cutters are used.

To transmit the rotary torque down to the bite, drilling pipes of standardised 9 metre lengths are used. The system of coupling permits assembly and disassembly of the drill pipe also during drilling operations. Because of the amount of drilling pipes required, their relatively short longevity and the high standards to which they are manufactured, the drilling pipes are forming a large part of the drilling costs.

17 Interesting to notice that the institute was founded by the offshore industry itself to make manufacturers standardise the equipment. In the past it was never certain that components from one manufacturer would match with the equipment of another one. Nowadays the API is universally recognised as the leading industry authority in matters of standards.


In order to keep the drill pipe system straight and to reduce therefore the occasions of pipe buckling, heavy, thick walled tubular couplings called drill collars are used. They are connected in the vicinity of the drill bit to both offer more stiffness to it and provide higher weight to assist the bit in the rock breaking process.

The tubular handling tools will be found on any rig and make the work of handling drill pipe, collars, casing and still some other tubulars. The “elevators” are gripping and lifting tubulars by their ends. Making and breaking connections of the drill pipe is made by the “tongs” which are basically large wrenches for applying torque to pipe.

While it was in the past still necessary to employ workers to handle the pipes, nowadays automated drill pipe handling systems can be found to perform this duty. The whole assembly of components used to drill is called the “drill string”.

On units like drill ships and semi-submersible vessels which are not bottom supported structures, as jack-ups or fixed platforms are, the drilling equipment must compromise with the sea motion. The procedure for drilling a well, as such, is not affected by this factor but the equipment of drill ships has to be adapted to the conditions in which the well has to be drilled. The equipment must include a motion, or “heave compensation system” that will accommodate the vessel’s movement relative to the sea bed.

5.4 Drilling mud:

Drilling fluid or mud is vital for the drilling operation. It is even, in the industry’s jargon, assimilated to the lifeblood of the drilling system. Its functions are not solely to lubricate the drill bit but also to remove the drilling debris, to stabilise the hole and to maintain counter-pressure to possible formations of gas or liquid forces.

The composition of the fluid is quite sophisticated and consists essentially of bentonite – a kind of clay dissolved in fuel oil or water. It is called mud because of its consistency and the dirt which it causes. There are also synthetic based muds (SBM) on the market which offer several advantages compared to the oil based muds (OBM) but their price is still prohibitive.



Big attention is to be paid to the preparation of the drilling mud as it has to be ensured that the pressure is high enough to be greater than the one encountered if the drill bit strike an unexpected pocket of oil or gas and, at the same time, not excessive to avoid mud to infiltrate the structure of rock and therefore get lost in it.

The operating principle of the drilling mud system is quite simple: It is pumped into the drill string until it reaches the drill bit, where it eventually exists around the teeth of the drill bit. As there is a constant mud flow the expelled mud makes its way back to the surface. The mud returns are collected and directed into the “shale shaker” where the particles of drilling debris are removed. Prior to going again to circulation, the drilling mud is allowed to stand in the settling and storage tanks; those tanks are opened to the atmosphere and make the release of any gaseous hydrocarbon products dissolved during the drilling process.

5.5 Drilling hazards:

The two major hazards encountered in drilling operations are kicks and blow-outs. Theoretically, if the drilling fluid (or mud) is maintained at the correct weight to compensate any different formation pressure encountered, the well should be safe. Still it happened many times in the past that the mud pressure was exceeded by the one of the formation thus resulting in the phenomenon known as “kick” describing the mud being pushed out of the well. If the situation is not quickly brought under control it can lead to an extremely serious situation called a “blow-out”. This happens when the mud is finally expelled with amazing force out from the hole. Eventually, after the mud has been “vomited” from the hole, a gush of either gas, oil or sea water, often mixed together, envelops the rig. It could be easily to imagine the consequences if the gas ignites, what it also did and in the past blow-outs have been responsible for the destruction of entire rigs and many life losses.

To avoid such disasters to happen again, very expensive installations called Blow-Out Preventers (BOP) have been installed on rigs. They are able to withstand up to 1’000 bar of pressure and when a kick or blow-out threats the rig, controls are operated and the large and powerful devices are closed together to seal off the hole and prevent in this manner the passage of well fluids or gases up to the rig. On platforms and jack-ups the Blow-Out Preventer is being installed “onboard”, while on drillships and semi-submersibles the BOP stack is found in the subsea at the well’s entrance. Another big danger for the rig’s crew and for the rig’s equipment as well is the hydrogen sulphide (H2S). One of the most dangerous well fluids encountered, H2S is at the same time a valuable constituent of crude oils and is essential for the production in the refinery of sulphur. A mixture of one part of H2S with 1’000 parts of air is already a lethal dose to man. It has another very unpleasant property: It is very corrosive. Therefore all the drilling equipments, the BOP and even the drilling mud have to be treated against this.



5.6 Deviated wells:

One of the most impressive steps in drilling technology is the possibility to drill nowadays a horizontal well. The directional drilling technology has developed radically in the past twenty years and wells can now be drilled up to 8 kilometres from the well entrance. This technique not only permits to reach several reservoirs from one single emplacement but also to enhance their production, often by up to 25%. This is made possible with the use of “geosteering” which enables the driller to guide the drill bit to the optimal location. Another possible use of geosteering is the drilling of multi-lateral wells which allow two or more wells to by drilling through the same well bore. Due to improved drainage, the production of a multi-lateral well may be improved by up to 500% in ideal cases.



CHAPTER 6: OFFSHORE SUPPORT VESSELS: 6.1 Introduction:

Should the platform field be a kind of hive, so would offshore vessels be its bees. Even if the “bees” stand often in the shadow of “hives”, the latter wouldn’t manage to subsist without their assistance and support.

Towing the platform and positioning it on location, deploying their anchors, supplying them, fighting possible fires, bringing crews on and off and many other duties are among the services done by offshore vessels to their “masters”. They can be subdivided in four main work sections:

- Exploration

- Construction

- Production

- Maintenance Here is a little summary of the oil or gas field’s development, from offshore an vessel’s view: In the exploration phase, following offshore vessels can be found:

- Seismic vessels making a sea bed survey and locating oil or gas reservoirs, as well as the optimal drilling place.

- Anchor Handling Tug Supply Vessels are towing the Mobile Drilling Units

and positioning them on location and spreading their anchors.

- Platform Supply Vessels and Crew Boats can be found as well at this primary stadium of the field’s development.




Then comes, the construction phase:

- Pipelaying vessels or barges are deploying production, test or water injection pipelines, which are sometimes installed with various underwater vehicles.

- Anchor Handling Tugs are towing jackets, platform legs and platform parts or

the platform, loaded or not on a barge, itself on location. Anchor Handling Tug Supply Vessels

- Crane vessels or barges are required for construction or assembling of the

various parts of the production platform.

- Multi Purpose Supply Vessels are offering berths for workers and can perform various tasks within the construction phase.

- Accommodation barges or vessels are allowing from several dozen to several

hundreds of workers to live on board.

- Platform Supply Vessels and Crew Boats are supplying the construction site with necessary materials, working tools and personnel.

And finally, the oil production and maintenance phase18 :

- Platform Supply Vessels are supplying the production site with all necessary things for its production and bring also all the needed materials for maintenance of the site. They assume also various other functions.

- Crew boats can be found as well and provide fire fighting aid if needed or more

usually making the crew transfer from or to ashore.

- Multi Purpose Supply Vessels are ideal to perform maintenance work.

- Diver vessels can be seen in shallow waters or where underwater repairs in reasonable depths should be done. For deep water repairs, Remotely Operated Vehicles (ROVs) are required. Those millions of dollars expensive “toys” must

18 Production and Maintenance are being merged, because usually maintenance is performed while production is going on, unless there are some major repairs en route.



be steered by a special operator devoted to this task and such a sub sea vehicle requires an additional engineer for its maintenance or repair. ROVs can be launched from every offshore vessel type, in harsh environments ROVs should preferably be launched through a “moonpool” – a hole in the vessel’s hull, permitting ROVs or divers to have direct access to water through one vessel’s bottom. This avoids the ROVs to get damaged, when launched over board, if the vessel is rolling.

- Well Stimulation Vessels are able to increase the flow of hydrocarbons from a

well.

- Terminal Tugs are required to keep tankers on position, while loading oil.

- Stand-by Vessels have beside their primary function, which is to provide rescue and first aid to people on the offshore installations, the duty of “chasing” all vessels which represent a danger for the platform.

Further a description should be given of specialised vessels such as: Seismic vessels, well stimulation vessels, pipe laying vessels and offshore units like accommodation and working barges.

6.2 Offshore vessel’s design19:

The modern offshore vessel is like no other vessel within the Marine Industry. Due to the special operations and varied tasks that this type of vessel is required to perform, in addition to the harsh and demanding environment in which these operations must be carried out, the design of the vessel is unique.

It is therefore necessary for the reader to get a little familiarized with the operation or manning of a modern offshore vessel to be aware of the special design and construction characteristics of such vessels.

As each vessel type has its own properties and own features, depending for which operation type it has been designed, there would be as many detailed description as there are

19 Ritchie, Gary: Practical Introduction to Anchor Handling and Supply Vessel Operations



vessels available. To avoid this, a description of the design of an Anchor Handling Tug and Supply (AHTS) vessel will be made. Its design is very similar to the one of the typical Multi Purpose Supply Vessel and it has almost the same characteristics as the Platform supply vessel, apart from the towing and anchor handling abilities.

Offshore vessels have large after decks, which are utilised for deck cargo and for anchor handling and towing operations. This large after deck is enclosed on two sides by protective barriers and bulwarks which ensure that cargo; equipment and personnel are protected from the sea. The stern of the vessel is open to the sea, with a rotatable stern roller fitted to enable the vessel to recover and deploy a rig’s anchor and to maintain a clear area for the vessels tow wire.

The forward section of the after deck leads to the vessels winch house and accommodation block. The winch house is on the same level as the after deck and houses the vessel’s towing wires, winches and anchor handling equipment.

The following design and operating criteria can be expected on any Anchor Handling and Supply Vessel:

The hull form of the vessel is conceived in such a way that a large after deck is available for cargo, anchor handling and towing operations.

The hull form will be such that manoeuvring abilities are at a premium during slow

speed and static operations. High windage20 areas are a distinct disadvantage for Anchor Handling Vessels during anchor deployment, recovery and towing operations and for Supply Vessels during cargo operations offshore. A higher windage area will require an increase power ratio to maintain station-keeping capabilities – that’s why in harsh weather regions, offshore vessels which require higher protective barriers and higher built accommodations, have generally more powerful engines.

Manoeuvring systems are of major importance with the requirement to operate the vessel safely and effectively at slow or static speeds. Another important aspect for an offshore vessel’s design is the protection given to crew, cargo and equipment. There is still a further aspect of protection which must be warranted on offshore vessels, especially on the ones working with cables, wires or anchors: To secure propulsion thrusters as well as the thrusters from external danger sources such as tow wires, anchors and pennant wires. The stern and underside of the vessel are areas that require the most protection and as such the offshore vessel has a unique propulsion arrangement, proving protection and excellent manoeuvring capabilities.

20 Windage area is the surface of the vessel which is exposed to wind i.e. squalls and blasts.


The major function of an Anchor Handling Vessel is for operations utilising winches. With increasing exploration in extreme water depths, the need for powerful, reliable and physically immense winch drums with deepwater capabilities is of paramount importance in the design of modern Anchor Handling Vessels.

For deepwater operations and general support work, sufficient storage space must be available onboard the Anchor Handling Vessel for cargo (containerised, bulk and liquid), wire and chain.

Suitable Bridge design is required to ensure that full 360° visibility is available for critical operations and the duplication of all manoeuvring, navigational and communications controls at the after bridge control position as well as the traditional forward console, is required.

6.3 Offshore vessel’s propulsion means:

Anchor Handling and Supply Vessels are, by their very nature, required to maintain their position and / or heading to a very high degree of accuracy whilst unloading or loading cargo, or while carrying out anchor handling duties. For this reason these vessels are fitted with very powerful thrusters that dwarf thrusters fitted on much larger cargo vessels.

Generally there are two types of thrusters which are in common use, the tunnel thrusters and the azimuth thrusters.

The majority of Anchor Handling Vessels are now fitted with two bow thrusters and one stern thruster as a minimum, although new vessels have a variety of configurations mixing thrusters with azimuth units.

The majority of modern vessels have azimuth thrusters fitted at the bow, still there are some vessels which have them fitted to the stern.

Generally the azimuth thruster is essentially the same as the tunnel thruster, however it has the capability to rotate through 360° and is therefore of far greater use to the vessel’s master. As with the tunnel thruster, the pitch and power of the azimuth thruster is controllable.



In addition a number of vessels have no main conventional propeller, but utilise azimuth thrusters for power and directional control. As the azimuth thruster may be rotated for directional power, no rudder is required.

Many of these vessels are fitted with a “Kort” nozzle – a kind of tunnel around the propeller. This has several advantages: It provides protection for the propeller blades against wires and chains. It also increases the propeller’s efficiency and reduces athwartships component like transverse thrust effect – this is particularly welcome when the vessel is manoeuvring at low speeds.

Still there are some shadows planning above azimuth thrusters: They increase the water draft of the vessel, the exposure to damage is increased as well, for an extra bearing and seal arrangement to allow the rotation of the thruster.

There are more and more Anchor Handling and Supply Vessels available with Dynamic Positioning systems fitted as standard. Barely a very few vessels, if any, are nowadays built without DP system. Please refer to the chapter 7: “Dynamic Positioning Technology” to get more information about it.

6.4 Anchor Handling:

There are many anchor handling vessels presently on the market and several hundreds

others currently ordered. After having considered their design, let us have a look how the anchor handling duties are like?

Most of the chartered anchor-handling vessels have performed, prior to arriving on location, the towage of the mobile drilling unit. Although the tugs are in control of the rig’s movement, they are following orders of the drilling rig’s bargemaster or towmaster. This relationship could be summarize quoting the principle: “The tug is the servant of the tow”. The rig’s future emplacement is determined by the operator on the basis of the results of the geophysical surveys. The location of the rig is also discussed between the operator’s marine representative and the contractor’s marine staff in regards to the seabed, mooring plan and the pipeline or telecommunication cables which can be found in the area. The positioning tolerance permitted by the operator, in any direction of the determined emplacement, is very little. Nowadays with modern positioning systems it became a matter of metres to position a rig. Beside the emplacement of the unit, its final heading is also very important, as this must take account of its drilling ability or the convenience for helicopter or crew boat operations.

When approaching from the location, the aftermost anchor is normally the first to be deployed. Unlike the majority of the deployed anchors, the first one to be dropped by the rig itself as it passes over the specific seabed position of the anchor. The rig’s unit anchors are




normally numbered clockwise, with the forward anchor on the starboard side designated as being number 1. The number of anchors to be deployed is usually eight or twelve, each anchor chain is measuring about 1’200 metres and the weigh of a standard anchor, which can be found on almost all rigs, is about 16 tons. The whole anchor laying operation can take up to several days.

Still before the first anchor is dropped to water, another anchor is passed by a crane to an anchor-handling vessel, while the towing vessel and the dropped anchor keep together the rig in place. A large steel ring called a “chasing collar” is attached to the rig’s anchor chain near the anchor itself. The chasing collar is suspended from the deck of the rig by a wire named “chasing pennant”. The pennant is passed to the anchor handling vessel, which is then able to pull the rig’s anchor, while the rig pays out the anchor chain. Once the determined chain length is reached, the vessel can lower the anchor to the seabed. The most common anchor is the Admiralty pattern anchor but many other different types are available. The anchor’s position is to be marked with a buoy attached to the chasing collar. After the anchors have been all deployed, the rig has to show satisfying mooring tension in the chains. Chains tensions are, after the rig has been moored, checked normally every four hours, or hourly and even constantly during bad weather. Here is how a typical sequence would look like21:

1st step: Drop the first anchor (No. 4)

2nd step: On arrival at location run weather bow anchor (No.1) and second stern anchor (No.5)

3rd step: Run second bow anchor (No. 8)

4th step: Release towing vessel from tow bridle

5th step: Run breast anchors (Nos. 3, 6, 2 and 7)

6th step: Add back-up anchors to main anchors where required

7th step: Pre-tension

There are several anchor patterns i.e. there are several geometrical arrangements of anchor chains which can be used for mooring a drilling anchor. They depend as well on the type of rig, its shape and the number of anchors, as the environmental factors like tides, current or seabed properties.

21 An Introduction to Marine Drilling, Malcolm Maclachan, page 250.


6.5 Offshore barges:

Apart from offshore vessels, barges can be found as well in the world of offshore. They are cheaper to build and have several features, which make them preferable to vessels in calm areas all over the year or for seasonal works like for instance in the North Sea region.

The barges’ advantages are their breadth to length ratio and their rectangular shape thus

optimises the deck space area and allows them to carry big sized cargos on deck. Thanks to the spacious deck, barges are particularly predestined to play the role of a “hotel barge”, because enormous accommodation can be built on them. It should be added that, thanks to their breadth, the rolling periods are much longer than on traditional shaped vessels, avoiding workers to be exposed to sea sickness. Alone this fact weights in balance in the operator’s choice of the contractor, as, according to statistics from the French Oil Company Total, about 10 percents of workers are unable to work on vessels due to sea sickness, while on barges this number is significantly smaller.

Another considerable aspect of barges is their small water draught, giving them

monopole in some very shallow waters or swamps. They will doubtless play a great role in oil exploitation in the new Eldorado of oil offshore industry: The Caspian Sea.

Offshore barges can as well be fitted with engines and own propulsion means, rather

then being totally reliable on tugs for any move in the water. Some barges – working in deep waters - are even be equipped with Dynamic Positioning to keep stay on location. Even if such well equipped barges exist, most of the available barges are equipped for four or eight anchor point moorings to stay on position.



6.6 Offshore vessel types and their duties:

6.6.1 Multi Purpose Supply Vessels (MPSV)

Multi Purpose Supply Vessels: MPSVs are multi-purpose vessels capable of providing

a wide range of maintenance services for oil fields. These vessels offer sophisticated functions such as dynamic positioning, fire-fighting, deepwater handling, helipads, and the capacity to carry large equipment and personnel.

6.6.2 Anchor Handling Tug Supply Vessels (AHTS)

Anchor Handling Tug Supply Vessels: AHTS vessels are used to install and maintain oil platforms as well as towing non-self-propelled drill rigs or other non-self-propelled vessels. AHTS are equipped with powerful engines and winches and are used to tow equipment for setting and retrieval of anchors and deployment of other oil production-related equipment. They are able also to transport liquids in tanks, containers on deck or even sometimes cement or barite – if they aren’t fitted with under deck tanks or storage spaces and designed only for towing and anchor handling they are called Anchor Handling



Tug vessels: AHT. The tug / supply and AHTS vessels have been described as the “illegitimate offspring of a tug and an OSV (Offshore Supply Vessel or PSV – please refer to next section) fathered in the oil patch”. If the vessel hasn’t the ability to handle anchors, it will be merely called Supply / Tug vessel. AHTS deserve only their designation if they show all features of an Anchor Handling Tug Supply vessel.

6.6.3 Platform Supply Vessels (PSV)

Platform Supply Vessels – also called Offshore Supply Vessels (OSV) - carry supplies to offshore platforms. In addition to their large deck surface which makes it possible to transport various equipments, such as heavy and oversized shipments, they are fitted with tanks that can be used to store and transport drinking or industrial water, drilling sludge, fuel, methanol or cement. Because of those excellent transport abilities, PSVs are called – in professional jargon – “Sea trucks”. They also care about vessels passing nearby the oil or gas field and make them deviate from their heading if the latter represents any danger for a platform or installation. The ones working in artic regions are sometimes equipped with powerful fire fighting systems allowing them to make growler or even smaller sized icebergs deviate from their course. Another and more conventional method of steering icebergs out of the way of rigs is to encircle the threatening berg with a buoyant fibre rope and making the iceberg deviate with sustained use of engine power.




6.6.4 Terminal tugs

Terminal tugs are dedicated to assistance and operations at offshore oil and gas

terminals. Even if there are more and more shuttle tankers22 available, traditional tankers remain the backbone of oil transport ashore. As those tankers are unable to stay on position and can almost never moor by themselves, the use of terminal tugs is required. Those tugs bring traditional tankers on location, help them mooring at the buoy and keep them in position while loading. Even shuttle tankers sometimes require to be handled by terminal tugs.

6.6.5 Crew boats

Passenger Vessels can be classified in two categories:

22 Shuttle tankers are specially designed tankers for offshore purpose and able to operate in offshore areas and keep their position, even in bad weather condition. This additional equipment is very expensive and raises significantly the cost of such a vessel - therefrom the relative low number of shuttle tankers available. Please also refer to chapter “shuttle tankers” for further information.



• Fast Supply Intervention Vessels provide emergency supplies and transport response teams

• Surfer crew boats transport staff members to oil facilities and move them around among different platforms.

They are fitted with powerful engines, making them reach 20kn and even sometimes virtually 30kn – but they rarely reach such a speed. This is due to two main reasons: The high consumption costs making operators order those vessels at cruising rather than at maximum speed – thus to save about half of the fuel consumption, while the speed is reduced “only” by a few knots, remaining generally above 20knots - and cargo stored on deck, reducing the vessel’s speed as well. If the water environment allows it, crew vessels are often made out of sea water resistant aluminium. Fast supply intervention vessels are equipped with impressive fire fighting system: Monitors are often steered – by joystick – from the bridge and their fire pumps are so powerful, that an aluminium 50m length vessel could be moved at a speed of 5kn - without any other means of propulsion than the monitor using the full power of the 1200 m3 / hour fire pump. Some fast supply intervention vessels are even fitted with transversal thrusters acting automatically with amazing power to counteract the power of the fire fighting monitor. Such remote controlled apparatus has also proven - in areas like Nigeria - to be a very dissuasive means against piracy.

The alternative and main competitors to crew boats are helicopters, but even if the latter

are up to ten times faster, the higher is the risk of accidents, they offer only few passenger seats (usually less then thirty – the most popular helicopter type in the offshore business is the Sikorsky S-61 N that can carry only twenty-four passengers). Their incapacity to carry cargo makes fast crew boats more attractive to operators. In top of that, they are about one and a half time more expensive to charter than even larger crew boats. Still helicopters are more popular in harsh environment areas like the North Sea or regions where the offshore platforms are at remote emplacements, like in the US Gulf or in the Gulf of Mexico.

6.6.6 Stand-by Vessels:

Stand-by vessels have been compulsory for attendance of all manned offshore installation located in the UK sector of the North Sea, even before the tragic event of the Piper Alpha23 disaster in 1988. Before this catastrophe which scattered and shocked all UK

23 The Piper Alpha disaster, which occurred on 6 July 1988, was due to a leakage of natural gas condensate, which ignited, causing a massive explosion. A second and larger explosion engulfed the entire platform. The disaster accounted 167 casualties out of 229 people working on the platform – only 62 crew members survived (Source: UKOOA). The bitter irony is that the ones who followed the safety instructions died and the one who derogated to them survived - The survivors jumped from the deck some 60 metres (!) into the rough, undulating North Sea. Concerning this event, a very interesting documentary has been made by the BBC: Spiral to Disaster – Piper Alpha Oil Rig Explosion.



and a large part of the world as well, most of the stand-by vessels operating in the North Sea were converted trawlers. The disaster highlighted deficiencies in their operational capabilities and they were severely criticised by the Cullen Inquiry24 . The new generation of Stand-by vessels had to be at least 11 metres in length, capable of a speed of 10 knots and providing 360° of unrestricted vision from the wheelhouse. Bow thrusters became compulsory and the main propulsion means had either to be fitted with twin propeller, or an azimuth propeller; two fast rescue crafts were seen as being a minimum for an immediate deployment.

Even if they are compulsory in the North Sea area, stand-by vessels aren’t mandatory in many regions. Often the function of “stand-by vessel” is being imputed to utility vessels or other vessels which stay nearby the platform.

6.6.7 Well Stimulation Vessels:

Well stimulation vessels are specially equipped units which can perform well stimulation methods like “fracturing” and “acidizing”. Even if such operations could be done from the rig as well, not each rig has such special equipment on board and has the flexibility of the well stimulation vessel to do it the optimal way. Well stimulation vessels are equipped with tanks able to carry big amounts (more than a dozen hundreds of m3) of various chemicals like the well stimulants: Proppants, raw hydrochloric acid, liquid nitrogen and several other liquids and dry additives. Another feature of those vessels is their big and powerful pumps.

The two methods normally used for well stimulation are “fracturing” and “acidizing”.

The fracturing (also called fracing) consists in splitting rock formation by pumping liquids with sand (“proppants”) at very high pressure down the hole. The pressure is calculated with care and might reach as much as 15’000psi25 pressure. Once the rock layer is opened and the high pressure gone, a solid called “proppants” – sand or artificially manufactured - holds the cracks open allowing well fluids to flow inside this hole. The aim of the whole operation is to improve the flow of hydrocarbons into the well bore and therefore raises the production output.

The acidizing technique is used to remove damage near the well bore in sandstone and carbonate formations and to produce long linear channels away from the well. It is used to dissolve deposits restricting the perforations. To prevent any kind of corrosion of steel or formation of mud, both of them might endanger or block the tubing perforations, additives are mixed with the acid solution. 24 The Cullen Inquiry is named after Lord Cullen, who became famous by conducting inquiries into three major British disasters; The Piper Alpha oil platform disaster was among them. 25 This corresponds to more than 1’000 bar pressure!



Both methods can be combined as well, thus resulting in fracture acidizing. This technique involves injecting acid at a very high pressure – even greater than the one reached by fracturing. This is made in an attempt of stimulating a new well to flow.

That type of vessel is relatively rare and barely forty vessels are currently active26 .

6.6.8 Pipe Laying Vessels

Even if the diploma thesis will not touch the specific works done in the Subsea and the pipe laying, still this vessel’s type should be briefly discussed. Those vessels – depending on the specific duties and the environment in which they work can be built as well in the ship-shaped or flat bottom barge design as in the semi-submersible fashion. A big number of these vessels have a heavy-duty crane to perform construction and installation works. Because of the required accuracy pipe laying units are also equipped with a dynamic positioning system. A complete pipe welding and coating factory is installed on deck. Some of the vessels are fitted with huge storage reels for flexible as well as for rigid reeled pipe lines.

Prior laying the pipes on the sea floor the pipe pieces – so called “joints” – have first to be welded together. After that the “non-destructive testing” (NDT) is carried out before the pipe is, moved aft, horizontally until it reaches the stinger which guides the pipeline into the water, and to the seabed. To avoid the pipeline being pushed aside by – for instance – side coming sea waves, the pipeline’s laying is controlled by means of pipe tensioners, which do only follow the vessel’s motion to a limited extent. This method of pipe laying is called the “S-lay” and is the most widely used up to 1’000 meter water depth with a traditional stinger – latest stingers allow this method to be used up to 3’000 meter water depth and even beyond. Still most of the deep water installations are made with a “J-lay” tower. Unlike the “S-lay”, the “J-lay” is installed vertically and allows welding, coating and the non-destructive testing in a vertical way. If the “S” designation probably from the stinger, the one of the “J-lay” is due to the shape of the pipe when lowered onto the seabed making it resemble to an ice hockey stick.27

The pipes are supplied to the pipe laying vessel by platform supply vessels, multi-purpose ships or sometimes by pipe-laying carriers. The pipes are picked up with the crane and put into the temporary pipe storage racks.

26 Source: www.e-ships.net – ship’s database. 27 Source: Ship knowledge 4th edition, Klaas von Dokkum, page 77.



6.6.9 Seismic Vessels

The name speaks for itself: This category of specialised vessels is equipped for geological surveys. The seismic vessel’s duty is to traverse the area under investigation in a systematic pattern, emitting controlled bursts of sound energy from a submerged air or water gun array towed behind the vessel. The sound waves radiate through the water and into the rock formations under the sea bed where they are refracted and reflected by the different layers of rock. The return signals are absorbed by hydrophones towed behind the vessel, up to 240 contained within a streamer, several kilometres in length28 . To avoid any risk of disruption of the survey, chase vessels are often employed to make deviate the maritime traffic – if necessary – from its course.

Those vessels are fitted out with incredibly powerful compressors which are requested for the air-guns. The most impressive feature and the most expensive one as well, is the computing centre which is able to process an amazing amount of collected data and also to store them. Just to give some figures: The amount of data collected during just one single medium-sized 3d marine survey would fill up to more than 20’000 compact discs, which would correspond to an almost 25 metres29 stack30 .

Nowadays there are about 170 vessels of this type31 available.

28 Source: Offshore Engineering: An introduction – 2nd Edition, Angus Mather. 29 The website speaks about 650 feet i.e. 197,6 metres; for my part I measured the thickness of a compact disk (1,25mm) , calculated and found out that this would result in a 25metres stack (20’000 * 1,25mm = 25’000mm i.e. 25 metres. 30 Source: www.ccgveritas.com – website from the French Compagnie Générale de Géophysique Veritas. 31 Source: www.e-ships.net – ship’s database.


6.6.10 Shuttle Tankers:

Basically there are two types of tankers equipped for offshore loading operations:

Crude oil carriers: For the oil transport over long distances. It is provided with basic loading and mooring equipment. Shuttle tankers: In comparison to crude oil carriers, shuttle tankers spend a large proportion of their life loading, unloading and manoeuvring in and out of a port.

Approximately 20% of the UK’s oil production and 60% of Norway’s oil is transported by shuttle tankers rather than pipeline. The equipment found on shuttle tankers being built lately shows a large spectrum of features, such as segregated engine rooms, redundancy in steering, additional bow thrusters and stern thrusters or manoeuvring and dynamic positioning equipment. Their ability to keep position even in very rough weather would theoretically allow them to keep position while linked to the FPS with waves up to 6 metres. When the wave height exceeds 4.5 metres oil transfer ceases. These ships tend to be in the 100,000 – 125,000 dwt range.

The next generation shuttle tankers should be called multi-purpose shuttle tankers (MST) which are likely to be designed to facilitate drilling and built for potential conversion to FPSO or FSO units with a minimum of work.




CHAPTER 7: OFFSHORE’S SPECIAL FEATURES: 7.1 Introduction:

While for decades the Offshore industry inspired herself from the maritime technique to build their ships, using the same engines, fitting the instruments for their purposes, the trend is about to invert. Passenger vessels built with integrated Dynamic Positioning Systems have already been built and X-Bow designed container vessels may soon be seen in the North Sea area or crossing the Atlantic. There are still a lot of other remarkable features, but Dynamic Positioning and X-Bow are the two most representative technologies the offshore world can offer.

The Dynamic Positioning System already proved its efficiency in the numerous favours it did to the industry, allowing the first deep water drilling operation, it is still today the sine qua non condition32 for deep water exploration and production. On the other hand you have the X-Bow concept: Conceived for offshore support vessels working in harsh environment, the X-Bow is more than a bold design, it is revolutionary. While Dynamic Positioning already proved its value in the past decades, the X-Bow has still to prove its worth in the coming years. Be that as it may, both technologies are characteristics of the offshore business: Ingenious and innovative. Both have another common point: They deserve being considered.

7.2. Dynamic Positioning:

Dynamic positioning (DP) is based on a computer controlled system, which automatically maintains a ship’s position and heading by using her own propulsion means. The computer refers to its own sensors, as well as to gyro compasses, wind and current sensors. The mathematical model contained in the computer’s program allows the Dynamic positioning system to react in an optimal way to any position change. The computer has to calculate precisely the required steering angle and thruster output and the thrusters have to respond as accurately as possible.

Even if the Dynamic Positioning costs are falling due to both newer technologies and higher competition, the system remains very costly and – depending on vessel’s or rig’s type – very complex. Beside this the maintenance of the mechanical system requires much more

32 Sine qua none condition means indispensable condition


attention; the fuel costs for their part are quite high. Still the system is becoming more compelling as the offshore oil production enters ever deeper waters.

The advantages of the system are numerous: Excellent manoeuvring, allowing the vessel or the rig unit to change easily – within minutes - its position, while it takes hours or even days to move a jack-up rig or change the position of an anchored unit. The units equipped with Dynamic Positioning dispense themselves of requiring the assistance of an anchor handling tug, what represents a big economy, especially regarding the current charter prices for AHTS. And, last but not least: the ability of being independent from the water depth factor or from an obstructed sea bed, giving also more respect to environment by showing mercy – for instance - on coral reefs. 7.3. The specifications of Dynamic Positioning: A ship has six degrees of freedom in its motion, three of these involve translation:

- surge: forward and astern (the x – axis)

- sway: starboard and port (the y – axis)

- heave: up and down (the z – axis)

And the other three involve rotation about the three above mentioned axis.

However, dynamic positioning is primarily coping with the first three degrees of motion to keep control of the ship.

Basically the system needs a gyro to determine the heading of the vessel and a so-called Position Reference Systems (PRS) to establish the vessel’s position. The reference systems are various and most of them are specific to the offshore sector of activity, as most of the traditional methods used for ship navigation are not accurate enough to be used for dynamic positioning. The most common are:



- Differential GPS (DGPS): The position obtained solely by GPS proves to be insufficient for offshore use, that’s why satellite signals have to be corrected by use of a fixed ground based reference station that compares the GPS position to the known position of the station – minimizing satellite signal errors and sinking drastically the initial mistake. This requires one or several differential stations. The drawbacks are degrading of the signal because of sunspots or atmospheric disturbances, or even the absence of a satellite signal due to obstruction by cranes or structures and lastly the impossibility to operate in high latitudes.

- Hydroacoustic Position Reference (HPS): This system is based on one or more

transponders placed on the seabed and a transducer placed in the ship’s hull. The acoustic signal is sent by the transducer to the transponder, which is triggered to respond to it. The distance is known and the direction of the signal can be determined. The disadvantages are the vulnerability of the signal to noise by thrusters or other acoustic systems. Furthermore this system is limited to shallow waters. The three types of hydroacoustic position references are:

o Ultra- or Super Short Base Line (USBL or SSBL)

o Long base Line (LBL)

o Short Baseline (SBL)

- Light Taut Wire (LTW) is the oldest system used for dynamic positioning and reveals to be very accurate in relatively shallow waters. A clump weight is lowered to the seabed. By measuring the length of the wire and its angle, the relative position can be calculated. It isn’t suitable for deeper water as the current curves the wire. Sometimes use is made of a horizontal wire when the vessel is close enough to a structure.

- Fanbeam and CyScan are based on laser technology. Even if their range is

more than 500 metres, this system requires only a small prism to be installed on a surrounding structure. The drawbacks of the laser system are its risk to lock on other targets than on the installed prism and the blocking of the signal.

- Artemis system is a radar based system. A unit is placed on a nearby structure

and aimed at the unit on board the ship. The range is several kilometres. It has been tested as a reliable positioning system.

- Differential, Absolute and Relative Positioning System (DARPS) is used on

shuttle tankers while loading from a FPSO. Both vessels are equipped with GPS and have therefrom the same errors. The position from the FPSO has merely to




be transmitted to the shuttle tanker, so that the latter can calculate the range and bearing, which can be used be the dynamic positioning system.

- Miscellaneous other systems are available like the RADius, RadaScan, both

based on radar or Inertial navigation, a system which uses GPS in combination with Hydroacoustics. Many of the new technologies are making use of the optical fibres.

Depending on the ship’s type and its duties, the DP system can be fitted with sensors determining the motion of the vessel, the effect of wind on the programmed ship’s model. A Pipelay ship may measure the force needed to pull on the pipe, large crane vessels will have sensors to determine the cranes position, as this changes the wind model, enabling the calculation of a more accurate model.

Classification Societies have issued rules for Dynamic Positioned Ships described as per IMO33. All of them are equipped with automatic and manual position and heading control and have to be operational under specified environmental conditions. The DP vessels are classified in three classes:

Class 1 has no redundancy; it means a DP Class 1 vessel would risk a loss of position in the event of a single fault.

Class 2 has redundancy so that a single fault in an active system i.e. generator, thruster, switchboard, remote controlled valve can not cause a system failure.

Class 3 is equipped to withstand fire or flood in any one compartment without the system failing. This can be solved by having two segregated engine rooms for instance. The additional costs – even compared to Class 2 - are enormous and only very few vessels are fitted with such an equipment. The Norwegian Maritime Directorate has specified the Class 3 as being required for operation where loss of position could cause fatal accidents, severe pollution or damage with major economic consequences. This involves for example diving support vessels.

Each Classification Society is having its own specific description, here is a small summary of the different notations referring to the three IMO classes:

33 Source: IMO publication 645


IMO Class Lloyd Register Det Norsk

Veritas Germanischer Lloyd

American Bureau of Survey

Class 1 DP (AM) DNV-AUT DNV-AUTS

DP 1 DPS-1

Class 2 DP (AA) DNV-AUTR

DP 2 DPS-2

Class 3 DP (AAA) DNV-AUTRO

DP 3 DPS-3

The one who operates the DP system has to qualify as a DP operator. This comprises an introduction course, followed with a minimum of 30 days of seagoing DP familiarisation. Then an advance course is planned and finally a minimum of 6 months watchkeeping on a DP ship, including a statement of suitability by the master of a DP vessel, are required to obtain the needed certificate.

It is not out of question that the dynamic positioning system would become popular, even in the traditional maritime sector. With container operations, crowded ports can be made more efficient by quicker and more accurate berthing techniques. This eventuality may become reality as the DP technology becomes cheaper and the ports more crowded as they already are. Some cruise ships already benefit from this advantage allowing them to benefit from faster berthing and to keep position above a coral reef while the passengers could discover some islands which weren’t accessible to most passenger vessels - or even not accessible at all - until then.



7.4 The X-Bow:

Like their elder counterparts – mobile drilling units – offshore vessels weren’t, in early

years, purpose built but were converted vessels – mostly former trawlers. The first revolutionary concept was designed by a Norwegian shipbuilder: Ulstein. At that time the UT-704 was a state-of-art AHTS vessel with an almost perfect design and optimal proportions for its duties. From this point, the UT designation became popular and for almost thirty years the UT design would be the highly rated and the vanguard of offshore support vessel models, setting standards and dictating to ship owners how their ships are going to look like. In the meanwhile, in 1999, the UT design office was sold with the whole Ulstein group - the ship yards excepted – to the Vickers Company, which became part of Rolls Royce. Nowadays the UT design is a trademark of Rolls Royce.

This almost monopoly state was breached since a few years when a flow of very competitive offshore vessel design offices appeared. But the terrible toss for Rolls Royce was the apparition of the X-Bow on the offshore market. The creator of this state-of-art offshore vessel was nobody else than…Ulstein itself.

The new design offers unique features and the vessel’s look is unique as well. Still ship owners were not rushing to have their vessels built with this new concept – not yet: In January 2008, Ulstein had 26 vessels in its order books – 20 from 26 had an X-Bow design. The real wave of enthusiasm only began after the successful launching of the anchor handling supply tug vessel: The type AX-104, christened Bourbon Orca. In 2005, when the first X-Bow ship was delivered to Bourbon, the latter could claim having a vessel, which not only had an avant-garde hull design but also two other major innovations: The Odim Safe Anchor Handling System (SAHS) and the diesel-electric propulsion system.

The Safe Anchor Handling System is a major step in the anchor handling world. It allows a much saver work for the crew, as anchor handling is one of the more dangerous activities carried out in support of offshore operations, with the deck crew manually handling heavy equipment on an exposed deck. All duties related to anchor handling or hauling an object (as – for instance – a buoy) can now be performed remotely without any seaman on deck. This feature will probably spread rapidly in the anchor handling world, as many seamen are unwilling to expose themselves in such risky operations.

Conventionally anchor-handlers make use of diesel-mechanical propulsion, as the diesel-electric propulsion solutions available until now have been both very expensive and bulky for anchor handling operations. The big inconvenient thing about classic diesel-mechanical propulsions is their waste of energy: all two or four main diesel engines have to be run at a very low load when propellers are idle, which results in more fuel consumption and dirty running of the engines, which consequently require more maintenance. The “zero pitch loss” is known and accepted in the anchor handling and towing sector of activity, still it costs yearly hundreds of thousands dollars for a small AHTS and above a million for a big



one. This loss is inexistent with Ulstein’s propulsion arrangement: The engines and converters have been divided into six generating sets (so called gensets). This allows an optimal use of the power station: For instance, when the ship is idling, only one of the six gensets is in use at medium load, while the other five are turned off. As the gensets are of various powers, the system always choosing the optimal configuration to run the ship. The vessel Bourbon Orca was expected to save a million dollars a year – according to Trond Myklebust, the president of Bourbon Offshore Norway – only thanks to its diesel-electric propulsion system.

But the most spectacular and distinctive feature of the Ulstein AX-104 is its lines, especially the shape of the bow. The X-Bow is an inverted bow which leans gently back as it rises out of the water, extending the hull all the way up to the bridge. The Ulstein X-Bow behaves the same way as a surface piercing bulbous bow does. However, being taller, it deflects incoming water in a more smooth way, as the bulbous bow does. This means a reduction in the power needed to drive the ship forward. Still it isn’t its main advantage; the revolutionary bow doesn’t distinguish itself in the calm sea but in rough water and in areas like the North Sea and among the major problems for vessels in this region are pitching and slamming - which they are subject to. The X-Bow solves this problem in decreasing rates and amplitudes of pitching. It provides a smoother ride with less speed loss in waves and, while in very harsh weather conditions some vessels are really crawling in the sea, the X-Bow allows the vessel going with much more easiness through the water. What is its secret? The X-Bow gives 900m2 more buoyancy up to the upper deck for Bourbon Orca than a bulbous bow would. As the vessel begins to enter a wave, buoyancy builds immediately, giving it a smooth lift. A traditional vessel built with bulbous bow sees the equivalent volume build-up starts more slowly and later, this leads to an increased acceleration to do the same job and finally resulting in increased rates and amplitudes of pitching.

The X-Bow concept was applied on an AHTS at first but it makes still much more sense using this design for PSVs, as they have to cross much bigger distances. The Bourbon Company saw it the same way and the first orders for Ulstein after the delivery of the Bourbon Orca were two platform supply vessels. This points another benefit for the X-Bow, the significantly increased space for cargo. According to Håvard Stave, design manager at Ulstein design, the Bow would not be more expensive than a bulbous bow. This fact did not prevent the Bourbon Orca from costing 650 millions NOK (more than 80 millions €) – the price of the vessel is adjusted to its unique features.

Ulstein does not want the offshore market having the exclusivity of the X-Bow and already designed several merchant fleet vessels with this vanguard feature. The advantages are particularly obvious for container vessel: The sight line is not obstructed by containers, permitting therefore a larger number of containers to be carried. Ulstein sets one sight on the container market, targeting particularly the feeder market in harsh environment regions. Who knows? Maybe one day container vessel officers navigating – during winter time – on the North Atlantic Ocean will say in concert with Ronny Iverson – Captain of the Bourbon Orca:




“The only thing better than good weather is a good bow”34 Only time will give an answer to this question.

CHAPTER 8: THE CONCLUSION TO THE FIRST PART:

Allseas Company’s slogan: no guts, no glory is also the unofficial adage of the whole offshore industry. The risks taken by the industry are as well technical, financial as sometimes human. Turning, the so-called “Mord See”35 - the North Sea - area into a flushing Eldorado, as well for states and for industries as for workers. It is also a world by itself: Having its own rules, own technologies, own vessels and own structures. While it could seem – at first sight - dull to work on or with structures which neither move, nor enter ports, it would rather be the contrary: In comparison, the traditional merchant sector may appear boring to some, compared to the hundreds of different aspects which are part of the offshore activity sector and which are still linked together. However that may be, the offshore world is worth being known: For its titanic platforms, for its bold engineering, for its incredible diversity and because of many other aspects composing this giant mosaic. In this first part you could, dear readers, only be witness to the tip of the iceberg; many other amazing things could be written about this topic but wouldn’t find place in the present thesis; which purpose is to introduce the reader to the offshore oil industry, not describe it in an exhaustive manner.

It is in fact a pity that so many major merchant marine countries are unaware of the capacities and potentials of this sector and pay almost no attention to it. If they are not interested in the offshore features, they should (at least) pay some attention to the gain which it generates – at least nowadays…

34 Source: www.ulsteingroup.no 35 “Mord See” is an – nowadays - obsolete expression used by the North-West Coast living Germans to refer to the North Sea – “Nord See” in German, which caused the loss of thousands of people’s live in the numerous flooding.



PART II: OFFSHORE VESSEL MARKET ANALYSIS AND FORECAST

Chapter 9: Introduction to Part II:

It seems the owners and investors have launched a big assault, at all fronts at once: The West-African region knows a considerable growth with many deep-water projects; the South-East Asia offshore market sees Vietnam emerging and Malaysia intensifies its production to supply the energy hungry neighbourhood. The need for energy also stimulates greatly the Indian offshore business. The North Sea region production stagnates and already started to gently decline, so will the Mexican Gulf offshore area. Still a considerable production should last in those areas for at least two decades. As the Artic exploration and production, due to high barrel prices, becomes affordable, the production in these areas is assumed to grow strongly. The Barents Sea will witness within the next years the construction of the biggest gas field production site, assuring the positive energy balance of Norway and Russia; the Caspian Sea for its part is doomed to become one of the biggest offshore oil production areas. This intensification of offshore activity and therefore the high resulting demands have boosted the whole offshore industry which sees both its mobile units and offshore vessels’ charter and utilization rates reach dizzy heights.

Never in the past, had the offshore world seen such high profits. Being one and a half decade, from 1985 and 1999, in the doldrums, the whole offshore industry and the petroleum sector, as well, suffered years with low returns. The barrel price then barely reached the 25 USD mark and was not rarely seen in the 10 to 15 USD area. But since the turn of century, things look completely different, especially for rig and offshore vessel contractors, whereas the past years have been hard times for contractors with small margins and unsatisfactory utilization rates, the things became in the meanwhile upside down: The contractors are nowadays considered by the operators as their equals – what was still recently almost unthinkable. While contractors had for decades to search and had often to beg for contracts, it is now the operator’s turn to look for chartering offshore vessels and units and compete with the rival companies to secure contracts.

The charter rates reached peaks at incredibly high level: on the spot market anchor handling and towing vessels have been earning, in September 2007, as much as 305’000 USD per day36 – for comparison a Very Large Crude oil Carrier (VLCC) earned in a average 56’300 USD37 in 2006, while daily rates in the region of 28’000 – 30’000 USD38 for 4’500 TEU capacity container vessel, were seen in the same year. However, this was merely for a short period of time and only seen in the North Sea area; more current rates

36 Source: Market Summary 2007, Fearnley Offshore Supply. 37 Source: The Platou Report 2007, page 11. 38 Source: Shipping and Shipbuilding Market 2007, page 89, Barry Rogliano Salles



were ranging for a conventional AHTS above 15’000bhp between 13’000 USD up to 76’000 USD39. Such rates make possible a rate of return within a period of several years, while a tanker is generally paid back in 12 years or more.

There could be a bad omen upon the long-term supply vessel market forecast: The AHTS fleet will nearly double by 2010 and the Platform Supply Vessel fleet will be, for its part, one and a half time larger than nowadays40 . Up to now the large number of new offshore vessels has been largely absorbed by the high demand of the market. But, how long will it still last? Is there a future for the offshore market and what does it look like? Those are among the questions which will hopefully find an answer in the second part of the present diploma thesis.

Through the second part, we will have a cursory glance at the oil price influences and the whole offshore market, before focusing on the core of this offshore market analysis: The offshore supply vessels. Finally we should attempt to have an outlook on the future prospects for offshore vessels.

39 Source: The Global Supply Vessel Forecast, October 2007, page 4, ODS-PETRODATA 40 Source: The Global Supply Vessel Forecast, October 2007, page 2, ODS-PETRODATA



CHAPTER 10: INFLUENCES AND EVOLUTION OF OIL PRICES AND THEIR CONSEQUENCES ON OFFSHORE BUSINESS IN THE PAST AND IN THE FUTURE

One could question the wisdom of writing about barrel prices, operators and the mobile rig units while the subject to speak about is actually the offshore vessel market. It is right the analysis is treating upon offshore vessels but it is not possible to examine this market closely without having a look on the oil prices which affect operators’ decision and their essential Exploration and Production (E & P) budget. The latter is very important because it determines what will be the level of activity i.e. the demand for the drilling rig units and indirectly the need for offshore supply vessels.

The various influences on oil prices and the resulting moroseness or keenness of the investors to invest in offshore are not the only aspect which determines the daily charter rates. Depending on the world region, on the state policy and regulations, on the environment and the weather reigning in the area and, of course, the political risks and dangers, the charter rates might and actually also do strongly fluctuate. In Artic regions for instance, the charter rates are several times higher than in the already expensive North Sea. Still the most capital factor for the offshore industry is the oil barrel price.

While the barrel of Brent41 (bbl.) was around 10 USD in the first quarter 1999, it reached the historical 100 USD mark in January 2008 due to the actions of a Broker. The anecdote is worth being quoted: “According to an oiltrader in New York, the broker placed an order at NYMEX42 for 1000 barrels of oil at 100 USD / bbl. and sold it immediately afterwards (with a loss) because he wanted to one day to be able to tell his grandchildren that he was the first person in the world to buy a barrel for 100 USD…”43

A French proverb says “le malheur des uns fait la fortune des autres” which is translated “One man’s joy is another man’s sorrow”, it could be easily used when speaking about the oil prices. The high price level of the hydrocarbons slows economy down, rising the transport costs, melting the margins of the ship industry – just to quote this single one – passing on the consumers, which see their purchasing power sink as the product’s price rises

41 The Brent Crude is originally an oil field, which oil is particularly “sweet” i.e. contains relatively little sulphur. This crude of high quality is used as the crude oil price benchmark. 42 New-York Mercantile Exchange 43 Source: Market Summary 2007, page 2, Fearnley Offshore Supply.



as well as the transport expenses, the heating costs etc. At the same time the oil price peaks boost the oil industry’s investment, rises considerably the margins of refineries, allowing the majors to make comfortable profits and improve their exploration and production portfolio.

Each rule proves to have its exception: A wealthy Middle-East prince was once asked by a journalist, when the oil prices rose at about 40 USD per bbl, if he was happy about the recent soar of petroleum income, he then answered he would prefer the prices to go down at 20 USD per bbl. When the disconcerted reporter asked why, the prince answered that his whole expenses are planed on a income based on a 20 USD price, if the price rises to 40 USD, he do not know what to do with the 20 USD surplus nor how to spend it. This “poor” man must really be sad by now.

However that may be, the offshore industry is depending of the oil price fluctuation: Is the oil price high, so will the industry be strong or vice versa: Is the worth of oil passing a through so will the industry experience a fall in the hire and charter rates. This is not always perfectly matching but most likely. The connivance between oil prices and offshore industry evolution and remuneration are obvious: The first offshore undertakings were made under the impulse of both increasing demand and rising prices. The high prices in the seventies also made the North Sea exploitation possible and granted the owners of rigs and supply vessels with good revenues. Until the late eighties, when the oil and offshore industry suffered time of sullenness. Since the turn of the century the oil prices did not stop to grow and so did the whole industry.

One of the big questions is: How long the oil prices are going to remain that high? If referring to the Energy Information Administration (EIA), in a long term projection, the world oil prices should decline from 68 USD44 per barrel in 2006 to 49 USD in 2014, then rising to 59 USD in 2030 (95 USD on a nominal basis45). The world liquids consumption should increase from 83 million barrels per day in 2004 to 118 million barrels per day in 2030. This is the most probable oil price development; still the EIA submits two other possibilities: The low oil price and the high oil price evolutions. In the worst case, for the oil industry, the prices should go down to about 30 USD by 2012 and remain in the region of 30-40 USD per barrel up to 2030. In the “high oil price” case the prices will steadily rise up to 2030 and should reach 100 USD per barrel (or 157 USD on nominal basis). Still according to this study petroleum will remain the major and leading energy at least up to 203046. All the projections made do not take in account the possibilities of war, stock exchange crash, further dollar devaluation, inflation or other unexpected events.

44 All the prices given are in real 2005 dollars. 45 Nominal basis is taking in account the monetary devaluation, while the prices given by the EAI are still based on the dollar worth in 2005.

46 Source: International Energy Outlook 2007, chapter 3: Petroleum and Other Liquid Fuels, Energy Information Administration.



However, the reference curves have been, in the past years, several times revised significantly upwards so that one could question if this trend is not to be resumed in the coming years. Some specialists are even making forecasts speaking about an oil barrel price of 200 USD. One of the main reasons for the tremendous rise of the barrel prices is the shortage of refinery capacity: Mr. G. W. Bush once met the Saudi Arabian prince to negotiate an increase in oil production; the prince argued that it will not be much use to increase crude oil production if there are not sufficient oil refineries to cover the demand. It is, however, neither in the interest of the OPEC47 nor in the one of the oil companies to increase their production. To quote Mr. Peter M. Anker – from R.S. Platou: “The large oil companies do not have an obligation to provide a rapidly growing world economy with a steady stream of cheap oil. Their common mandate is to deliver returns to their shareholders, and they are doing a great job of it.”48

In any case, the offshore production will most probably remain viable, due to the technological improvements in drilling thus shortening considerably the time needed to complete a well and allowing to drill both deeper and in a more efficient way.

47 Organization of Petroleum Exporting Countries – those countries accounted in 2004 for 41 percents of the total worldwide oil production i.e. 49 million barrels per day and, according to EIA reports, are expected to reach 52 percents of the market share by 2030. 48 Source: The Platou Report 2006, page 3.


CHAPTER 11: THE OFFSHORE OIL PRODUCTION AREAS:

The offshore industry has its constraints, opportunities or restrictions depending mainly on the region where it is active. Unlike the traditional maritime industry, the offshore sector is still at a quite primary stage of the globalisation process.

One of the main reasons for this is the environmental factor: Harsh weather conditions, stormy sea, ice, hurricanes and many other meteorological factors make each region very specific and play a much more significant role than in the traditional navigation. While virtually an offshore vessel conceived for West Africa, could also navigate in the stormy North Sea, in winter season, it would be complete inappropriate to make it operate there. The mobile drilling units are even more concerned by this as the drilling equipment may very well restrain their aptitudes, restraining their use to shallow and calmer waters or to places where they are able to drill through the rock trapping the hydrocarbons. This is the first fact which must be faced: The environmental factor is a big hindrance for the globalisation of the market.

Another big obstacle which proves to be sometimes insurmountable for operators – especially for the oil majors – is the national policy concerning the exploration and exploitation of the sub sea reservoirs. Like in Mexico for instance where the national oil giant “Pemex” deals exclusively with Mexican companies, leaving it up to them to find partners internationally. Thus making the market almost hermetically sealed for foreign operators. This protectionism policy is found in many other countries like Angola, Brazil, and Malaysia – only to mention these three. Maybe in the near future the offshore industry will witness a greater flexibility in countries with a rigid policy like Mexico, in order to both bring in new capital and above all to take advantage of the long experience of the big operators to improve production.

The system of taxation plays also a major role in the expansion of the industry – especially for big oil companies which are seeking to make their revenues grow and optimize profits. This is why West African countries are particularly interesting for foreign investors: With taxation like 10 percents in Nigeria of the income of the produced oil, large margins are guaranteed. On the other hand, the rise by 10 percents in the United Kingdom in taxation has somehow broken the keenness of the investors to expand their shares in the British sector of the North Sea.

Despite the slower globalization process, noticeable improvements have been made towards a globalization of the offshore market. Many of the offshore supply vessels built nowadays – even if intended for the shallow water areas – are also operational in deep-water and even in harsh environment. It seems versatility of the supply vessel fleets will be a great joker of the contractors in the coming years. It is also very possible to see one day the state of Mexico give up its strict protectionism.




Overview over the current situation and outlook into the future:

As each region has it own characteristics for the offshore supply vessels, the most important should be considered a little closer.

Here is a non exhaustive list of the world’s big offshore oil producing regions, we are going to consider:

- The U.S. Gulf

- The Gulf of Mexico

- The North Sea

- West Africa

- Brazil

- The Caspian Sea

Other big offshore oil producing regions are the Middle East, South-East Asia, Australia, Alaska, the Mediterranean Sea and the Artic region. Those areas will not be discussed for two possible reasons: They have a “minor” exploitation (compared to the ones we will discuss) and / or they are widely being dominated by non-European players.

Roughly it could be considered that the U.S. Gulf / Gulf of Mexico, West African and Brazil are similar in regard to their weather conditions and relatively proximate between each other, this trio is also nicknamed the “Golden Triangle” in the offshore industry’s jargon. This similarity permitted in the past the American supply vessel owners to trade the surplus tonnage to Brazil, Africa and Mexico, when the US Gulf supply vessel market witnessed moroseness in the charter rates as well as low activity. While the U.S. Gulf and the Gulf of Mexico show signs of decline in production as well as in terms of proved hydrocarbon reserves.

Especially the Gulf of Mexico has been cut to the quick and while it was assumed to have 48.5 billion barrels of proved oil reserves, at the end of 1995, it was only accredited with 13.7 billion barrels at the end 200549, with a production currently in free fall. The

49Source:http://www.bp.com/liveassets/bp_internet/globalbp/globalbp_uk_english/reports_and_publications/statistical_energy_review_2007/STAGING/local_assets/downloads/spreadsheets/table_of_proved_oil_reserves_2007.xls – the table of proved reserves 2007 – British Petroleum.



reassessment of the potential for oil production in Mexico is due to the fact that the oil production in Mexico was projected to increase steadily, to 5.0 million barrels per day in 2030. Instead of this, its production is already declining now. Nevertheless the urge to maintain a certain level of production will most probably encourage the Mexican national oil company to revise its exploration and production budget upwards50 . This would stimulate the offshore activity in the Gulf of Mexico, especially in its deep-water areas.

The North Sea region as already previously mentioned is characterised by its severe weather in the winter time. This compelled the offshore industry to improve the structures’ size, the resistance of the units to the harsh environment as well as the technologies for drilling in such a condition. Therefore most of the latest technologies were brought in first, onto the Western European offshore market. It is therefore currently the market which offers the best charter rates, the Artic region activity excluded, as the requested qualifications and the vessels’ requirement are higher than in other offshore production regions. An interesting feature of the North Sea market is its spot market, which is represented by a larger number of vessels than in other offshore production regions and proves to be, by far, the most lucrative among all offshore markets. So that considerable fleets are waiting, to deserve operators on demand, and are likely to be found either in Aberdeen for the British sector or Stavanger for the Norwegian area, the two main ports welcoming and harbouring the spot market vessels.

The maturity and the decreasing oil production of the oilfields in the North Sea will let little by little the bigger operators turn themselves unto new markets. Recently the oil major Shell abandoned the costly project of building offices in Aberdeen - maybe as a symptom of this evolution. The reservoirs’ exploitation should last few years longer, in the North Sea, on the Norway side than on the British one. A considerable level of production should still last, despite the steadily decreasing volume of exploitation, for the two coming decades. In a long term prediction, the Norwegian state owned company Statoil-Hydro will exploit the fields located in the Barents Sea, while the British investors will seek in the North Atlantic for further hydrocarbon reservoirs. The operators and contractors active in the North Sea will doubtless find easily employment as their long experience, 30 years for some of them; in this difficult area, is a valuable experience to conquer new markets.

While the North Sea actors were the pioneers of the exploration and production in extreme weather conditions, the Brazilian market is to be decorated as the leader of the offshore exploitation in deep waters, as its wealth lies in the deepness of the Campos and Santos basins. The Brazilian domestic market prevents an open access for international offshore tonnage, in several ways, like with heavy taxes on flagging foreign vessels into Brazil to qualify for tenders or by law, privileging the local tonnage and contractors. The only possible access to this market for foreign tonnage is through local co-operating partners or subsidiaries, obtaining an operating licence for renewable two-year periods - this made a reactivation of the local shipyards by European and Far Eastern shipbuilder possible. A remarkable fact of this market is its steadily progressing exploration and production 50 Source: International Energy Outlook 2007, chapter 3: Petroleum and Other Liquid Fuels, Energy Information Administration.



programme, mainly through the biggest Brazilian operator: The Petrobras Company, which is semi-public and quoted at the New-York Stock Exchange. Ensuring long-term contracts, Petrobras counts on long-term policy, and has a very methodical way of developing its fields. Another healthy aspect is its expansion, with the latest discoveries in the Santos basins, which make a saturation of this market unlikely for the nearest future.

The West African offshore exploitation has become recently very popular, as well in the emerging deep-water production as in the intensification of the exploitation in shallow waters. Similarly to Brazil, most of Western African countries do request operators or contractors to go through local partners, so-called weavers, to have access to the market. Despite the geopolitical instability and the piracy, which still recently nearly disrupted the oil production in Nigeria, it is a very attractive place of activity for big operators and especially the oil majors. One of the main reasons for this is the relatively low level of taxes; the latter is based on the percentage of income: To quote the taxation of some countries, Gabon taxes 10 percent, Cameroon asks for 15 percent, while Congo ranges at 7,7 percent51 . Still there is no rose without a thorn and beside the dangers of piracy; the operators and contractors have constraints in regard of the crewing management, as quotas of the working crew must be composed of local people, which must be schooled prior being employed by the industry. Notwithstanding the political delicacy, the West African offshore area has the best prospects for the future, with a dynamic and rapidly growing market. The era where this market was a kind of trash can, for the other markets’ outdated vessels, seems light years ago and the mean age of the vessels employed in this region has drastically sunk, largely due to the arrival on the market of numerous newbuildings.

Last but not least: The Caspian Sea. Already introduced as being the new Eldorado in the offshore oil activities, it accounts already several promising discoveries, as the Tengiz field in Kazakhstan having estimated reserves of between 6 billion and 9 billion barrels of oil52 . Despite the uncertainty, due to the problems over the establishment of maritime boundaries between the four main countries in the Caspian region: Azerbaijan, Kazakhstan, Turkmenistan and Uzbekistan, many oil majors have taken a large stake in the various consortiums operating in the region. A challenging aspect of the market is the difficult maritime access to it, due to the narrow river and canal systems. This forces the operating oil companies to build modulated offshore units which are brought in for assembly in the Baku area. A further challenge for the industry is the necessity to build shallow draft anchor handling supply vessels with icebreaker capability. This is pointing out two of the main features of this sea: The presence of ice, even if seasonally, and the shallow water.

It is now more and more obvious that the mature offshore production areas are now, after several decades of exploitation, declining. Some of the “old guard” offshore regions will maybe recover a high level of production thanks to the deep and ultra-deep reservoirs exploitation but they are not, however, expected to reach again peaks in amount of production. They will more likely be replaced by the new coming offshore markets or the

51 Figures given by Mrs Steinhoff - from ABC Maritime 52 Source: Offshore Engineering: An introduction, page 40 – Angus Mather


one with bigger oil and gas reserves such as the Caspian Sea, West Africa, South-East Asia, Brazil, the Middle-East. Still the figures given by the industry should be considered with big caution, as the history of offshore proves these estimations to be – sometimes – completely wrong. In the Gulf of Mexico in largely overestimating the reservoirs’ capacity and in Brazil where fantastic discoveries have been made, extending the production’s expansion for the next decade, whereas it was expected to decline by now.




CHAPTER 12: MOBILE RIG MARKET AND ITS FORECAST:

The mobile rigs market is an important factor for the supply vessel market, as around one third (33 percents) of the supply vessel fleet are employed on drill support, while 58 percents are employed on production support and 5 percents on construction related duties (4 percents others)53 . Roughly it could be said that there is an average supply vessel to rig support ratio close to 1:1. As there are currently about 145 rigs either under construction or on order, one could assume that the increase in the supply vessel demand would therefore be raised by 145 units. However this ratio will of course change depending on the type and location of drilling.

Another pleasant fact for the supply vessel owner could be the consequences of the increasing exploration activity: A larger number of production sites are to be built which would result in a rise in demand for construction assisting vessels and – with a higher number of production platforms – an increase of production support activity.

The rig demand has increased in a tremendous way: While in the nineties some rigs were sometimes chartered for a daily rate under the breakeven point, less than two decades later the demand has increased reaching abnormally high levels for the mobile rig market, while the charter rates have breached records, reaching never seen heights. It makes it possible for some rig owners to obtain a return on investment within one long term contract. With rates firmly established such as 500’000 USD for ultra deep drilling units or 200’000 USD for a large jack-up rig, nothing can go wrong. If one thinks about the fact that in the eighties some rigs were chartered for wages as miserable as 12’000 US. The current rates also explain the large number of rigs ordered or being built currently. Some experts have voiced concern about it but most players agreed that increasing demand would easily absorb the newbuildings.

It is quite interesting to have a look at the rig order books. The American drilling rig contractors are the incontestable leaders, accounting for about 70 percents of the world wide active rig activities, making out of Houston, Texas, the capital of the offshore drilling world. Despite them being the number one, the rig order books show completely different figures: While the Norwegian investors have invested about 8 billion USD in the newbuildings of rigs, thus represented 60 percents of the global order book, in 2006, the American owners only accounted for 7 percents of the orders. Virtually even after the delivery of all rigs currently in order, the Americans should still detain 60 percents of the world rig fleet but with the most rigs being built in the seventies and eighties, the giant US armada is becoming ageing54 .

53 Source: The Global Supply Vessel Forecast, October 2007, page 2, ODS-PETRODATA 54 Source: The Platou Report 2006, page 3.



Another noticeable evolution is the numerous arrivals of “smaller” players, smaller in inverted commas because big company groups as the Aker Group are anything else than small. This tendency was particularly conspicuous in the FPSO sector, where 11 new players emerged, in 2006, awarding in the same year 11 of the 17 leasing contracts55 . This new phenomena goes against the current of what the industry witnessed in previous years with huge mergers like the one between Transocean and Sedco-Forex, in 2000, becoming Transocean-Sedco the world’s biggest offshore drilling company. The newborn company took over, in the following year, another big company: Reading and Bates / Falcon. This tendency was expected to go on, in the longer term, until the market consolidates into 4 or 5 big companies representing at least 80 percents of mobile units56 . In fact it also did in the short term period with a further big merger between Global Marine and SantaFe international which became Global-SantaFe, the second largest drilling company after Transocean-Sedco57. Things look momentarily different as the US contractors are not willing to invest the prohibitive sums required to build additional units, whereas the new players seem much more aggressive.

The reason for this absence of investment from US contractors is very simple and has some similitude to the policy of their biggest client: The oil majors, as the evolution is very similar. In the bonanza years, in the seventies and the beginning of the eighties, US rig contractors invested billions to build enormous fleets of jack-ups and semi-submersibles. The huge building program reached its peak in 1982, when in this sole year almost a hundred of rigs have been built – jack-ups alone accounting for eighty units58 . Comparatively from 1985 to 2005 only 110 units have been built. However, the US contractors currently own entire fleets that are, if not yet, so at least, almost paid back and which are now making giant benefits allowing most of the US rig owners to make record high profit.

The operators’ exploration & production spending, for it part, is steadily increasing to both compensate the higher rig charter rates and to fight declining production due to the decreasing offshore reserves. The keenness of the operators to invest and the current almost shortage of rigs has pushed operators to ensure more medium and long term contracts. This is especially notable for deepwater units which are almost all chartered on medium to long term. The Brazilian operator Petrobras has ensured, by far, the largest number of deepwater units, for comparatively low daily rate, by signing several five to seven years long term contracts. Generally spoken almost all rig owners are willing to enter long, firm, reliable and stable commitments.

55 Source: The Platou Report 2007, page 41. 56 Source: Shipping and Building Market 2001, page 43, Barry Rogliano Salles. 57 Source: Shipping and Building Market 2002, page 22, Barry Rogliano Salles. 58 Source: The Platou Report 2006, page 37.



The prospects for the medium-term forecast are good. Unlike the offshore vessel market, the mobile rig market is reserved to a much smaller caste of investors. Beside this fact, the market is assumed to absorb quite easily all newbuildings as the demand is not saturated yet – at least for the next few years. How it will at the long-term look like, is a question which should be answered with great caution.

CHAPTER 13: CURRENT OFFSHORE VESSELS59 MARKET AND ITS FORECAST:

“Thank you 2007”60 titled the Fearnley’s market summary - rightly, because 2007 was a year where nothing could go wrong. The market was fuelled by historic high oil price and the investment-portfolios pushed the market activity level, rates and number of newbuildings orders to unprecedented levels. Despite the very weak US dollar, the offshore vessel owners made big profit and the market witnessed, 2007, many mergers and company acquisitions. Being until now a little niche market, the offshore vessel supply market has lived its life without the interference of companies foreign to the market. Things are about to change with the arrival of many new “non-offshore” players with a considerable amount of money channelled into offshore support vessels from other shipping segments. The current year should confirm the presence of outside influence. Presently the offshore supply vessel market is strong, day rates are soaring and the market is able to absorb the numerous new buildings – the question is: how long wills this growth and prosperity still last?

Let us make a flashback in the late seventies and early eighties when the oil industry was experiencing record oil prices and activity levels. At that time, an unbelievable high number of rigs were built and the number of new offshore supply vessels being built was tremendous as well. The falling oil demand and the excess of available rigs and offshore vessels leaded the whole industry into a lean period of nearly two decades. Nowadays the demand is very unlikely to go down and the oil prices have multiplied tenfold within the last decade! The oil majors and larger companies have enough revenues to afford themselves the current charter rates. Yet their natural inclination to optimise profits will make them seize the opportunity to press charter prices downwards as soon as possible. The history is somehow cyclical with the same mistakes being made and very similar phenomenon a being witnessed – it is to be feared that the offshore history will not be an exception to this rule. Whereas thirty years ago, the access to the vessel supply market was almost childishly simple and with only a few hundred thousands of dollars, a crew and good will, one could

59 Please notice that only the Platform supply vessels and anchor handling towing supply vessels will be discussed here. The other vessel types are either too specialised or represent a too insignificant number of units. 60 Market summary 2007, page 2, Fearnley Offshore Supply


already be granted with the entrance ticket to the market. Nowadays things became a little more complicated: Newbuildings became very expensive, mariners became rare and the requirements (such as the certificate for operating a dynamic positioning system) for employing them, have considerably raised. Still these facts do not scare investors which let flow billions of dollar streams into newbuildings.

The supply vessels have improved in many regards: they became much more sophisticated with many technologies which became or are about to become standard, such as the dynamic positioning system, they are more versatile as well in their abilities to operate in severe weather as in the multiple duties they are able to perform. Even a diesel-electric propulsion means seems required to be employed on the Norwegian market.

The operators’ exigencies have increased and supply vessels which have been in service for more than 20 years are less and less tolerated – and if they are despite everything hired, chartering them may require an internal dispensation. This policy could find its detractors in the two total losses which the Bourbon group had to claim in the past year, as both vessels were recently built and less than five years in service. Nevertheless the clear tendency is from operators’ side to have tight age restrictions, particularly for long-term tendering. This is good news for well maintained and newer unit owners but not so good for those with a smaller ageing fleet.

Average Fleet Age (All AHTS / PSV)

Region

Average age

Asia-Pacific 15.67

Latin America 16.21

Mediterranean / Middle East 20.22

West Africa 15.27

Northwest Europe 10.79

North America 17.05

Global 16.07

Table: ODS-Petrodata, page 37 – October, 2007.




As it can be recognised from the tables the age of the world wide offshore supply fleet is almost everywhere, except in Northwest Europe, at least 15 years old and this despite the considerable number of vessel deliveries in the last few years. Almost two thirds of the global offshore supply fleet are above 20 years old61 . In the two last decades newbuildings were not replacing elder and smaller vessels but were delivered to respond to a demand for larger vessels. The Middle-East market, for instance, needs almost only smaller offshore vessels and has therefore a much elder fleet than the Northwest European market, which employs a much bigger number of larger vessels: It is containing 33 percent of the world’s large AHTS and 43 percent of the large PSVs62. This is by no way a stereotype and this is particularly obvious when having a look on the statistics, as well in the fleet age statistics of the PSV and the AHTS63:

PSV Fleet Age

Size (DWT64)

Average age

0 – 1’999 23.05

2’000 – 2’999 12.16

3’000 – 3’999 5.70

4’000 and above 5.83

All PSV 14.64

Source: ODS-Petrodata, page 37, October 2007.

61 Source: The Platou Report 2004, page 41. 62 Source: The Global Supply Vessel Forecast, page 27, October 2007. 63 Please notice that the PSVs’ size is based on their transport capacity, in deadweight tonnes (DWT), and the one of the AHTS is calculated on their towing abilities, in break horse power (BHP). 64 Deadweight Tonnes



AHTS Fleet Age

Size (BHP)

Average age

0 – 6’999 19.33

7’000 – 11’999 18.57

12’000 – 14’999 15.41

15’000 and above 6.69

All AHTS 14.64

Source: ODS-Petrodata, page 37, October 2007.

Beside Bourbon, no owner has been willing to build smaller vessels (with less than 3’000 dwt), despite the fact that the fleet’s age is currently above 20 years. Only 81 vessels are on order, while the current fleet has 540 trading vessels in the smaller vessels’ segment, while the number of larger PSV has enormously increased within six years: From 131 units in 2002, there are currently about 340 units available at the beginning 2008 – by the end of the year there are assumed to be almost 400 vessels with more than 2’999 dwt on the market - with a further 100 units to appear on the market until 201165.

The AHTS market for its part is having a similar evolution: The larger unit fleet is growing amazingly rapid. It seems the owners put their faith into the large AHTS, above 15’000 bhp, some have already be seen at 30’000 bhp and more – however there are currently 115 units available on the market. While between 2002 and the beginning of 2008, the number of large AHTS (above 15’000 bhp) has grown by 50%, until 2011 there should be 204, what represents a further increase of 77 percents of the current size of the fleet66 .

This evolution for both the AHTS and PSV market is astonishing, especially when considering the current prices: A large AHTS costs now as much as 80 million USD to be built, while a large multi-purpose AHTS reaches even 135 million USD and the smaller AHTS – below 8’000 bhp - are currently built for only between 14 and 17 million USD. However most of the smaller units are specifically intended for the Southeast Asian market.

65 Source: The Global Supply Vessel Forecast, page 11, October 2007. 66 Source: The Global Supply Vessel Forecast, page 4, October 2007.



This surge in prices is quite recent: While the average building costs of the AHTS under construction are 67 million USD, not that long ago a 15’000 bhp AHTS could be built for less than the current average cost of a large PSV i.e. 34.8 million USD67. This trend is surprising especially as the smaller units, without reaching the peaks in rates like the larger units do, have much more interesting returns on investment. So how is it in future looking like?

In the nearest future very good: The rates are assumed to raise, for both AHTS and PSV markets. As we have already seen the oil prices will most likely remain at a high level and therefore the operators’ income should warrant their high exploration and production budgets. The rigs’ activities and the platforms being built by now and in the medium-term will raise considerably the demand for PSV and AHTS. So is all rose on the offshore vessel market? Nothing is less sure than that: The industry is facing in an acute manner the lack of qualified seamen; particularly the ones able to operate the dynamic positioning system became rare. Some captains talented with this ability are asking currently not less than 800€ per day! However the wages have risen enormously in the whole industry, as they have in the traditional maritime market. But the problem which will bring the biggest headaches to the ship owners is the coming overcapacity of offshore vessels. Despite the demand continues to rise with a forecast increase of almost 50 percents for large AHTS between now and 2010 and the increase, in the three next years, by around 35 percents for large PSVs, the supply will supplant the demand. On current delivery schedules the large AHTS fleet will increase by 79 percent by 2010 while the large PSV fleet size will have increased by around 46 percent68 .

This is a major increase in fleet size like the one which occurred in 1982 and 1983 when over 300 new AHTS and PSVs joined the market. The market looks a little different nowadays as a part of the fleet has reached a certain age and could be renewed. “Could”, because only very few old fleet owners are considering the possibility of disposing of their elder units. It will come to a shock of generations and as the large offshore vessels will come on the market, the larger, newer vessels are assumed to be able to secure work, putting downward pressure on the smaller lower specifications units. Still this is a very theoretical forecast. The final outcome will strongly depend upon the reaction of the old fleet owners to the flow of newbuildings and, above all, on the policy of the operators.

It is not so sure that the new building owners are going to come out as winners from this duel, as some of them are heavily in debts.

67 Source: The Global Supply Vessel Forecast, page 4, October 2007. 68 Source: The Global Supply Vessel Forecast, page 2, October 2007.


Chapter 14: Which are the overall prospects for the industry?

To set a term to this diploma thesis and to make it short: For the global industry things look very well, for the rigs good and for the supply vessels uncertain. It could possibly again happen that the offshore vessel owners experience again the doldrums they already passed through in the late eighties and nineties. By now the whole offshore market looks like a kind of a poker game, with, presently big wins and rising bids, with some players not bidding at all, while some others take a big gamble. Eventually, with the exceeding supply, the only which are likely to have the card up their sleeves are the operators.



Annex:

Figure 1: The (for that time) impressive drillship – “CUSS I”

Source: www.offshore-mag.com

Figure 2: Fifty years later – A modern FPSO.

Source: www.keynote-engineers.net



Figure 3: The giant “Troll” concrete platform during the towing operation

Source: www.statoil.no

Figure 4: In comparison – and despite its 324m height – the Eiffel Tower appears “small” compared to

the Troll platform.

Source: www.statoil.no



Figure 5: The various hydrocarbon traps

Source: www.lonestarsecurities.com

Figure 6: The Ramform Explorer - A seismic vessel with the typical seismic exploration V shape hull

Source: www.aker-yard.com



Figure 7: The GFS Galaxy Jack-up

Source: www.rigzone.com

Figure 8: The Erik Raude semi-submersible



http://www.rigzone.com/



Figure 9: The conventional towing of a semi-submersible unit

Souce: www.rigzone.com

Figure 10: A quite unusual and astonishing sight: The heavy transportation vessel "Blue Marlin" is

carrying the semi-submersible "Thunder horse".






Figure 11: The Conoco Phillips owned “Ekofisk” Oilfield – it has a daily oil production of 220’000

barrels and it is currently the fourth largest oil field in the North Sea.

Source: www.npd.no

Figure 12: An artistic impression of a Tension Leg Platform

Source: www.atlantia.com



Figure 13: The work barge “Otto 1” with accommodations for 300 men.

Source: www.abcmaritime.com

Figure 13: Bourbon Emerald – a Platform Supply Vessel with the UT-745 E Rolls-Royce design

www.aker-yard.com



Figure 14: The Maersk Handler - an anchor handling and supply vessel with UT 722 LE Rolls Royce

design

Source: www.aker-yard.com

Figure 15: A semi-submersible is "experiencing" a blow-out.





Figure 16: A vanguard anchor handling and supply vessel: The X-Bow designed Bourbon Orca

Source: www.marine-marchande.net

Figure 17: An artistic impression of an X-Bow container vessel

Source: www.marinetalk.com



Figure 18: The amazing evolution of water depth capability in the offshore drilling

Source: Keppel Offshore and Marine – Report to Stakeholders 2004, page 48

Figure 19: The crude oil prices - currently flirting with the hundred dollars per barrel mark

Source: BP Statistical Review of World Energy June 2007, page 16.



Figure 20: The World proved oil reserves by region

Source: BP Statistical Review of World Energy June 2007, page 7.

Figure 21: An ageing armada - the worldwide rig fleet

Source: The Platou Report 2007, page 42.



Figure 22: Second-hand value of rigs - up to four times higher than three four years ago

Source: The Platou Report 2007, page 39.

Figure 23: The North Sea Tonnage - the AHTS average time charter rates

Source: The Platou Report 2007, page 41



Figure 24: AHTS newbuilding delivery schedule - more than a hundred new vessels will flood the market

Source: The Platou Report 2007, page 42

Figure 25: Artistic impression of the 2010 delivery expected "Peter Schelte" Leviathan – the vessel’s specification speak for themselves

• Length between perpendiculars: 370 m • Breadth: 117 m • Accommodation: 560 men • Topsides lift capacity: 48000 t • Jacket lift capacity: 25000 t • Total installed power : 95 MW

Source : http://www.allseas.com/



References :

With mentioned Author(s):

1) Mather, Angus Offshore Engineering: An Introduction – second edition Witherby & Co Ltd, London, UK, 2000 ISBN 1 85609 186 4

2) Boswell L. F., Edwards A.J., D’Mello C.A. Mobile offshore structures Elsevier Applied Science Publishers Ltd, London, UK, 1987 ISBN 1 85166 277 4

3) Bein, Gerhard Maritime Abkürzungen / Maritime Abbreviations, fifth edition No mentioned publisher ISBN is not available

4) Clauss G., Lehmann Eike, Östergaard C. Offshore Structures – Volume I, first edition Springer-Verlag London Limited, Germany, 1992 ISBN 3 540 19709 5

5) Wagner, Lothar, Die wissenschaftliche Abschlussarbeit VDM Verlag, Berlin, Germany, 2007 ISBN 978 3 8364 0459 4

6) Reid, George H. Primer of Towing – third edition Cornell Maritime Press, Centreville (Maryland), USA, 2004 ISBN 0 87033 563 4



7) Van Dokkum, Klaas Ship Knowledge – fourth edition DOKMAR, Enkhuizen, the Netherlands, 2007 ISBN 978 90 71500 06 0

8) Stickel-Wolf C., Wolf J. Wissenschaftliches Arbeiten und Lerntechniken – first edition Gabler Verlag, Lengerich, Germany, 2001 ISBN 3 409 11826 8

9) Kuchling, Horst Taschenbuch der Physik - seventieth edition Fachbuchverlag Leipzig, Leipzig, Germany, 2001 ISBN 3 446 21760 6

10) Cousin P.-E., Sinclair L., Allain J.-F., Love C. E. Dictionnaire Français-Anglais - first edition HarperCollins, Glasgow, Great Britain, 1994 ISBN 2 85 036 268 9

11) Maclachlan, Malcolm An Introduction to Marine Drilling – first edition Oilfield Publications Limited, Ledbury, England, 1986 ISBN is not available

12) Steel, Jane The Global Supply Vessel Forecast ODS-Petrodata, Aberdeen, Great Britain – October 2007 ISBN 1750 6557

13) Schönknecht Rolf, Laue Uwe Unkonventionelle Schiffe – 1st edition Transpress – VEB Verlag für Verkehrswesen Berlin, 1990. ISBN is not available

14) Mordhorst, Jan Versorger auf See - 1st edition Koehlers Verlagsgesellschaft mbH Hamburg – 1996 ISBN is not available



15) Becker, Hughes Drilling Engineering Workbook – Rev. B Backer Hughes INTEQ, Houston – Texas, USA – December 1995 ISBN is not available

16) Becker, Hughes Petroleum Geology – Rev. A Backer Hughes INTEQ, Houston – Texas, USA – December 1999 ISBN is not available

17) Lyons, William C. Standard Handbook of Petroleum & Natural Gas Engineering – Volume 1 Gulf Publishing Company, Houston – Texas, USA – 1996 ISBN 0 88451 642 7

18) Guo B., Lyons W. C., Ghalambor A. Petroleum Production Engineering Elsevier Science and Technology Books – February 2007 ISBN: 0750682701

19) Gibson, Vic

Supply Ship Operations OPL, London, Great Britain – 2006 ISBN: Not available

20) Ritchie, Gary

Practical Introduction to Anchor Handling And Supply Vessel Operations OPL, London, Great Britain – 2003 ISBN: Not available

Without mentioned Author: 21) World Oil Outlook 2007

Organisation of the Petroleum Exporting Countries ISBN: 978 3 200 00965 3 www.opec.org



22) Monthly Oil Market Report – February 2008 Organisation of the Petroleum Exporting Countries www.opec.org

23) Market Summary 2007 – Supply and special ships 18th January 2008 Fearnley Offshore Supply www.fearnleyoffshoresupply.com

24) Structural Design of Offshore Ships Det Norske Veritas – April 2004 www.dnv.com

25) Offshore Market Report – December 2007 R.G. Hagland, Haugesund, 28th December 2007

26) Shipping and Shipbuilding Markets 2000 – 2007 Barry Rogliano Salles, Paris, France www.brs-paris.com

27) Transport Maritime et Construction Navale 2001 – 2007 Barry Rogliano Salles, Paris, France www.brs-paris.com

28) Offshore pétrolier Institut des Sciences de l’Ingénieur de Toulon et du Var

29) Ulstein Today – Newsletter from Ulstein, quarterly from 2005 - 2008 Ulstein Mekaniske, Ulsteinvik, Norway www.ulsteingroup.com

30) Offshore Frontiers, from 2000 - 2008 Transocean Sedco Forex Publication www.deepwater.com



31) BP Statistical Review of World Energy British Petroleum, June 2007 www.bp.com

32) Keynotes, Quarterly News for Acergy – Issue 14 Acergy, Winter 2007 / 2008 www.acergy-group.com

33) Offshore Magazine, February 2007 and June 2005 PennWell, Tulsa, USA ISSN: 0033 0608

34) The Journal of Offshore Technology – 2007 IMAREST, London, Great Britain ISSN 0968 784X

35) Shipping World & Shipbuilder – 2007 IMAREST, London, Great Britain ISSN 0037 3931

36) Offshore Marine Technology, 3rd and 4th quarter 2007 The Royal Institution of Naval Architects, Wales – 2007 ISSN 0306 0209

37) Guidelines for Marine Operations

OPL, London, Great Britain – 2005 ISBN 1870 945 956



Web Links: Tidewater The world leading offshore vessel contractor www.tdw.com Allseas Pipelaying vessels and heavy lift Services Company http://www.allseas.com/uk Diamont Offshore On of the world’s largest drilling contractors http://www.diamondoffshore.com Energy Information Administration Energy Department of the US Government http://www.eia.doe.gov/ Fairplay Online Magazine www.fairplay.co.uk/ Organization of the Oil Exporting Countries http://www.opec.org « Seeschiffe der Schweiz » Internet web page about the Swiss fleet http://www.swiss-ships.ch Offshore magazine News from the Offshore Industry – mainly drilling sector http://www.offshore-mag.com Tradewinds Shipping News http://www.tradewinds.no/



World Trade Organisation http://www.wto.org/ Statoilhydro Company The Norwegian state owned Oil Company http://www.statoilhydro.com R.S. Platou Norwegian Seabroker http://www.platou.com Barry Rogliano Salles French Seabroker http://www.brs-paris.com/ Seatrade Magazine http://www.seatrade-global.com/ Bourbon Group The second largest offshore vessel contractor http://bourbon-online.com The Aker Group One of the most active and among the largest shipbuilder http://www.akeryards.com Wikipedia, the free encyclopedia www.en.wikipedia.org



Versicherung / Ehrenwörtliche Erklärung Hiermit versichere ich, dass ich die vorliegende Arbeit selbstständig und ohne Benutzung anderer als der angegebenen Hilfsmittel angefertigt habe. Alle Stellen, die wörtlich oder sinngemäß aus veröffentlichten und nicht veröffentlichten Schriften entnommen sind, sind als solche kenntlich gemacht. Die Arbeit hat in gleicher oder ähnlicher Form noch keiner anderen Prüfungsbehörde vorgelegen. Bremerhaven den 7. April 2008 _____________________

Daniel Tanner


diplomarbeit 20daniel 20tanner 20offshore

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