COLUMN | Quick updates: more subsea greenwashing; changes at the International Seabed Authority; happiness at Tidewater [Offshore Accounts]

Whilst the Olympic Games are still providing delight, controversy, and, er, surprising footage, the fun and games have not stopped in the offshore sector. This week, we look more signs of excessive investment in offshore wind service vessels – but with an offshore oil and gas twist this time – as well as an important election at the International Seabed Authority (not quite Trump versus Harris), and some Tidewater dates and research.

Greenwashing the subsea sector?

We noted two months ago that the orderbook for the wind sector just continues getting larger and larger, even as companies continue not to make much money.

Since then, further newbuild windfarm commissioning service operation vessels (CSOVs) have been ordered from a diverse cast of players, including Belgium’s Windcat Workboats, Taiwan’s Dong Fang Offshore (with two vessels ordered), Rem Offshore ordering last month, and Japan’s Mitsui OSK Line joint venture, Ta San Shang Marine, placing its third order.

“Wind is the Augustus Gloop segment of offshore, gorged on investment, like the character in Roald Dahl's Charlie and the Chocolate Factory, but liable to fall into a chocolate river and meet an untimely end, unless it can deliver,” we noted in June.

No surprise then to find out that the investors behind Norwind Offshore in Norway have now ordered what is claimed to be a sixth windfarm vessel at Vard, through their new company Wind Energy Construction. No surprise, but this one is completely unlike the other five CSOVs Norwind ordered.

What is an energy construction vessel?

The owners and the yard are billing it an “energy construction vessel” built to the Vard 3 11 design, which they say will be “tailor-made for the offshore wind and subsea market, including inspection, maintenance, and repair of pipes, and construction and installation of infrastructure above and below sea level.”

When we look at the specifications, however, we see that this 111-metre-long vessel with a 22-metre beam and accommodation for 120 personnel on board looks remarkably like… a light subsea construction vessel. It will have a motion-compensated gangway installed for wind turbine access, yes, but otherwise with its 150-tonne active heave compensated deepwater crane (which itself belies any monopile wind turbine function), it is for all intents and purposes a subsea vessel.

Which is fine, John Fredriksen has ordered four such subsea vessels through his Seatankers company to a Salt design in Wuchang Shipbuilding Industries Group in China, and we reported earlier in the year that Rem Offshore and Myklebust were also building a similar light construction vessel in Norway, too, which could function in both wind and oil and gas. Dong Fang Offshore has very successfully operated the subsea vessel (ex-Seabed) now Orient Constructor in both subsea and wind in Taiwan, so the concept is proven.

The acquisition of Maersk Supply Service by DOF has shown that the subsea market is recovering, indeed booming. However, we feel it is disingenuous to announce that “to expand capacities, especially towards the growing renewables market, a movement-compensated offshore crane of 150 tonnes is also being installed” on this new vessel. What renewables market needs a 3,000-metre-rated AHC crane?

You’re placing a bet on oil and gas, no need to be ashamed, Norwind owners and Wind Energy Construction, despite your green corporate names. In fact, with all the green and ecological statements of virtue, you will probably be able to sell the ship to Singapore’s Cyan, which recently bought a largely North Sea safety standby company (Sentinel) and a predominantly subsea construction and drilling support company (MMA Offshore), all whilst claiming that the deals were greener than green and cleaner than clean.

Can we declare net zero on greenwashing, please?

Lodge loses at International Seabed Authority

A lot has happened in the week since we ran our story on the new scientific paper that seemed to suggest further research might be needed before the International Seabed Authority (ISA) could approve the commercial mining licence for The Metals Company.

This is the pioneering subsea mining company that seeks to hoover up polymetallic nodules from the deep waters of the abyssal plain of the Clarion-Clipperton Zone in the Pacific Ocean using a converted drillship and harvesting equipment owned and operated by Swiss/Dutch construction giant Allseas.

We closed that piece stating that it was time for the secretary general of the ISA, Michael Lodge, and the ISA as a whole “to stand up for science and ecology against vested interests. More research is clearly needed, and commercial mining in the Clarion Clipperton Zone should not be allowed to proceed until new research work is done.”

Well, on Friday, Leticia Carvalho of Brazil was elected to replace Mr Lodge as the Secretary-General for the period 2025-2028. Despite the backing of Kiribati, Nauru, and other Pacific micro-states that have sponsored mining licence applications and have supported exploration projects in the Clarion-Clipperton Zone, Mr Lodge lost when the 169 states in the general assembly voted not to give him a third term leading the body.

Why does this matter?

This is important because Ms Carvalho is an actual ocean scientist with a master’s degree. The Brazilian oceanographer spent 17 years working for the Brazilian Ministry of the Environment, then moved to head up the United Nations’ marine and freshwater branch in 2020. Mr Lodge was a British lawyer with experience in the Law of the Sea, rather than ecology.

“I don’t believe a business, any business at that scale, with that relevance, can start without the regulatory basis well settled and agreed,” Ms Carvalho had told the Financial Times sometime prior to the vote.

The need to agree to a Mining Code is critical to the approval of The Metals Company’s plans since Nauru, its sponsor state, made an application for the company to commence commercial extraction of millions of tons of the mineral-rich nodules.

The stock market as a whole took a beating on Friday, but The Metals Company was especially hard hit, with its shares falling 10 per cent over the week to US$1.03 after close on Friday. This suggests that perhaps the market feels that Ms Carvalho may be less supportive of the company’s plans and desires for a quick start to commercial extraction than her predecessor.

Indeed, Ms Carvalho has said there was a risk that commercial extraction could cause lasting “damage” to the environment without “any mechanism to stop the harm.”

Karma’s a thing! Who knew???

I feel that Mr Lodge has only himself to blame. Last year, we reported how The Guardian and The New York Times had both ran stories (here and here) stating that Germany, Costa Rica, and other ISA member states had criticised the secretary-general for openly supporting seabed mining at a meeting of the international body’s 2023 council.

They felt he had overridden their objections and requests for a precautionary pause in commercial seabed mining until the environmental implications of the industry had been thoroughly studied. Mr Lodge responded with a shirty (with an "r") letter to the German federal ministry for economic affairs and climate action (here) disputing their points.

He had previously threatened a lawsuit on an unlucky journalist who had described him as “a cheerleader” for subsea mining, but perhaps adopting a combative tone with some of the states calling for a measured and evidence-based approach was a step too far.

Let’s see if Mr Lodge is able to secure any non-executive positions in the sector, which would be proof of the all too common revolving door between senior leaders in government, regulatory bodies, or public administration leaving a job, only to turn up on the payroll of a company associated with the sector a short time later.

Tidewater results coming soon; good news for CEO

Good news for Quentin Kneen, the CEO of Tidewater, who has received over US$70 million as the proceeds of exercising his stock options so far this year. Last month, the journal Happiness Science (who knew?) published research that showed that not only are rich people happier than poor people, but that “wealthy individuals [are] substantially and statistically significantly happier than people earning over US$500,000 per year.

Moreover, the difference between wealthy and middle-income participants was nearly three times larger than the difference between the middle- and low-income participants, contrary to the idea that middle-income people are close to the peak of the money-happiness curve. Finally, the absolute size of the difference in happiness between the richest and poorest people was large.”

The author of the paper, Matthew A. Killingsworth, said that this proved there was “evidence against satiation” and that the richer you are, the happier you can be. All those Greek shipping magnates supping chilled Dom Perignon on their yachts can chuckle at my naivete for not recognising this sooner.

Certainly, Mr Kneen also has cause to smile. Tidewater’s share price is currently 15 to 20 per cent lower – at US$87 at the time of writing – than it was when he fortuitously sold hundreds of thousands of the company’s shares with perfect timing earlier in the year at prices between US$104 and US$108 per share. The market is now looking for evidence of further earnings growth to propel the stock back to the highs it hit earlier in the year.

Tidewater will release its next financial results for the three months from the start April to the end of June, tomorrow, on Tuesday, August 6, 2024, after market close in New York. An earnings conference call has been scheduled for Wednesday, August 7, so we’ll see how this offshore supply vessel industry bellwether is performing. Key things to look for in the results – is there improvement and profitability in the Middle East for the company, and have rates and utilisation for anchor handlers picked up across the world?

Dr Killingsworth has delivered good news to Mr Kneen. Maybe Mr Kneen can deliver good news to the entire industry and to Tidewater’s shareholders?

Background reading

If you missed our summer reading and podcast tips last month, click here for some poolside/ringside/departure lounge insight.

To see how the offshore drilling market has improved, and what you might expect from Tidewater on Wednesday, this Tweet from Tommy Deepwater summarises the increase in operating free cash from the big three drillers – Transocean, Noble, and Valaris – in their second quarter earnings filings.