Offshore support vessels: understand the scenario of this market in Brazil

  • 08/10/2020
  • 9 minutes

The offshore support vessel market is, in a way, a thermometer of the economy on a global scale. This is because the increase in demand for this type of ship indicates a greater volume of business being carried out due to the greater port activity and on the high seas.

Accordingly, statistics released on the Markets and Markets portal point out that, between 2018 and 2023, the worldwide Offshore Support Vessel Market is expected to grow by around 5%. However, with the current Coronavirus (Covid-19) pandemic, these projections must be modified.

About this change in direction and to clarify the impacts of the current crisis in the Brazilian context, we invite Gustavo Machado, from Wilson Sons’ UltraTug Offshore business unit. Read on and see what the expert says about this difficult time and your expectations for the future.

The pre-Coronavirus Offshore Support Vessel Market

In the wake of the growth of ship-to-ship operations, including in Brazil, the estimates until the beginning of 2020 for the offshore support vessel market were encouraging. According to Gustavo Machado “2020 would be a year of recovery, since some tenders were underway to contract various types of vessels. We had a fleet reduction in 2019, but this drop was contained and, in 2020, there was a possibility of resuming growth. Everything was designed to be a year of good results for this market”.

However, this expectation, which until then was reinforced by the numbers, has been totally changed due to the Coronavirus pandemic, decreed by WHO on March 11. From this unexpected scenario, all the programming and planning for the operations had to be modified. According to Gustavo Machado “drilling activities have been temporarily suspended, leading to the postponement of the start of projects”.

In this context, Gustavo continues, “production will have to have its targets revised, which should cause a reduction in the short term. Companies are certainly already in contact with their suppliers, with whom they must be discussing some contingency plan. Only with the return to normality will contracts be resumed as they were outlined before the pandemic”.

The impacts of the pandemic on the market

However, serious the crisis may be, there is a certainty that the offshore support vessel sector will strengthen once again when the worst is over. The question, in this case, is not whether there will be recovery, but when it will start. This is, at least, the expectation of the Wilson Sons specialist: “we hope that the recovery period will be as short as possible and that the most acute phase of the crisis will pass soon. The truth is that 2020 was a year that came with an interesting perspective and the pandemic of the new Coronavirus completely changed that view”.

Considering this abrupt change in plans, companies that hire Offshore Support Vessels tend to take two directions: the suspension or interruption of contracts. In the first case, there is only a temporary stop in the services for later fulfillment. That is, if a vessel is hired for 500 days, with the suspension, this period will only be fulfilled when it returns to normal. “It is a situation distinct from an interruption, in which the contract is canceled without a return forecast”, explains Gustavo Machado.

The influences of agreements between oil producers

In addition to the interruption in oil auctions and the crisis caused by the pandemic, the Brazilian Offshore vessel market has also suffered other recent shocks. The main one was the result of the meeting between representatives of OPEC member countries on 6 March. In it, a dissent between Saudis and Russians caused the price of a barrel of oil to plummet to $ 20, the lowest value in 18 years.

In this context, Gustavo Machado expects that, in the medium term, the outlook will stabilize: “there were many drilling projects underway and new fields to be explored. For this reason, we expect that these projects will be resumed from the moment that the most difficult phase of the crisis passes”.

The specialist also highlights the strategy adopted by Wilson Sons, which has focused on operations using support vessels of the Platform Supply Vessel (PSV) type. The reason for this is the greater versatility of this vessel, which, according to Gustavo Machado “can be modified to meet other types of operations such as loading cargo supplies, in addition to being able to be converted to operate as an Oil Spill Recovery Vessel (OSRV), used to contain oil spills at sea. PSV ships can also be used in shallow diving operations, to support ROV teams and mobilized dive teams”.

Expectations for the short term

This whole context further increases the uncertainties “we see a more acute phase of at least 60 days, in which the impacts on the market will be more severe. In any case, it is always very difficult to make estimates in difficult times like now. What we hope is that the movement observed in the “pre-Coronavirus” phase will materialize as soon as the situation is stabilized”.

Outlook for the future

Just like the vessel segment, the projections for the O&G market – Oil and Gas (petroleo e gas) – in Brazil, are for growth. According to RBNA Consult, investments of around US $ 200 billion in this sector should be generated over the next ten years.

However, the current crisis generated by the pandemic should also slow down in this area, aggravated by the current state of divergence among OPEC leaders.

The attitude of large companies in a scenario of uncertainty

Anyway, it is in difficult times that big companies show their real value. In this respect, Gustavo Machado highlights the role played by Wilson Sons “thanks to our financial strength and operational capacity, we can better manage more severe moments of crisis like the current one. This guarantees our non-negotiable commitment to security, which, for us, is a sine qua non – indispensable – condition in all our activities”.

Finally, the specialist adds that “the market for offshore support vessels should recover, but in the long run, it is difficult to make any prognosis. Therefore, we will work in the short and medium term, hoping that normality will return as soon as possible”.

Enjoy and be sure to check out the article in which we highlight the importance of the maritime agency in the Offshore market.