Focus: History Revisited

History Revisited

Shortage of mariners, boats and record costs greet Gulf of Mexico rally.

By Jim Redden, Correspondent

Matthew Rigdon doesn’t hide his astonishment that long-stacked and largely inef cient deepwater offshore service vessels have returned to active duty.

“I was shocked that some early 2005 boats that are direct-drive and non-diesel electric have been reactivated and they are working,” said Rigdon, vice president and chief operating of cer of Jackson Offshore Operators LLC, Houston. “These aren’t fuel ef cient and generally not very attractive for our clients. That just tells you what demand is.”

The edgling recovery in the Gulf of Mexico oil and gas sector has brought with it a shortage of deepwater support vessels, and more notably, a shrinking pool of mariners. It is an environment strikingly reminiscent of the one described in the The (New Orleans) Times-Picayune on May 27, 2012: “Offshore operators face shortage of quali ed mariners.”

At that time, operators were two years removed from a federally enacted shutdown in response to the deadly Deepwater Horizon blowout and oil spill. Ten years later, they are in the second year of recovering from the Covid-fueled market crash and, again, history has come a-calling.

Gulf PSVs are in high demand, supporting deepwater production facilities, like Shell’s Mars B Olympus platform. Idle vessels are few and far between along South Louisiana waterways these days.

In 2012, however, the eet of deepwater support vessels was suf cient, but crews were lacking. Today, neither are readily available. Also, as of Sept. 2, S&P Global Petrodata listed 27 rigs under contract, but roughly 19 are actually drilling, while 40 deepwater oaters were active in 2012. Though each of those rigs require at least two offshore service vessels (OSV), platform supply vessels (PSV) dominate the active eet, servicing activities ranging from platform-based development drilling to workovers, as oil companies look to squeeze more production from existing assets. “Production support activity is what’s really driving deepwater demand,” said Rigdon.

Quintin Kneen, president and CEO of Houston-based Tidewater Inc., the world’s largest workboat company, agreed. In the company’s secondquarter earnings call, he said they have “been catching up on deferred maintenance and looking for ways to enhance production. The rigs that are now going back to work as well as the offshore wind farms that are being constructed are adding another layer of demand, and we’re going to see that come in 2023.” affecting the entire infrastructure.

“We’re seeing in ationary pressures, and that’s frankly why the industry is able to get some of this pricing. We need it to absorb some of the in ationary costs,” said David Grzebinski, president and CEO of Kirby Corp., Houston, the largest tank barge operator in the U.S. “We repair a lot of barges and steel is up over 200 percent. And, as expected, signi cant supply chain issues delayed many new equipment deliveries during the (second) quarter.”

One way to avoid supply chain bottlenecks is to sidestep third-party vendors. After encountering issues getting lique ed natural gas (LNG) for

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The few available Gulf deepwater boats in a once-overbuilt eet are commanding day rates not seen since, well, 2012. Long-term charters of six months to a year for 4,000-6,000 dwt PSV now range between $35,000 to $45,000/day, said S&P Global Senior Marine Analyst Richard Sanchez.

“The spot market for big PSVs is going as high as $50,000 to $55,000 a day,” he said. “We haven’t seen these kinds of rates since the last super cycle back in 2012 to 2014.”

Multiyear high day rates, however, have been partly offset by fourdecade-high in ation that has seen the costs for everything from diesel to maintenance skyrocket, compounded by exasperating supply chain issues

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its ve dual-fuel vessels trucked to its Port Fourchon, La., shore base, New Orleans-based Harvey Gulf International Marine bought two LNGpowered 10,000-gal. tanker trucks. “We now have the entire supply chain from the re nery to the rig running on LNG,” said CEO Shane Guidry.

TIGHT LABOR MARKET

Higher costs, however, pale compared to the wages and bene ts vessel owners must pay to keep crew from jumping ship. That is, if they are able to attract willing bodies after scores of mariners were discarded in the latest downturn. Many are reluctant to return to an industry they view as ckle.

“When you’re talking about the operating costs on a deepwater supply boat, your crew accounts for about 70 percent of OpEx. So, while costs have gone up for maintenance, repair, parts and support labor, it’s not as signi cant a dollar amount increase, as it’s a small percentage of the operating costs on a deepwater vessel,” Rigdon said.

The challenge of attracting and retaining mariners is expected to be around for the foreseeable future. According to the U.S. Bureau of Labor Statistics, overall employment for broadly de ned water transportation workers is pro-

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jected to grow by 12% a year or roughly 8,400 vacancies each year until the end of the decade, growing faster than the average of all occupations measured.

“There’s stiff competition for Jones Act-quali ed mariners right now and I don’t think it’s going to abate. We’ve seen a big reshuf ing where people with high skills can pick whatever they want from a range of jobs,” said Sanchez, who noted that pay for dynamic positioning (DP) of cers has nearly doubled to as high as $850 a day.

To help bring more non-mariners into the fold, Kirby started its own Coast Guard-accredited school last year, providing training from entry level deckhand to the wheelhouse. “In an effort to curb an industrywide employee shortage, Kirby recruits and trains individuals with no maritime experience, and also trains experienced mariners through continuing education courses,” said a company spokesman.

Unlike many of its peers, Jackson Offshore managed to avoid layoffs by keeping its six PSV under long-term charter during the downturn. “We have an advantage in that the guys who work for us, worked throughout the downturn, when others were getting laid off. So, we’ve de nitely garnered some mariner loyalty,” said Rigdon. “But the market overall is extraordinarily tight for mariners.”

The labor woes go beyond onboard personnel. If vessel owners are able to successfully navigate supply chain hiccups and acquire needed parts, nding specialists to work on engines, electrical, DP, automation systems and the like can be a struggle.

“Our major vendors are having a hard time getting labor as well,” said Rigdon. “So, if you can get the parts you need, then it’s a matter of having quali ed labor from the vendor to do the work. That’s driving some serious delays in repair work, as well as any more reactivations that may or may not happen in the future.”

VESSEL RELOCATIONS

Reactivating acceptable deepwater vessels is unlikely to ll the void as only 16 PSVs over 4,000 dwt remain stacked, said Rigdon, and returning them to service would cost no less than $4.5 million per boat. “I think we’ve kind of hit the wall on the number of reactivations we’re going to see,” he said.

Contributing to the tightness in the Gulf eet, a number of vessels have relocated, most prominently to the Caribbean deepwater strongholds of Guyana and Suriname, where 26 of the 46 active deepwater support boats are U.S.- agged, Magda Rodriguez, S&P Global senior analyst, Americas, said in a Sept. 1 email.

More than a geographical realignment is taking place. Vessels that once delivered completion brine and other consumables to production platforms are now doing anything including, most notably offshore wind support, as well as ocean cleanup, scienti c research, expanded port services and even space exploration.

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Elon Musk’s SpaceX Corp. bought two PSVs last year and converted them to retrieve rocket parts. Pictured above are the Doug and Bob at Port Canaveral, Fla.

Last year, a division of Elon Musk’s SpaceX Corp. acquired two PSVs for use in retrieving rocket parts, Sanchez said.

“The (stacked) boats got so cheap that they became commercially viable for a lot of different groups,” he said. “The deepwater is now competing with a number of entities and it’s not just (oil and gas) operators trying to get boats. The point is, these boats are going back to work, so they’re all competing for the same pool of mariners.”

Sanchez said it’s gotten so tight that 1,500- to 3,000-dwt boats are being reactivated for deepwater work. “We’ve seen increased demand for smaller boats, because they kind of ran out of the high-end boats and they still have to move stuff,” he said.

Far from the Gulf, those smaller vessels, more suitable for shallow water exploration, are nding ample opportunities in places like the Arabian Gulf off Saudi Arabia.

“[Saudi] Aramco has been very public about bringing signi cantly more jackups into the Kingdom and in turn, came out for a large 20-plus OSV tender in the second quarter to support this uptick in activity,” Tidewater’s vice president of sales and marketing, Piers Middleton, said during the company’s second-quarter earnings call in August.

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