COLUMN | Battle of the s̶u̶b̶s̶e̶a̶ subsidy robots? Eidesvik, Fortescue, Fugro, Maersk, Ocean Infinity, XOcean [Offshore Accounts]

Every child knows that it is best if their parents pay for stuff. Even big, grown-up companies like it when governments play mum and dad, and hand them cash.

This week we look at how the taxpayer is funding much of the innovation in the marine fuels space, and even some office fit-out costs.

Equinor takes five-year charter, and taxpayer cash

Before Christmas we saw how the European Union and the Norwegian government are investing over US$27 million to install a potentially revolutionary ammonia-powered fuel cell in conjunction with engine maker Wärtsilä onboard the PSV Viking Energy.

The ship is owned and operated by Eidesvik (here) but is on a long-term charter with Equinor. Next year, the EU-funded ShipFC project plan to equip Viking Energy with a 2MW fuel cell running on green ammonia produced from renewable energy.

It’s not clear to me why European taxpayers need to subsidise Equinor’s decarbonisation programme when Equinor is making about one billion US dollars per month in profit after tax at the moment (here).

Fortescue want to power MMA Leveque with tax dollars

We also noted in the same piece that billionaire Australian metals magnate Andrew Forrest is working to install a similar functioning ammonia fuel cell on the MMA Offshore-owned PSV MMA Leveque this year.

Guess what? Fortescue is in negotiations to receive state subsidies for its Bell Bay renewable hydrogen hub in Tasmania, which would provide the long-term ammonia feedstock for the marine fuel in Australia. This is part of the Liberal Government’s expanded US$330 million regional hydrogen development program (here and here).

Fortescue has deferred its final investment decision on the Bell Bay project until it can reach an accord with the Tasmanian government on its hydropower allocation and the applicable price, and an approval for its subsidy application (here). Why rush if the treasury in Canberra will be contributing much of the cost?

Cheap renewable ammonia and hydrogen depend on cheap renewable electricity to power the electrolysis process to make it. And the Australian taxpayer will be on the hook to help some of Australia’s biggest companies, including Woodside, to produce it.

What a surprise.

Fugro leads Dutch consortium to green Methanol subsidies

At the same time, subsea survey leader Fugro is part of a 22-company Dutch consortium known as MENENS (Methanol as Energy Step Towards Emission-free Dutch Shipping) and has been awarded a grant from the Netherlands Enterprise Agency for the development of methanol as a low-carbon shipping fuel.

The consortium will convert the engine of the survey vessel Fugro Pioneer to run emission-free on methanol by the beginning of 2023. Fugro says it will also contribute to the wider development of the engine technology and energy management, ship design, safety procedures and technology validation of this emission-free fuel (here).

Thanks for the US$27 million

“This is a major and tangible achievement on Fugro’s step towards Net Zero emissions by 2035,” said Fugro’s CEO Mark Heine. “A specific thank you for the people at the RVO and the Ministry of Economic Affairs and Climate for making this very specific grant possible for the Dutch transport sector.”

The value of the grant to MENENS has been stated as being €24 million (about US$27 million), so that is a pretty big thank you to the taxpayers of the Netherlands.

Maersk also backs methanol

Both Fugro and Eidesvik recognise that achieving emission-free shipping is not going to be quick or easy, as most vessels were built to run on fossil fuels and require either conversion or retrofitting to operate with a low-carbon or zero-carbon energy source.

Fugro believes that for large-scale introduction, the most viable option is methanol, a view that Maersk has also supported. In November we covered (here) how Svitzer, Maersk’s wholly-owned tug company, was working with designer Robert Allan Ltd of Canada to build a methanol-powered harbour towage unit. Maersk itself announced (here) an order for eight 16,000TEU containerships each capable of being powered by methanol. These vessels will also be capable of running on conventional fossil fuel as an alternative. The shipbuilding agreement with Hyundai Heavy Industries in South Korea also includes an option for four additional vessels in 2025.

Danish taxpayers back methanol too

Needless to say, Maersk has already stated that it expects the Danish taxpayer to chip in and help pay for half the costs of its “sustainable fuels”. Maersk describes this as “public co-funding” here.

Bloomberg estimates that the Maersk Group will make a profit of over US$16 billion in 2021 (here), the biggest profit in Danish corporate history, whilst Reuters reports that the Danish government will need to issue US$9.9 billion of bonds in 2022, as the country continues to run a budget deficit (here).

Does the world’s biggest and most profitable shipping company really need the extra cash from the Danish state?

Ocean Infinity also gets “Silicon Wharf” subsidies…

We’d all like a new office full of plush furnishings, trendy décor, and walls lined with verdant, indoor plants… and also have someone else help pay for it, preferably the taxpayer.

It’s not just Fugro, Maersk, and Equinor that have their hands out for subsidies. Serial acquisitor and mini-marine conglomerate Ocean Infinity seems to have managed to obtain a British government grant of nearly US$2 million for its new office and ROC in Southampton, branding the facility a key part of “Silicon Wharf” in the subsidy application from 2020, which you can read on the Solent Local Enterprise Partnership website here.

“Silicon Wharf?” Please.

Large losses in most recent filing

The grant application finally throws some light on Ocean Infinity’s long delayed plans to launch its first fleet of USVs and states that the company “is procuring a fleet of robotic ships and this Getting Building Fund support has been a significant help in reassuring investors and helping with the case to grow the initial fleet from 10 vessels (~£75 million) (US$101.25 million) to 20 vessels (~£150 million) (US$202.5 million). These robotic vessels will be used in the growing sector of low carbon logistics, but also offshore data collection and inspection.”

The first Armada USVs for Ocean Infinity are due to deliver about now, from Norwegian shipyard Grovfjord Mek Verksted (GMV) in Troms, around a year late from the original delivery date in December 2020. At the time of writing, there’s no news on when the ships will actually deliver. Maybe the press release will come out as we go to print, which would be great.

Help wanted

However, the fact remains that at the end of December, the company was advertising (here) for a Fleet Operations Director to “take the leading role in liaising with the newbuilding team and ensure a seamless handover from the newbuilding team to the operations team at delivery from the yard and onto operational phase for each vessel” and to “take the leading role and be responsible for the preparation within Ocean Intelligence for the delivery of the Armada fleet, including HSE, permits, licenses, certification, safety cases, etc.”

This suggests that perhaps there are further bumps along the road before the first Armada USV is safely alongside its new home port, at, er, Silicon Wharf. Indeed, the role talks about the Fleet Operations Director hiring crew for the vessels, so it is not even clear whether the Armada fleet will be uncrewed, or whether they will be what Ocean Infinity describes as “lean-crewed,” reflecting the worst of both worlds, as we highlighted here a year ago.

Questions, questions, questions

The grant application doesn’t throw any light on who actually owns the company, and when Ocean Infinity first registered in 2018 at Companies House (here), the parent company was stated as an entity in the secretive tax haven of the Cayman Islands. You won’t get any disclosure there, nor in Delaware, where its American subsidiary is registered.

The most recent group accounts filed at Companies House showed that Ocean Infinity Group had lost US$77 million by December 31, 2018, the last date when a report was made. And we thought that Bourbon’s parent company was slow to file its accounts (here).

It is not clear why Ocean Infinity couldn’t file its 2019 and 2020 accounts in 2021, or why a new company called Ocean Infinity Innovations has been set up in 2021 with a different shareholding (here), but the US$77 million of accumulated losses from the most recent accounts might explain why the investors needed the “reassurance” of a Solent Local Enterprise Partnership grant.

More British subsidies flow

But it’s not just all those lovely, vintage-styled copper light fittings at Silicon Wharf that require British government assistance. When we looked at the mobile hydrogen filling station grant for the Saverys family’s Windcat Workboats under the British Government’s Clean Maritime Demonstration Competition announced in September (here), we found a veritable cornucopia of companies claiming taxpayer aid.

You can download the government spreadsheet here. It’s worth reading and it is great that the public can see who is accessing state funds, transparently.

Fifty-five projects won cash in the competition. The winning recipients were announced at London International Shipping Week, and will receive a total spend by the British government of £33.5 million (US$45 million), almost twice the subsidy for the Viking Energy project, but spread much more thinly.

So, who won the taxpayer’s cash?

Reading the spreadsheets of proposals, as well as Windcat Workboats, you find many familiar suspects. The winners are spouting all the usual buzzwords, and many of them seem to be claiming money for things they would, perhaps, already be doing anyway.

Serco (the famous UK government outsourcing company) and its partners claim to need just under US$1.2 million for a project to “rapidly electrify and de-carbonise highly polluting marine workboats using powerful twin engines using only electricity and hydrogen as fuels.”

Siemens, with its market capitalisation of around US$150 billion (with a “b”) needed just under US$300,000 for its part in a project to develop an “integrated, multi-vector digital energy platform to manage the balance of supply and demand in the maritime sector, ensuring the optimisation and resilience of clean energy supplies for shore power, land-based infrastructure and other use cases.”

No, we are not sure what that means, either.

Sonardyne and its partners were awarded a few hundred thousand pounds “to develop an optimised hybridisation solution for remotely operated, uncrewed vessels. Combining innovations in human-assisted autonomous control of serial hybrid propulsion, mission planning, and active platform efficiency measures, the consortium will develop and validate a solution for small USVs capable of delivering trusted multi-mission capability and long endurance necessary to disrupt the deployment of large carbon-intensive ships in the offshore wind, ocean science, and maritime security markets.”

This seems awfully like what Fugro, XOcean, and Ocean Infinity are already doing with their USVs.

Sea-Kit, Fugro’s partner for its USVs, and Bramble Energy, won over a million pounds “to retrofit an existing 12-metre USV with a hydrogen fuel system and perform a series of tests and sea trials to qualify and quantify the system performance against the USV’s existing greenhouse gas-emitting fuel and record a range of metrics under real-world maritime use. Data gathered from testing and trials will be utilised for the design and build of future 12-metre USVs as well as used for extrapolating out across the existing and imminently planned larger Sea-Kit vessels to bring the fuel option to the USV market.”

Nice.

Silicon Wharf hits the jackpot

Guess who else got lucky in the great government money giveaway?

Yes, Ocean Infinity – again. The British taxpayer is expected to shell out for more support to the Armada fleet.

The Ocean Infinity consortium won over US$2 million in taxpayer funds with them to contribute around another US$1 million themselves. The consortium consists of Ocean Infinity Innovations as lead (not the Caymans-controlled company, which ordered the first actual Armada vessels back in 2020), and its partners, including the University of Oxford, and a company called Oxford Green Innotech (which used to be owned by the university in part, until mid-way through the year, but suddenly wasn’t, just before it won the large grant, according to Companies House data), as well as… Shell. Oil companies seem to never knowingly miss a subsidy if they can find one.

Does Shell really need US$50,000 of taxpayer money to pay for the storage of ammonia at Silicon Wharf?

What are you paying for, Joe Public?

The project seems a little bizarre, so we will deconstruct it piece by piece:

“A zero-carbon coastal freight network represents a multi-billion-pound industry for the rapidly-growing wider global ship technology market, in part driven by the requirement for zero-emissions technology. To support this change there’s an urgent requirement to optimise clean-Marine Power System (MPS) solutions for a wide range of current and future vessels.”

To which we would observe that this is exactly what Eidesvik/Wärtsilä /the EU, and Fugro and the Dutch government are doing, with each of the rivals spending over eight times as Ocean Infinity on actually delivering working solutions on board real ships.

Two or three million dollars doesn’t really go very far if you are planning to revolutionise the entire coastal freight network.

“This project represents Phase 1 of a multi-phase approach – the demonstration of an Ammonia Marine Power System (AMPS) and subsequent energy output compared with the operational power requirements from OI’s Armada78 Un-crewed/lean crewed Surface Vessel (USV),” the Ocean Infinity grant application continues. “With a view to optimising the AMPS solution in preparation for Phase 2 – integration of optimised AMPS solution into OI’s Armada fleet.”

So, basically, the British taxpayer will pay to prove that ammonia creates less greenhouse gases than marine diesel on vessels that have not even delivered from the Vard shipyard in Vietnam yet, and also pay for the design by which an ammonia fuel cell might one day be installed on an Armada vessel.

You can read the rest online. The British government says that all the projects will be completed by March 2022, which seems a stretch, given that the 78-metre Vard vessels will not have delivered to Ocean Infinity then.

It is not clear what sanctions apply if delivery of the project outcomes is late. We observe that once subsidy cash is disbursed, it rarely returns to the government, even if projects end in failure or delay.

But the fittings and furnishings at Silicon Wharf do look top-notch.

XOcean beefs up for a big fight

This state support for Ocean Infinity is just as well, as rival USV survey company XOcean has plans to hire over one hundred new staff in the coming year to support its growing USV fleet in Northern Europe. XOcean also announced it has opened an office in Norway (here), and received further support from the Endeavour Network of venture capital companies after winning an entrepreneurship competition (here).

Rather implausibly, the company also appointed the former marketing director for Baileys Original Irish Cream Liqueur as its chief commercial officer. We covered here how in 2021 the company had received a tranche of funding from funds supported by members of the band U2 and the actor Liam Neeson.

Cheers! I’d much rather wealthy celebrities and venture capitalists funded the company, rather than long suffering taxpayers…

If it looks too good to be true…

Oh, but wait. XOcean got its Irish government subsidies in 2019, as per the Irish Maritime Development Office here.

Does anyone in the offshore industry not have their hand out for taxpayer money? Or is innovation impossible for huge companies like Equinor, Siemens, Shell, Maersk, Woodside and Fortescue to sustain, without you and I having to chip in and help? Together these companies have a combined market capitalisation of over half a trillion (with a “t”) dollars.

Corporate welfare is something we’ll be watching in 2022.

Background Reading

Specifications of Fugro Pioneer are here. The diesel-electric vessel was built in 2014 and is flagged to the Bahamas registry.Fugro Pioneer has 447 DWT, a length overall of 53.63 metres, and accommodation for 32 crew and survey staff. The ammonia fuel cell grant is likely much larger than the entire value of the vessel.

We covered the rise of battery-hybrid technology for PSVs in the North Sea here.

We first covered the battle of the subsea robots between Ocean Infinity, Fugro (and latterly XOcean) here.

For a great summary of the actual military contest to build fighting USVs, see Malcolm Davis’ article here.

Full OECD analysis of Denmark from December 2021 is here.