COLUMN | The twelve days of offshore Christmas: Brent Crude, ammonia fuel cells, Myanmar, floating wind turbines, Bourbon, and Standard Drilling – Part Two [Offshore Accounts]

Not long until Christmas now! As the big day gets closer, you will have seen Esvagt, Swire, Seacor, Cairn Energy, Vantage and Shearwater featuring in Part One of our Twelve Days of Christmas for 2020 here. So, who replaces the seven swans-a-swimming and twelve drummers drumming in Part Two of our offshore sing-along? Forgive us if some of the links are a little tenuous, but the mulled wine has hit hard this year.

Seven weeks of straight gains for oil

Oil rocked back to price levels not seen since March last Friday, completing seven glorious weeks in a row of consecutive price gains. Investors celebrated the beginning of the Covid-19 vaccine roll-out, heralding the possible return to normal patterns of demand and consumption, the easing of travel restrictions and a cure to the disease which has claimed close to two million lives this year.

At the end of the trading day on December 18, Brent crude finished up 76 cents, or 1.5 per cent, at US$52.26 a barrel. US West Texas Intermediate crude powered ahead to US$49.10 after reaching US$49.28, its highest price since February. Hurray!

Of course, beaten up industry players should know better than to celebrate, and will perhaps keep the Moet on ice… Monday and Tuesday saw prices fall sharply, as the UK reported a new mutation of the coronavirus, which seems more contagious and transmissible, if not more virulent. A host of nations promptly imposed travel restrictions on the UK, South Africa and other countries where the new variant has been found.

At the time of writing early in the morning in Australia on Wednesday the 23rd, Brent had retreated to US$49.93 per barrel. Reuters coverage here.

Eight metre summer draught on ammonia-powered PSV

Well, 7.9 metres to be exact. That’s the maximum draught of Viking Energy, the Eidesvik PSV which is going to be the testbed for a potentially revolutionary US$27 million ammonia-powered fuel cell in 2024.

I warned you some of the connections might be a little suspect. Chartered by Equinor in the Norwegian sector of the North Sea under a recently renewed, five-year time charter contract, the vessel has 1,060 square metres of clear deck, 2900 DWT, and is already LNG-powered. Viking Energy was the first ship in the world to receive “Battery Powered” class notation in 2016.

We’ve already covered the move to diesel electric and battery hybrid power for PSVs here, but the ammonia fuel cell is the next possible step to a zero emissions PSV, and to a zero emissions shipping industry more generally. Eidesvik and Wartsila, supported by Norwegian and EU government research subsidies, will install cells with a 2MW output on the vessel. Full details of the ground-breaking project are available here.

The Saverys family behind Euronav are backing hydrogen for green vessel power (see the Fifth Day of Christmas in Part One here) but Warsila, Equinor and Norway appear to be backing ammonia.

“As part of the testing, the vessel will use ammonia in transit between harbour and offshore installations for one year,” said Vermund Hjelland, Vice President of technology and development at Eidesvik Offshore. “In addition, we envisage that ammonia will be used to power the vessel when alongside quay. Our ambition is that 60 to 70 per cent of the energy consumption will come from ammonia during the test period. In addition, we want to demonstrate that the technology can supply up to 90 per cent of the total power demand.”

The remaining energy consumption on board will be powered by LNG, which has been Viking Energy’s main fuel source since its delivery in 2003.

Nine months of work on Block M9 Myanmar for Hak-5

Westwood Energy recently reported how Myanmar is finally moving ahead with major drilling plans long postponed because of the Covid outbreak. The former Burma is potentially the next gas-exporting giant in Asia, and already has a pipeline connecting Posco’s offshore Shwe field to southern China.

Japan Drilling’s mid-water semi-sub Hakuryu-5 is expected to depart from Singapore for Block M9, offshore Myanmar, any day now, following a six-month delay from the original planned start date due to the pandemic. Covid infected more than 150,000 migrant labourers in Singapore, compared to just 4,000 other people in the wider population of the Lion City, tests (here) have shown.

The outbreak led to restrictions in the Singapore shipyard where the rig underwent a special survey. Hakuryu-5 arrived from Indonesia in April, after a contract with Medco Energi, and has now completed its five-year survey at Keppel FELS.

The 1977-built rig is contracted to PTTEP Myanmar for around 283 days working in the Andaman Sea (nine months, as near as dammit, for the purposes of this article). Westwood also reported that PTTEP Myanmar has issued a market survey for another moored floater for an eight firm well plus five-well option well program pencilled in to commence between May and June of 2022. This rig would be needed for the further development of Zawtika field, also in Block M9.

Also scheduled to depart shortly from Johore in Malaysia to Myanmar is the Transocean ultra-deepwater DP drillship Dhirubhai Deepwater KG2. Woodside Petroleum has chartered the rig for three wells in Blocks AD8, AD1 and A7.  Woodside hoped that drilling would commence on December 30, but AIS information shows the rig is still stationary in Malaysia. The campaign is expected to finish in April.

Dhirubhai Deepwater KG2 arrived from Dampier, Australia, at the end of September and in October the rig was taken on-hire on standby by Woodside Petroleum, at half of the operating day-rate. The full day rate will come into force when operations commence.

Ahead of the pack, however, was the Diamond Offshore ultra-deepwater semi-sub Ocean Monarch, which finally departed from Malaysia for Myanmar on November 25, after a long standby at anchorage in Johore since April, waiting on Covid delays. The rig is under charter to POSCO International and has been contracted for a seven well programme estimated to take about 18 months.

Ocean Monarch was being towed to location, moored and then supported by UOS’ 200-tonne bollard pull, 12,000kW AHTS GH Endeavour and GH Columbia.

Ten MB turbines for Italy’s first floating wind farm

Offshore wind power just keeps growing, as we have mentioned several times this year. Now, we see the funds raised for the first major floating wind project in the Mediterranean. Copenhagen Infrastructure Partners (CIP) has invested in the development company 7 Seas Med, which has been developing a 250MW floating wind project off the coast of Italy, in the Sicily Strait (here).

7 Seas Med requested a 30-year maritime state concession in the Sicilian Channel earlier this year. According to the application document, the wind farm will comprise 25 wind turbines, each with an individual capacity of 10 MW, installed on Norwegian company Stiesdal’s semi-submersible TetraSpar design floating foundations (more here).

The project is called Hannibal and is valued at €740 million (US$900 million). It is not clear if it is named after the Carthaginian general who attacked Rome with an army mounted on elephants in 216 BCE, or after Michael Hannibal, who is one of CIP’s renewable energy partners, or after the fictional serial killer Hannibal Lecter. Perhaps all three?

Hannibal the offshore wind farm is anticipated to enter the construction phase in 2023, providing potential work for large anchor handlers.

Meanwhile, in the States, Keppel announced the keel-laying of the first American-built wind turbine installation jackup for Dominion Energy (here) at its Keppel AmFELS yard. With a price tag of US$448 million the unit will be Jones Act-compliant and will be the second most expensive jackup ever built.

SBM managed to blow US$470 on the disastrous Yme jackup for Talisman in the North Sea; the unit was ultimately scrapped without ever producing oil (see here). Let’s hope Keppel and Dominion have better luck with their monster unit than SBM.

Eleven months for Bourbon restructuring

As we reported here on January 2. 2020, all of Bourbon Corporation’s assets, including over four hundred vessels of various types, were transferred to a new holding company called Société Phocéenne de Participations, owned by the company’s European creditor banks.

Now, eleven months on, Bourbon’s recovery plan with all its creditors was approved on December 14, 2020, by the Commercial Court of Marseilles. This decision completes the financial and capital restructuring of the world’s largest offshore owner in terms of fleet size – for now.

The agreements signed with the creditors reduce Bourbon’s debt by more than €1.5 billion (US$1.83 billion) from €2.648 billion (US$3.22 billion) to “just” €1.065 billion (US$1.3 billion), including €228 million (US$277.6 million) in bonds which are redeemable for shares in the Société Phocéenne de Participations by the end of 2021, “depending on market conditions,” as the company put it in the press release here.

The conversion of the major part of the company’s debt into equity follows the example of Tidewater, Hornbeck and Solstad in their restructurings and strengthens Bourbon’s balance sheet. Bourbon’s agreements provide for new financing of up to €150 million (US$182.6 million) – repayable over 3 years – as well.

The restructuring will result in new shareholders coming onboard alongside the long-suffering French banks BNP Paribas, Crédit Agricole, Crédit Mutuel, BPCE and Société Générale. ICBCL (the Industrial and Commercial Bank of China’s leasing division) and Standard Chartered Bank will take stakes of approximately 18 per cent and 10 per cent, respectively. The other creditors who have agreed to convert part of their debt into capital will hold the rest of the capital.

SPP’s Supervisory Board is chaired by Jean Peyrelevade, an 81-year-old centre-left politician (Wiki here), with Technip veteran director Olivier Dubois as vice-president, along with a host of venerable French financiers and oil industry veterans, including Carsten Plougmann, the former CEO of Maersk Supply Service.

You can read the full CVs of the board here… and we thought Hornbeck Offshore has an unusual board (here). Gaël Bodénès will become sole chief executive officer.

Bourbon says that its recovery is based on the “deployment” of what it calls the #BOURBONINMOTION strategic action plan. Despite the gratuitous use of the trendy #, this plan is not yet trending on Twitter.

Success may depend on its senior management team not being sent to prison for historic bribery accusations in Africa, which are still pending, after the court in Marseille decided to postpone the trial in February to an unknown future date (here).

Bourbon’s strategy has three elements – selling vessels to shrink its fleet and pay down debt, the provision of more integrated services to clients, and the digitalisation of the company’s ships, which it hopes will make it, “possible to improve operational excellence for customers while gradually reducing vessel operating costs and CO2 emissions”.

In terms of resizing, Bourbon has announced that the target fleet size at the end of 2021 will be less than 350 vessels. So, the sale of the century (here and here) will continue. See also day six of Part One for Swire’s sales…

Twelve Standard Drilling PSVs

Finally, the twelfth day! What better indicator for the health of the offshore industry than Standard Drilling, which owns a fleet of a dozen platform supply vessels? Utilisation for its four large, 4,000DWT+ PSVs totalled 74 per cent in October and November, excluding one ship in lay-up.

Standard Viking has won a new one-year firm time charter contract with an unnamed customer at levels, “above opex”, the company reported here, in what must be the most depressing piece of good news in this depressing year. The contract is scheduled to start in January, and the customer holds a further two annual options to extend the contract “at increased rates”. Above opex.

In mid-December 2020, Standard reported that Standard Princess started on a nine-month firm contract in the UK sector of the North Sea with CNR, whilst Standard Supplier is currently on a 45 days firm contract with Equinor, and Equinor also has another 45 days of options.

Standard Olympus is laid up in Sunderland, according to brokerage Westshore.

Standard Drilling’s other eight PSVs are medium-sized units of UT755 LN design of 3,300DWT, which it partly owns through its 28 per cent ownership in Northern Supply. The ships are managed by Fletcher Shipping of the UK and include FS Abergeldie, FS Balmoral and FS Carrick.

Out of these eight Northern Supply units, Standard reported that three are working on term contracts in the North Sea. Three more are what is described as, “held in house for maintenance”, which is a very polite way of saying that they probably aren’t earning any money, another one is in warm lay-up, and the eighth is in cold lay-up. So effective utilisation of the whole Standard fleet is just fifty percent.

Standard bought a 33 per cent share in a VLCC in January. According to Fearnleys (here) this one tanker could command a time charter rate of US$29,000 today after a rollercoaster year for crude carriers, more than the three large working PSVs can command in the spot market. Let’s see which segment delivers the goods for Standard in 2021.

Merry Christmas!

Alternative ideas

You didn’t like our twelve days of Christmas? Other ideas might include:

On the twelfth day of Christmas 2020, my true love gave to me:

• 104,000 followers for the son of the President of Equatorial Guinea on Instagram (here)
• Twelve warm stacked premium jackups (Borr Fleet status report here)
• Eleven dollar Tidewater shares (briefly in November, before they plunged to just over $8 now)
• Ten billion US dollar reduction in the ExxonMobil capital spending budget in 2020
• Nine thousand job cuts at Shell
• Eight days until the UK leaves the EU Single Market
• Seven million more votes for Joe Biden than Donald Trump
• Six weeks of ethnic cleansing in Nagorno-Karabagh
• Five thousand pounds a day for a PSV (on the North Sea spot market this week)
• Four new Arab peace deals with Israel (Bahrain, UAE, Sudan and Morocco, but Haaretz newspaper is not a fan here)
• Three Aussie cent MMA Offshore Shares
• Two Pacific Drilling Chapter Eleven filings (in less than three years)
• And a partridge in a pear tree.

Merry Christmas! May your happiness be large, and your bills be small.

To see and hear the Muppets and John Denver singing the original Twelve Days of Christmas, click here.

Background Reading

There’s much more about the science of ammonia as fuel for vessels here.

The LNG system on Viking Energy is described here.

Summary of offshore Myanmar production is here.

Specifications of the GH Endeavour and sisters are here.

If you are searching for the 7 Seas Med windfarm project, don’t click on this link to an identically named plastic surgery centre in America.