After our diversion into Harbour Energy's Carbon Capture and Storage plans last week and the abandonment of its 500-million-barrel Sea Lion discovery in the Falklands (here), we return for a quick and dirty, six-pack summary of the hottest stories in offshore, covering wind turbine installation, cablelay, subsea, green hydrogen, and anchor handlers.
Seaway 7 starts trading on the Oslo Euronext Growth market on October 5 (here), bringing together Subsea 7's Seaway 7 renewables division and Norway's OHT to create the fifth member of the Big Five Benelux Wind players, which we described here and here. Van Oord provided a timely reminder of the power of the integrated services model that the Big Five from the low countries represent, when it announced here a newbuilding wind turbine installation vessel (WTIV) plus an option sister jackup at Yantai CIMC Raffles yard in China on October 1.
Van Oord dubbed the unit a "mega ship," and it is clear that the order valued at €300 million (US$348 million) represents a step change in WTIV market: a vessel bigger than the units previously ordered by pureplay rivals Eneti and Cadeler, and greener. The order threatens to unleash another round of capital-intensive competition in the sector, as manufacturers battle to build bigger and higher output turbines that require bigger and higher-cost installation vessels, preferably producing lower and lower emissions.
Van Oord's vessel, like Jan De Nul's newbuild WTIV Voltaire, features a crane with capacity in excess of 3,000 tonnes and built by Dutch compatriot Huisman, but it is the first vessel in the sector to be able to operate on methanol on day one. Van Oord says running on methanol will reduce its WTIV's carbon dioxide emissions by 78 per cent.
Eneti and Cadeler opted for GustoMSC designs that are diesel-powered with option to adapt operations for future LNG or ammonia fueling at some point. Other WTIV units on order are supposedly "fuel cell ready," although details of when a functional and suitable hydrogen fuel cell for installation on a WTIV will emerge are not clear.
Ulstein Design says that it has a "zero-emission" design WTIV using a hydrogen fuel cell powered from seven forty-foot containers of hydrogen. Details of the Ulstein J102 design WTIV are here. More on green hydrogen below, too.
Van Oord has now taken a bet on the viability of methanol as a future fuel, at the same time that Maersk ordered eight 16,000TEU methanol-fueled container vessels from Hyundai Heavy Industries (here). The Van Oord WTIV will also be fitted with a selective catalytic reduction (SCR) system to reduce the nitrous oxide emissions to what the company describes as "an absolute minimum" and it is to be fitted with a 5,000kWh battery pack to manage the peak loads and regenerate energy to reduce the fuel consumption and corresponding emissions. Jan De Nul's Voltaire is fitted with a similar exhaust filtering system using an SCR system and a diesel particulate Filter.
Jan De Nul says that Voltaire will be the very first seagoing installation vessel of its kind to be an ultra-low emission vessel (ULEV), moreover Stage V-certified. Van Oord is matching this, and raising the standard further.
We have highlighted that the power of the balance sheets of the Big Five makes them formidable competitors to provide integrated solutions for windfarm engineering, procurement, and construction (EPC). As the big western turbine makers like GE, Siemens Gamesa, and Vestas confront lower margins in the face of higher competition from China and higher materials costs (here), they are likely to become more risk averse on offshore wind farm project management and project execution risk, creating a perfect gap for the Big Five, already well experienced in managing complex oil and gas EPC projects.
Conventional oil and gas EPC players like Saipem, Allseas and Heerema are racing to catch up.
One of Van Oord's other big investments is in a new build cablelay vessel from Vard in Norway for delivery in 2023, again boasting state of the art environmental technology (here). We have highlighted how the cable lay industry is now the focus of major investment as demand for both subsea data cables and underwater electricity cables increases (here).
Now, further new orders underline the growth in this segment. In September, Taiwan's High Tien Offshore Engineering announced (here) that it would build the first large cable vessel for the Taiwanese market to be owned by a domestic player. High Tien Offshore is closely connected to Big Five player DEME, as the company is headed by Tseng Kuo-Cheng, a former chairman of CSBC Corporation, which has a joint venture called CDWE with DEME in offshore construction.
"Following CDWE's investment in a large floating crane vessel Green Jade, a local offshore engineering company, High Tien Offshore will thus own the first large Taiwanese cable vessel," Mr Tseng said.
High Tien said that the newbuilding initiative is part of the Taiwanese government's promotion of a local development strategy for the offshore wind industry. The unit is scheduled to be built by the end of 2023 and be fully operational in 2024, but no shipyard nor design has yet been announced.
Currently, Taiwan's growing offshore wind farm electric cables are being laid by foreign vessels, including P&O Maritime's Topaz Installer, which is under contract to Seaway 7 and Van Oord there until 2024 (here).
Japan is also looking at boosting its domestic electric cablelay capabilities as Kokusai Cable Ship (KCS) and Mitsui OSK Lines announced that on September 24, that they had concluded a memorandum of understanding on collaborative operation of cable-laying ships to meet the country's increasing demand for installation of power cables.
KCS has over fifty years of experience in cable-lay following its foundation in 1966, and in 1967 it launched KDD Maru, Japan's first submarine cable-laying ship. The company claims that over the ensuing half century, it has been involved in the construction of some 70,000 kilometres of undersea cables, mainly in the Asia Pacific region. It oversees the maintenance of over 87,000 kilometres of cable.
In 2019, KCS launched the KDDI Cable Infinity, Japan's first self-propelled power and telecommunication cable-laying ship.
Mitsui manages and operates four Kokusai-owned cable-layers, and is currently flush with cash from its sensationally (and unusually) profitable container line.
French industry publication Le Marin, meanwhile, reported in September (here) that Malaysia's Optic Marine Services has bought the 2006-built PSV GSP Licorn , formerly Caledonian Vigilance, now renamed Cable Vigilance under the French flag and fitted out by Louis Dreyfus Armateurs. Cable Vigilance is a sister vessel to Ile de Molène, the new Alcatel submarine networks ship that will also be fitted out by Louis Dreyfus and converted into a cable ship.
These decisions show how geopolitical pressures mean that China's dominant offshore cable player S. B. Submarine Systems, the joint venture between Global Marine Systems (49 per cent) and China Comservice (51 per cent), is not welcomed by neighbouring states in Asia-Pacific working in this sensitive sector.
We have highlighted here and here how subsea robotics is a battleground, as uncrewed surface vessels (USVs) and autonomous underwater vehicles (AUVs) proliferate. Operators are seeking to reduce reliance on expensive crewed vessels, driving down costs, reducing emissions, and allegedly making operations safer. Both Fugro and Ocean Infinity have committed to investing millions in new equipment.
Time for an update.
Last week, The Irish Times reported here that smaller player XOCEAN had received nearly US$10 million in fresh funding, which valued the company at over US$100 million.
XOCEAN was founded by former OpenHydro chief executive James Ives in 2017. The company currently operates eleven USVs in Northern Europe from its headquarters in Ireland, as we reported here, providing environmental monitoring and seabed surveys for both oil and gas and wind energy operators. It claims that its USV fleet will eliminate over one million tonnes of carbon dioxide emissions between now and 2026, if its expansion goes to plan.
XOCEAN says that it has tripled revenue in each of the last two years, and that it plans to use the new funding to increase headcount from more than 100 people to 350 up to 2023, and that it plans to increase the size of its fleet to more than 60 vessels.
The Irish Times reported that the latest investment has been led by VentureWave Capital's Impact Ireland fund, which is backed by both Hollywood actor Liam Neeson and members of the band U2. Neeson's signature line (here) from the film Taken is "But what I do have are a very particular set of skills, skills I have acquired over a very long career, skills that make me a nightmare for people like you."
This seems appropriate to XOCEAN.
Fugro, meanwhile, continues to roll out its robotics, AUV and USV programme, boasting in its investor presentation in August (here) that it now owns and operates five USVs and seven AUVs, as well as 69 remotely operated vehicles (ROVs) including e-ROVs for deployment from the USVs.
Fugro's vessels are built at 12 metres LOA and 18 metres LOA in the Blue Essence and Blue Shadow series. In July, the company announced that it had completed its first uncrewed survey for Woodside in Australia (here). The USV remote inspection comprised a multi-beam survey, visual inspection and cathodic protection assessment of the gas trucklines.
Fitted with an electric remotely operated vehicle (e-ROV), the USV Fugro Maali was controlled from the Woodside-operated King Bay Supply Facility and Fugro's ROC in Perth, approximately 1,500 kilometres south of the Woodside trunklines. During the project, Fugro's remote operations team navigated approximately 2,400 kilometres in the surrounds of Dampier Port, one of the busiest resource ports in Australia, without incident.
Fugro says that the USV consumed a total of only 3,300 litres of diesel, reducing CO2 emissions by 97 per cent compared to a traditional subsea vessel.
Notably, Woodside was previously an Ocean Infinity customer in 2018 (here). Good win for Fugro.
That leaves laggard Ocean Infinity, which has been hamstrung by late deliveries and delays to its subsea robotics programme. What it lacks in tangible progress with its own core fleet, which is now smaller than it was in 2018, it has made up for with multiple corporate acquisitions, including MMT of Sweden, Ambrey Risk, and Abyssal, a Portuguese survey software company.
The company finally released some photos on social media (here) of its first remote operations centre in Southampton in the UK, from where it will eventually be controlling its USVs when they finally deliver and receive class approval. Nice hipster copper lamp shades and a "green wall" of indoor vegetation provide a relaxing ambience for staff. There would also appear to be tens of millions of dollars' worth of Hugin AUVs sitting, waiting in the warehouse for the company's Armada fleet of USVs to complete. There was no mention of any update on its backup centre in Austin, Texas, which may be necessary for operating the vessels in line with DP2 rules.
The update confirmed that the first Armada USVs will be built to Ice Class C and are designed to be transported on Antonov cargo aircraft for quick global deployment (although flying 21-metre long vessels around the world on dedicated cargo planes will of course negate many of the carbon dioxide savings of which the company boasts).
XOCEAN, notably, has units small enough to move around by trailer on land, clearly a more environmentally friendly proposition.
GMV has confirmed that the Ocean Infinity boats are actually built and equipped according to the rules for manned shipping, but when the boats are to carry out operations, the rudder house is lowered into the deck, and the steering is handed over to Ocean Infinity's remote operations centre. Building a USV to the requirements for manned operation would seem to be an additional cost compared to Fugro and XOCEAN's units.
The Ocean Infinity units from GMV are powered by Volvo Penta 7.7-litre diesel engines, similar to those used on many leisure craft, backed up emergency batteries for load shaving and uninterruptable power supply in the event of a failure with the conventional propulsion.
What it lacks in success as a driller, it now hopes to make up for with an innovative but implausible scheme to produce offshore green hydrogen from jack-ups. In September, Borr signed a deal with French hydrogen start-up Lhyfe and UK offshore engineering house Aquaterra Energy to develop a concept for an electrolyser on a converted jackup rig, using offshore wind power to produce green hydrogen, Windpower Monthly reported here.
Given that the average book value of a current Borr Drilling rig is in excess of US$100 million and that its new rigs, which will deliver in 2023 in Singapore, cost around US$150 million each, one would have thought that finding cheaper older units than the ones Borr owns would be a priority.
The concept seems to use surplus power in the immediate vicinity of offshore wind farms to produce hydrogen through the electrolysis of seawater. Lhyfe claims that this addresses "the challenges of grid connectivity and intermittent power supply that can be associated with remote offshore projects." Lhyfe says that it hopes the project could produce 100 tonnes of green hydrogen every day, and that the scheme will be in operation in 2025.
Given Borr's dire financial position and the fact that it reckons all its jackups will be working at the end of 2022, we're not sure that it is the right partner for Lhyfe and Aquaterra.
Certainly, the scheme should be based on utilising older rigs at the end of life with low purchase cost, just as Elon Musk did when he purchased two semi-submersibles for his SpaceX rocket operations, as we reported here.
Lhyfe is already producing ecological hydrogen from wind energy. Its first production site has been up and running since last month beside the Vendée Energie wind farm in northern France (here). The company says that the site will supply the first hydrogen to buses, rubbish trucks and fire engines in La Roche sur Yon, in Vendée, to forklift trucks in the Lidl logistics warehouse, near Nantes, to buses and utility vehicles in Le Mans and to heavy construction vehicles in the port of La Turballe.
Green hydrogen is a major step forward in the decarbonisation of heavy industry and provides a solution to the intermittency problem for wind farms – namely that when the wind blows hardest the power grid often cannot accept the massive quantities of electricity generated by the turbines.
At the moment the scale is small. Lhyfe's current French facility produces 300 kilograms of hydrogen a day, and the company says it "can be ramped up to one tonne a day to meet the growing needs expected in industry and the transportation sector."
We look forward to developments. Perhaps those WTIV operators waiting on hydrogen fuel cells won't have that long to wait.
Reading broker's reports for the last five years has been a dismal experience, as the industry fragments, and cash strapped owners sell vessels at fire-sale prices to avoid bankruptcy. The latest edition of Seabrokers' Seabreeze newsletter is available here.
There was also the news that larger anchor handlers are also changing hands, traditionally some of the most expensive and illiquid assets, as those who bought assets cheaply earlier in the cycle offload them. Finally, there may be some green shoots of recovery.
Step forward Eastern Navigation of Singapore, who flipped the 200-tonne bollard pull AHTS vessel ENA Frontier to Amsol of South Africa. For many years Amsol has been the primary emergency towage and salvage company in South Africa, building on its legacy Smit-Pentow business.
Seabrokers reported that the 2013-built vessel has just been relocated from Singapore to South Africa, and Amsol's social media feed showed that she immediately went to work on an emergency towage of a tanker off the Cape (here). ENA Frontier has been reflagged to South Africa and renamed as Umkhuseli.
The ship was built to the VS4616 design at Wuchang Shipyard in China as Toisa Envoy for Sealion Shipping. When Toisa went bankrupt and the fleet was liquidated in 2018 and 2019, Eastern acquired the unit for around US$5 million in cold lay-up in the UK and mobilised her to Asia.
In 2019 TotalEnergies made a massive gas and condensate discovery off South Africa (here) drilled with a semi-sub supported by high horsepower anchor handlers from the North Sea. A further discovery followed in 2020.
Now Amsol will have a locally owned and manned AHTS to support the development drilling on Brulpadda field.
We have already seen the French coast guard using the offshore downturn to boost its emergency towing capabilities through the acquisition of two former Siem Offshore AHTS Siem Garnet and Siem Diamond (here), and the Norwegian coast guard taking two huge Boa anchor handlers, Boa Bison and Boa Jarl (here).
Now the Icelandic Coast Guard has agreed to buy a 200-tonne AHTS from German privately equity owned player United Offshore Support (UOS). The 2010-built AHTS vessel GH Endurance was the winning vessel as a new emergency towing unit for Iceland after a tender process was conducted earlier in the year with five bids received, Seabrokers reported.
GH Endurance is a UT 786 CD design vessel and will be renamed Freyja by the coast guard. The purchase price has been reported as just over ISK1.7 billion (US$13 million), believed to be more than twice what UOS' private equity owners Hayfin and Breakwater Capital paid in 2018, when they bought the vessel as E. R. Vittoria along with a sister to join the eleven other large AHTS they acquired from the distressed Hartmann Group in 2017.
Nice to see someone selling an offshore asset for a profit.
Background reading
For a discussion of the environmental issues in the WTIV sector, Cadeler provides a third-party summary from Norwegian climate research institute CICERO here.
Fugro's USV and e-ROV specifications can be found here.
