COLUMN | Days Five to Eight of Offshore Christmas: Hydrogen and CMB; Swire Pacific Offshore, Sanko and K-Line; Brent Crude; Ammonia, Eidesvik, Fortescue and MMA Offshore [Offshore Accounts]

Not long until Christmas now! As the big day gets closer, you will have seen Cairn Capricorn Energy, Vantage Drilling, North Star, Vard and Shearwater featuring in Part One of our Twelve Days of Christmas for 2021 here.

So, who has the five gold rings, and who replaces the seven swans-a-swimming, as we revisit the festive heroes of our 2020 festive story (here and here)?

Day Five: The Saverys vision of Hydrogen power

Last year we celebrated the surprising purchase of Windcat Workboats and its fleet of 46 windfarm crewboats working in the North Sea by the Saverys family’s Compagnie Maritime Belge (CMB). CMB purchased the fleet for US$45 million, plus debt, from Seacor Marine. This was our fifth day of Christmas, on the grounds that there were “Five Months to first Hydrogen Powered Workboats” to go from the deal closing in January.

We were in fact five months away from the opening of the very first multimodal hydrogen refuelling station in the world by CMB Tech on June 3, 2021, in Antwerp. This grand event, complete with a speech by the wonderfully named Jan Jambon, saw the prime minister of Belgium fill a road truck with the new fuel, as bubbles were blown, and red, white, and blue dancers serenaded the vehicle and the assembled dignitaries.

“Hydrogen is the rockstar of the new kind of energies,” proclaimed the Executive Vice-President of the EU Commission, Frans Timmermans.

So far, though, no hydrogen-powered crewboat has been seen, let alone a hydrogen-powered construction support operations vessel (CSOV) for windfarm support, which the company said it was also interested in building. However, a few months ago Windcat Workboats did announce that Stephen Bolton had been hired from Bibby Marine as Managing Director CSOVs, saying that CMB would “support Windcat with its plans to build a CSOV business over the next years that will lead by example in terms of best-in-class designs with Hydrogen deployment and customer focus.”

Five Gold Rings from the British Taxpayer

CMB did win a grant of around US$900,000 from the British government in September to get additional taxpayer support from the Clean Maritime Demonstration Competition for its plans to further develop hydrogen bunkering in the UK. Windcat’s proposal can be seen in the second tab of the British government’s spreadsheet here.

The grant application actually states that, “working with CMB Revolve Technologies, Windcat has developed and built (sic) a Hydrogen Powered CTV. To operate this vessel in the UK, shore-based hydrogen bunkering is required and once sufficient bunkering is available further CTVs will be manufactured or converted from diesel. Without hydrogen at the ports, we cannot deploy H2 powered vessels and it is vital that we build an infrastructure.”

Obviously, with the billion-dollar fortune of the family, and its interest in Exmar and Euronav, as well as CMB, you would have through that perhaps the Saveryses themselves could fund the fuelling station. You’d be half right. They pay for half, but CMB succeeded in getting the UK government to fund the other half of the costs of its first hydrogen bunkering trailer, which will operate out of either Workington or Grimsby, with the tube trailer refuelling at the Liverpool hydrogen filling station owned by Air Liquide.

“The Bunkering trailer will be moved from the site using a partially hydrogen-fuelled truck. The project will link with the CTV at Grimsby and will conduct bunkering and re-supply experiments to research the commercial and legislative compliance issues with regards to the entire end to end process,” the company claimed.

Windcat versus CWind and HST – new fuel to the fire

From a commercial point of view, this is a game-changer. The next generation of crewboat from rival CWind is a hybrid surface effect ship (SES) with diesel-electric engines and battery-hybrid capability. CWind is owned by private equity as part of the Global Marine Group, which we have already observed faces an existential challenge in its traditional cable lay and cable repair markets (here).

CWind’s vision for the zero-emissions future is a battery powered crewboat that could recharge directly from electricity supplied by the windfarm itself in-field at power-buoys. Number three crew transfer player HST Marine has also adopted diesel-electric hybrid for its new build CTV series (here).

Now Windcat is opening up a whole new fuel supply chain, which it will control, with a completely different zero-emissions power source, before the proto-type power-buoy from Maersk Supply Services is even tested offshore (here).

We admire the Saverys vision for a hydrogen-powered future for the maritime industry, and we admire their chutzpah in getting British taxpayers to pay for half of the first mobile hydrogen bunkering station in the UK for Windcat.

However, they are not alone in having their hand out to the taxpayer, as we shall see later in this yuletide list. Green energy proponents often seem keen on the colour of taxpayers’ money.

Swire Pacific Offshore – hacked, in so many ways

Last year we were reporting the shrinkage of Swire Pacific Offshore, as the company’s fleet fell from 73 vessels at the end of 2019 to just 61 ships at the end of 2020 in what we described as the “Sale of the Century” here.

The disposal process continued this year, with the company selling off its largest and most sophisticated vessel, Pacific Constructor, which was bought by the Taiwanese newcomer Dong Fang Offshore to work in the windfarm sector (here). Swire also sold its stake in the Hongkong Salvage and Towage joint venture (here).

By June 30 this year, the Swire Pacific Offshore fleet had fallen to just 56 vessels through a combination of scrapping and second-hand sales, and “at least six more vessels are planned to be sold by the end of 2021,” the company reported in its half yearly results.

Then, to cap a rotten year, in November the company’s IT systems were hacked, and it suffered a serious data breach, which resulted in the loss of sensitive commercial and confidential personal information.

The company’s statement on the hacking is here. Ouch!

K-Line liquidates and sells to REM and Borealis

But at the time of writing, Swire Pacific Offshore is at least still in the offshore market, enjoying the fruits of the slow market recovery. It was widely rumoured in Singapore that the company would be sold by its disillusioned parent company, but despite speculation, so far, this deal has not yet occurred, at the time of writing.

In this respect Swire Pacific Offshore has done better than Japanese owner K-Line, which stunningly announced on Friday, December 17, that it was exiting the entire offshore sector and dissolving its subsidiary in Norway after 14 years in the industry (here).

K-Line has sold its four STX PSV 06 design platform supply ships KL Brevikfjord, KL Barentsfjord, KL Brisfjord, and KL Brofjord, which delivered in 2010 and 2011, to REM Offshore. The DP2 PSVs are Norwegian-flagged and carry Clean Design Notation, with diesel electric propulsion, 1,100 squares metres of clear deck space, and over 5,000 DWT in cargo capacity.

The also company sold its two huge anchor handlers KL Saltfjord and KL Sandefjord to affiliates of Borealis Maritime, the private equity backed owner, which had hitherto only operated a quartet of PSVs plucked from lay-up and the bankruptcy of ill-fated World Supply under the management of its Aurora Offshore subsidiary.

KL Saltfjord and KL Sandefjord are large powerful anchor handlers built in 2011 to the STX AH 12 design for operations in harsh environment. The vessels have a massive bollard pull of 397 tonnes, with large chain and fibre capacity, and both are fitted with an IKM WROV in a hangar, which makes the vessels ideally suited for pre-lay and other high-tension work. It’s a game changer for Aurora and Borealis.

K-Line announced a stonking JPY17 billion (US$150 million) loss on the sale of the offshore vessels, which industry sources suggest were sold for around US$100 million in total. Looks like somebody in Tokyo wasn’t writing down the value of the assets on the balance sheet in line with the market after the collapse in rates and activity in 2014. How strange.

Is the worst finally over? The geese are a-laying

If there is one sorry consolation for the sad tale of K-Line’s liquidation, it is that we can probably now officially call that the bottom of the offshore market has passed for this cycle.

The sale of a Japanese fleet has previously heralded the recovery of the offshore market. In 2001, Tidewater bought the offshore fleet of doomed Japanese owner Sanko (here), which had entered the market in 1998. The sale came just ahead of the longest and most sustained boom in the offshore industry, and Tidewater was able to flip six of the anchor handlers to Deep Sea Supply for a handsome profit in 2005.

Sanko then tried to re-enter the industry when the oil price peaked in 2008, but ended up selling its entire new offshore fleet once again as activity dipped, and in 2010 Tidewater acquired five 120-tonne bollard pull AHTS vessels from the Japanese shipowner, before Sanko went completely bust in 2012. Swire Pacific Offshore also picked up some high-end PSVs in that liquidation.

Sayonara, K-Line. Let’s hope your sale is as auspicious as Sanko’s were.

Seven Swans-a-Swimming on oil – at seventy dollars a barrel

It seems hard to believe that in December 2020 we were celebrating that at the end of the trading day on December 18. last year, Brent crude finished at a heady US$52 a barrel. Compared to the horror that unfolded when some US crude prices briefly went negative in April, this seemed a Christmas miracle, and marked oil’s highest price last year since February.

A year on, oil prices are more than forty per cent higher, at over US$70 per barrel, gas prices have more than doubled, and the major fossil fuel producers are finding their mojo again.

Saudi Arabia has estimated that it will achieve a budget surplus of around US$$24 billion in 2022, or 2.5 per cent of gross domestic product, following a fiscal deficit this year of a similar amount, the Financial Times reported here. The surplus is driven entirely by higher oil prices and an end to pandemic stimulus spending.

Reuters reported here that global petroleum inventories have fallen this quarter to their lowest seasonal level for seven years “as producers have failed to raise output to match the rapid rebound in consumption since last year’s coronavirus-driven recession.”

Higher oil prices are turbo-charging growth across the fossil-fuel world. The FT reported that, as the world’s largest oil producer, Saudi Arabia’s economy is forecast to grow 7.4 per cent in 2022, after growing by 2.9 per cent this year.

So, with the return of higher oil prices, we can expect to see a return of the hubris of the oil producers, which in the last boom included Azerbaijan and Saudi Arabia vying to erect the world’s largest flag pole (here), Kuwait hosting the world’s largest firework show (here), and the UAE building the world’s tallest building, the 828-metre-high Burj Khalifa.

Size isn’t everything, but high oil prices clearly help make everything bigger in the Gulf!

Eight maids-a-milking (governments for subsidies)

Our eighth day of Christmas for 2020 was a little tenuous, a reference to the approximately eight-metre summer draught on the PSV Viking Energy, the Eidesvik vessel that is going to be the testbed for a potentially revolutionary US$27 million ammonia-powered fuel cell. The connection may be tenuous, but ammonia, like hydrogen, is going to be one of the hottest topics of the next decade across the entire shipping industry.

Wärtsilä and Eidesvik are partners in the EU-funded ShipFC project to equip Viking Energy with a 2MW fuel cell running on green ammonia. Green ammonia is ammonia produced from renewable energy such as wind or solar or hydro rather than ammonia created from natural gas. The installation is scheduled to take place in late 2023.

Eidesvik has a strong track record in supporting sustainable innovations, the company highlights, having used LNG fuel in its fleet from as early as 2003, and fuel cells from 2006. Eidesvik believes that to achieve the industry’s decarbonisation targets, not only newbuilds will need to have the appropriate technologies, but that existing vessels like Viking Energy must also be retrofitted accordingly.

The Viking Energy project seems a credible project backed by serious money and supported by one of the world’s largest marine engine makers. Ammonia is clearly a major investment focus as shipping tries to identify the “future fuel” that will enable it to decarbonise and hit Net Zero in 2050.

But there are other contenders, both with rival fuels (like the Saverys family and CMB with hydrogen, and like Fugro with its state-sponsored methanol plan here), and rival projects to seize the technological lead in ammonia in the offshore industry.

Can’t see the Forrest for the green fuel

One of the major billionaire backers of ammonia as the fuel of the maritime transformation is Andrew Forrest, the founder and Chairman of the Fortescue Metals Group in Australia, the fourth largest iron ore miner in the world. Having made his personal fortune of around US$15 billion from his 35 per cent stake in the company, which specialises in digging up large tracts of Western Australia and shipping iron ore to China, generating huge emissions in the Chinese steel mills where it is smelted, Mr Fortescue now claims to have seen the light of decarbonisation. China’s steel accounts for about 15 per cent of the country’s carbon emissions, and over 60 per cent of the global steel industry’s emissions (here), so Mr Fortescue has much to atone for.

He has now set up Fortescue Future Industries, with major plans to be come a producer of both green hydrogen and green ammonia. At the COP26 conference in the UK he painted a fleet of London taxis green and signed a deal to sell hydrogen to the JCB digger company, with the bold statement “green hydrogen can save us, but waiting for it won’t.”

MMA Leveque is racing Viking Energy

Last month his Fortescue Future Industries announced a ground breaking deal for the conversion of the PSV MMA Leveque to run “almost entirely on green ammonia” in Australia.

The company launched a major attack on the oil and gas industry in a video featuring a youthful cloakroom attendant describing the “crock of sh*te” spouted by “dinosaur” “fossil fuel executives” on the matter of green energy (here).

The MMA Leveque conversion will see Dr Forrest put his money where his mouth is.

Many questions on the cost, the technology and the process

Both Fortescue and MMA are tight-lipped on exactly which company will be providing the ammonia fuel cell to power the 2010-built, 3,300DWT DP2 vessel, the exact details of the technology, where the conversion will take place, and how much it will cost. Indeed, technical information is singularly lacking, unlike the meticulously planned Eidesvik project.

Fortescue claims that it has “the technology, the knowledge, the finance, and, most importantly, the will to make it happen.”

What’s interesting about this development is that, if successful, it would catapult Fortescue far ahead of any of the other marine ammonia power projects in 2022, and take Australia to the fore of the decarbonisation revolution, in not just offshore, but in the entire marine industry.

MMA Offshore finally gets some proper techno-pixie dust

In the past (here) we have derided MMA for its “techno-pixie dust” approach to innovation. The MMA Leveque project is a genuine ground-breaker, however, and if Fortescue can get the vessel running on green ammonia next year, that would be the best Christmas present ever in the decarbonisation of the maritime industry.

Jacques’ back! With ammonia!

Fortescue want us to trust the advice of the cloakroom attendant in their promotional video for decarbonisation. You might be sceptical, but I would trust Andrew Forrest’s bag check lady over one certain former billionaire with an interest in ammonia.

In one of the most jaw-dropping announcements of 2021 (here), former Bourbon owner Jacques de Chateauvieux announced his company JS and Co would be building two firm very large ammonia carriers at Jiangnan Shipyard in China, with an option on two more, each with 93,000 cubic metres of capacity. No price was given for the deal.

After the train crash of Bourbon’s explosive growth and bankruptcy (here), the arrest of his former Chinese partner Simon Liang for “financial crimes” in Myanmar in 2019 (here), and the collapse of the Sinopacific group of yards where Mr de Chateauvieux held a personal stake with founder Mr Liang (here), our immediate thought was to wonder who on earth would be foolish enough to lend Mr de Chateauvieux the money for such a project.

Perhaps Santa will drop us a post card with the answer via [email protected].

Coming next

Last year we highlighted the Norwegian practice of dumping bad news out into the market the week before Christmas. Let’s see whether any companies decide to emulate Borr Drilling and DOF by using this holiday season as an excuse to hide some shocking issues (here).

Our final four days of Christmas will come out next week, from nine ladies dancing, through ten Lords-a-leaping, to twelve drummers-a-drumming. We note that Lord Frost has just resigned from the British government, so our coverage of Myanmar, floating wind, Bourbon and Standard Drilling should be topical.

Merry Christmas!

Background Reading (and Listening)

Reminder: Parts One and Three of our Twelve Days of Christmas 2021 are here and here.

For a truly spectacular choral and orchestral version of the Twelve Days of Christmas turn up your speakers and listen to The King’s Singers and the Tabernacle Choir here.

Aurora Offshore’s existing fleet list of four PSVs is set out here.

The October 2021 press release on the Viking Energyammonia fuel cell project is here.

More information about the ShipFC project from the Fraunhofer Institute for Microengineering and Microsystems in Mainz, Germany is here.

Forbes’ profile of Andrew Forrest is here.

Specifications of MMA Levequeare here.

See here for our past coverage of Jacques de Chateauvieux in Bourbon’s collapse.