Inelastic new ship supply and today’s relatively old offshore support fleet is pushing up demand for repair and conversion capacity.
Day rates for offshore support vessels and other service craft in Middle East waters are rising sharply following a major rebound in the offshore oil sector in 2022. Industry veteran Paul F. Friedberg is bullish about the future.
The owner and managing director of Dubai-based ship repair firm, Nordmarin LLC, is predicting a period of strong demand for offshore vessel repair and conversion services. He is putting his money where his mouth is, ramping up capacity at his repair facility located in Dubai Maritime City to make the most of the upturn.
“We see a strong market in the offshore vessel sector that could last for many months and possibly years to come,” he told Seatrade Maritime News. “The 2022 rebound exceeded all expectations and the market continues to strengthen well into 2023.
“We are seeing much higher day rates for all types of offshore service vessels. This looks set to last as the oil majors are finally increasing offshore activities, spurring on new field developments which will all require additional offshore fleet services in terms of supply vessels, anchor handlers, utility boats, workboats, tugs, crew boats, barges, and the like.
“Everything that was laid up is now either reactivated or converted to usable offshore service tonnage and put into service again. It is very encouraging to see owners acquiring laid-up vessels and undertaking repairs, and extending the lives of older vessels that they would never have considered a few years back.
“The sudden increase in demand for offshore services vessels coupled with a conscious delay in repairs and drydocking from many shipowners to save costs, resulted in capacity issues becoming a constraint as the level of enquiries rose sharply last year. More facilities and people were required across the board. In Nordmarin, we decided to do both, hence increasing our workforce by almost 50% to enable us to satisfy the demand from our regular customers.”
The strong market has also prompted the Nordmarin LLC boss to expand the facility and invest in a new repair hall which is currently under construction and set to be commissioned in early 2024. The new facility will enable the company to take on larger and more complex work and carry it out indoors rather than outside as is usual in the Middle East.
The offshore upturn is a contributory factor in a wave of recent merger and acquisition activity between some of the world’s largest fleet owners. This is streamlining both fleets and organisations and generating economies of scale that are beneficial for all parties.
Oil companies across the region have ambitious spending plans, with sharply higher exploration and production investment on the cards. Both Saudi Aramco and ADNOC plan to increase oil production by a million barrels a day within the next four years.
Meanwhile, Qatar’s North Field Expansion project will mean an increase in gas production of more than 60% during the second half of the decade. This should ensure a sound market for offshore vessel owners, offshore vessel management companies and not least ship maintenance, repair and conversion yards.
The Middle East holds close to half of the world’s oil and gas reserves. Production costs across the region are amongst the lowest in the world.
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