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'Intensifying crisis' for OSVs with Shell Arctic departure, says DNV GL

'Intensifying crisis' for OSVs with Shell Arctic departure, says DNV GL
The decision by Shell to pull out of drilling in the Alaskan Arctic is a major blow to an already hard-pressed specialised segment of the offshore industry, says DNV GL.

On Monday Shell announced it was suspending Alaskan Arctic exploration operations for the “foreseeable future” pulling out the one rig it had deployed in the region.

“As long as there are trade embargoes in dealing between Russia and Europe, those campaigns which could have taken place from oil majors have been put on hold,” DNVGL segment director for special ships Arnstein Eknes tells Seatrade Maritime News. “The relatively few numbers of vessels which could operate safely in Arctic waters are now facing a situation where they cannot do anything in Russia, and when Shell is pulling back from Alaska, it is just intensifying this crisis for these companies.”

“It’s simply making it a bit more risky, now, to design, build and operate vessels capable of Arctic operations. It’s a relatively tight market and it’s getting even tighter.”

The decision to abandon exploration off Alaska may only close one rig, in real terms, but it closes off a potential future revenue stream for a large number of ships as greater numbers of rigs populate these waters.

“If you have a drilling operation in the Arctic, you are not talking about 2-3 vessels [per rig] that you might have in the Gulf of Mexico, say,” Eknes explains. “You are talking about 15-20 vessels. “You would need more OSVs to support Arctic operations because it’s so far away from land-based support, you have to be more self-sufficient. You have to take care of your own redundancy, evacuation planning, rescue planning, fire planning. You have to bring all your requirements with you.”

“If you have to put these assets in lay-up you are also putting 10-15 people on board each vessel out of work. That’s a local impact.”

On Monday Norwegian owner Havila Shipping put two of its five AHTS’ operating in the North Sea into lay-up. There have also been reports of Norwegian OSV owners laying-up as much as 30% of their fleets.

Looking at the longer term Eknes warned of a repeat of the situation that oil and gas industry suffered from for a 20 year period until the early part of the last decade when the low oil  price deterred E&P investment over a lengthy period.

“It’s easy searching for oil, but it can be quite difficult if you haven’t been searching for a while, and suddenly you need to do it. From a commercial point of view it makes sense that the oil majors are revisiting their investment  budgets now when the oil price is down. It makes sense to scale back, but the risk of that is that if they have to start drilling again they will have lost a lot of the competence and a lot of continuity in terms of the people who support them,” he said.