A year ago (here) we highlighted the battle for control of the autonomous underwater vehicle (AUV) market between Ocean Infinity and Fugro, with both companies ordering new equipment and working on building global networks of remote operations centres (ROCs) from where the subsea robots and their mothership unmanned surface vessels (USVs) will be controlled by human operators via satellite. In November, Ocean Infinity announced a massive new build order at Vard's shipyard in Vietnam for eight 78-metre-long AUVs (here), in addition to its delayed delivery of nine USVs of 21 metres and 36 metres long from the first wave of its Armada investment at Grovfjord Mek Verksted in northern Norway (here).
The devastating Texas snow-storms, which knocked out power for several days in February in Austin, home of one of three proposed ROCs for Ocean Infinity, show the need to have redundancy and back-up at these command facilities. Even if a command centre controlling a dozen USVs has a back-up generator itself, this is of little use if staff can't get to work because fuel stations are closed due to not having power for their pumps, and electric cars can't be charged from the electricity network due to the power outages (here).
And work from home, when there is no power, is not an option either.
The Texas grid problems raise questions about how other command centres would cost-effectively take over vessel management from the site that was down over longer periods, without breaching legal requirements on staff working hours, or without having a large back-up staff of expensive master mariners and engineers on call at short notice in the back-up locations to take up the slack.
We have previously been sceptical of the cost benefits and purported safety advantages of large unmanned vessels (our reservations were set out here), and we presume the power crisis in Texas will be leading to searching questions and requests for contingency plans from the class and the flag state of the large USVs.
The latest update from Ocean Infinity here simply stated that just one remote operations centre, in Southampton, UK, was "in build." Given the lessons of Texas, and Fugro's announcement that its eighth ROC in Abu Dhabi is now open and operational (here), Ocean Infinity looks a little behind the curve.
Fugro's footprint of eight functional, in-service ROCs across four regions (the Americas, Europe, the Middle East and Asia) really provides the solid diversification and back-up that might convince regulators and customers that its uncrewed fleet can be operated safely.
A few weeks ago, Fugro, in partnership with SeaBot XR, a training and competence assurance company based in Winchester, England (here), and the UK Maritime and Coastguard Agency, announced here that the trio were launching the Maritime Autonomous Surface Ships (MASS) International Training Standards Working Group. This looks like an astute move by Fugro to shape the regulatory landscape for USVs.
The initiative will, "provide recommendations on new competency standards for inclusion into the International Convention of Standards on Training, Certification and Watchkeeping for Seafarers (STCW); the group will also propose specialisms, training structures and qualification requirements for remote and autonomous operators."
Effectively, Fugro is seeking to write the rule-book for the new AUV and USV operations both in the UK and worldwide: "Focusing on the mariners who operate this new technology, the group aims to ensure that their skills can evolve effectively and to high industry safety standards."
This puts the Dutch survey company at the vanguard of defining the rules and regulations that will apply in the battle of the subsea robots – a nice place to be.
The results of Fugro, a public listed company, show the strain being placed on it by the combination of a shift to renewables from its traditional oil and gas business, and the transition to AUVs and remote operations. Fugro's 2020 full year results were announced here.
The company reported a net loss of €22 million (US$26 million) for the second half of the year, which ballooned to €61 million (US$73 million) when discontinued operations were included.
But Fugro is robust. It has a market capitalisation of around €1 billion (US$1.2 billion) on the Amsterdam stock exchange, and produced free cash flow after investment of €88 million (US$105 million) over the full year. That is four times as much free cash as it had generated in 2019.
By the end of 2020 Fugro had made a significant reduction in its net debt to €296 million (US$353 million) down from €666 million (US$793 million) at the end of 2019. Fugro now seems in a much stronger position to outspend its start-up rival, and use the cash from its US$1 billion backlog of orders to drive new investments.
Having announced the retirement of its fleet of manned motherships (except Island Pride, which is due into the Cape Verde Islands today on a port call after a mysterious Atlantic mission), through the release from contract of the large subsea vessels Pacific Constructor and Normand Frontier, Ocean Infinity seemed convinced in the unmanned future.
On its website, celebrating the end of the contract of Pacific Constructor, the company stated (here) that it was "bidding farewell" to vessels, as it "embarks on its journey towards a carbon neutral future and anticipates the arrival of its uncrewed Armada fleet of vessels."
Until last week… when it announced (here) the purchase of MMT, the Swedish survey company, which has specialised in marine archaeology and performed some ground breaking work in both the Baltic and the Black Sea. The take-over was billed as "combining world-class innovation with unrivalled experience."
It also brings Ocean Infinity back into the vessel chartering business, again. And into direct competition with Fugro, again.
Lovers of the disco hit Kung Fu Fighting (here) will be surprised to learn that MMT was actually majority owned by Carl Douglas, albeit a different Carl Douglas to the Jamaican vocalist who propelled the song to the top of the charts in 1974.
MMT's Carl Douglas is a 59-year-old Swedish billionaire, whom Forbes estimates to hold a net worth of US$3 billion (here), including ownership of the world's largest lock-maker. With such deep pockets behind it, and such a long track record in survey since 1976, one has to ask why Mr Douglas is selling MMT. The company recently announced it had won a renewal of survey work on the Nord Stream pipeline in the Baltic (not the Nord Stream 2 pipeline, which is subject to sanctions, it was at pains to stress).
I suspect because significant future investment is required to take the company up to compete with Fugro and Belgium's Geoxyz (here), among others.
MMT has a much wider product portfolio than Ocean Infinity's tightly focused AUV and ROV offering, more akin to the diverse offering of Australia's Guardian Geomatics, in which Ocean Infinity took a 25 per cent minority stake in 2019. MMT boasts that it offers marine survey solutions covering geophysical (its core service), geotechnical, including integrated packages for entire projects, unexploded ordnance survey, environmental survey, and hydrography as well as pre- and post-pipelay surveys and inspection work. This increases Ocean Infinity's portfolio significantly.
MMT has been historically closely aligned with Reach Subsea in Norway, and the two have a frame agreement stretching until April 2022 for the subsea vessel Havila Subsea, and a joint venture operating two Surveyor interceptor ROVs.
MMT says this ROV is "our flagship and champion among our innovations. As a survey platform it is in a league of its own – producing high density data in speeds up to six knots. The [Surveyor] is very stable and packed with state-of-the-art sensors with respect to geophysical instrumentation as well as sounding equipment, such as dual swath and ping MBES in order to keep density at higher speeds. The data is coming in live and can be quality controlled with respect to quality and coverage in real time, hence avoiding surprises that can be the case with autonomous vehicles."
MMT also charters in the survey vessel Stril Explorer from Simon Møkster Shipping in Norway. The ship has been on contract to MMT continuously since April 2014 and according to Reach, will be on charter until at least the next quarter performing windfarm site surveys for Equinor in the Atlantic.
With the acquisition, Ocean Infinity buys MMT's forty years of experience and track record, but also a massively higher cost base, and much larger overhead in a business, which is increasingly competitive.
It is also not clear where the loss of MMT as an independent player leaves its erstwhile partner Reach. Indeed, a struggle for the customers that Reach and MMT served jointly looks on the cards.
Reach reported a profit of NOK43 million (US$5 million) for full year 2020 (here) and also set out its ambition to enter the subsea survey war through its Reach Remote initiative (here), which it says will "significantly reduce cost and virtually eliminate carbon footprint when brought to market in 2022."
Reach Remote is – guess what – a fleet of USVs dedicated to survey, inspection, and light repair projects, with two USVs due in service in 2022, and ten in 2025. The Reach Remote fleet, will – surprise, surprise – be controlled from ROCs, putting the company in head-to-head competition with Ocean Infinity and its former partner MMT, and with Fugro.
With MMT now being owned by a clear competitor, Reach faces a need to ramp up its investment as well, and some difficult negotiations with Ocean Infinity over the joint venture that owns the Surveyor interceptors.
"These USVs will serve as mobile power banks, data centres and communication modules for underwater ROVs, with both the USVs and ROVs operated from an onshore control centre," claimed Reach. "Features for both real time operator control and autonomous operations will be incorporated, as well as hybrid modes blending remote and semi-autonomous control. Reach Remote will be a great enabler, building on framework agreements already in place to position Reach as a preferred supplier of survey, inspection, and light repair services to the fast-growing offshore wind industry."
Reach hits all the buzzwords of unmanned operations in its promotional material: "Technology is enabling a radical redesign of how ROV operations are performed: shifting from a capital- and personnel-intensive setup operated from larger, energy-intensive offshore vessels towards a lean remote and autonomous platform, with certified personnel located onshore."
The reference to "certified personnel" is interesting – as it raises the question of certified by whom, and this will be a contentious area, as we saw above. Fugro clearly has ideas on this front.
Reach has bought into the un-crewed agenda and sets out the economic justification in the most explicit manner possible.
"Currently," the company concluded, "Reach provides its subsea services from six vessels. A typical Reach project today will involve some 30-50 personnel onboard a subsea vessel operating under strict HSEQ regimes. With Reach Remote, the same project can be executed with a much smaller, more fuel-efficient vessel and one third of the personnel, who will be located onshore without exposure to offshore operational risks. This is revolutionary in terms of cost efficiency and enhanced safety and will drastically reduce the CO2 footprint of this type of operation."
Game on. Player number three in the Subsea Survey War is clearly Reach, flying the Norwegian flag and backed by a grant from Innovation Norway.
Where does that leave the traditional stalwarts of the offshore survey and ROV industry?
Oceaneering, which operates a fleet of seven ROV and survey vessels and two dive support vessels, boasts a huge track record in AUV operations. The company has claimed it, "sets the standard in deep-water AUV capability and has completed more than 237,985 miles (383,000 kilometres) of survey for 93 clients on 580 different deep-water projects."
Oceaneering has a market capitalisation of over US$1.4 billion and looks well-placed to retaliate with some big spending of its own to prevent it falling into technical obsolescence, especially given its success in the defence sector with the US Navy.
Not so DOF Subsea, which remains weighted down by NOK8.1 billion (US$950 million) of debt at year-end 2020 according to its fourth quarter report (here). DOF has the most to lose from the revolution in subsea, if and when unmanned subsea operations become viable. As of December 31, DOF Subsea owned a fleet comprised of 24 vessels, plus one chartered-in ship, and 70 ROVs.
With heavy debts and its competitors moving to make conventional ROV operations obsolete, DOF looks horribly exposed. It needs to restructure quickly and gain some financial breathing space with its lenders to ensure that it isn't left completely behind in the technological arms race.
We'll keep you posted as the Battle of the Subsea Robots hots up.
Background reading
MMT's Black Sea archaeology programme can be explored here.
Who can forget the epic tabloid headline in Britain's The Sun: "British crew find chest that could contain £100 million of Nazi gold in the wreck of a German cargo ship," referring to Ocean Infinity's efforts to locate a sunken German vessel from 1939. Unfortunately, the Icelandic government confirmed (in Icelandic) here that no valuables had been found.
My colleague Oliver Weiss covered the legal dispute with the government of South Africa over the millions of dollars of silver salvaged from the World War II wreck of Tilawa by Advanced Marine Services here.
Havila Shipping's Q4 2020 report, which covers the fixture of Havila Subsea and the other vessels in the fleet, can be viewed here.
