Tide turning on vessel supply and demand

The design, construction and use of vessels in the offshore wind industry is changing fast to keep pace with the progress of a sector that is under pressure to grow quickly while constraining costs. But is the drive to produce more vessels outpacing the market's needs?

The pod system on CTruk’s vessels means they can switch from crew transfer to component transport
The pod system on CTruk’s vessels means they can switch from crew transfer to component transport

Demand is continuing to rise for vessels that can facilitate the construction and upkeep of large, far-from-shore wind power projects. Until a few months ago, the hottest topic of conversation in the industry was an anticipated shortage of vessels. But the tide appears to have turned. Vessel operators are now starting to talk about the problems caused by oversupply.

"It’s a slow market at present," says Martin Huss, chief sales officer of specialist vessels provider A2Sea. "This is a high-investment area of business, where payback time is very long. Now there are more vessels than projects."

His view resonates to some extent with Joe Phillips, head of strategy and policy at global consultancy GL Garrad Hassan. "There is some evidence of an over-supply situation developing for main installation vessels over the next 36 months," he concurs, "although I would not say we are moving from famine to feast just yet."

A host of policy, permitting, financing and logistics hurdles have combined to slow down the progress of projects in several key geographical areas. In Germany, recent rules on grid connection liability should provide more confidence for investors but policy uncertainty is likely to affect developments over this year and next. In France, tender awards are still being made, with project details now starting to emerge. But construction has yet to start.

Notoriously, there is no steel in the water yet in the US, while China has vast potential and ambitious plans but has so far progressed slowly. In any case, the geographical location of these two large potential markets puts them out of reach of most Europe-based vessel operators.

Conversely, progress in other northern European markets, including Belgium, the Netherlands and, tentatively, some of the Nordic states, is a promising development for vessel owners and operators. A larger pool of potential clients offers them the opportunity to expand their fleets and the prospect of being able to deploy them flexibly for more days of the year.

Relative abundance

There are now more vessels than ever available for hire, but project developers and EPCI contractors can choose from only a limited range of proven vessels manned by experienced crews for work to be carried out within their planned time window — for example, this summer. "So the main issue is not so much the availability of vessels per se, but the availability of contractors with proven vessels and an established track record of delivering offshore wind projects," says Phillips.

Nonetheless, the general picture is one of abundance rather than dearth. "The market is in rapid development, with new vessel types, new vessel owners and existing owners ramping up," says Hans Nadolny, head of marine operations at Siemens Wind Power. "This, combined with a relatively large existing fleet, gives a good selection to pick from," he adds.

The buoyant offshore wind market has attracted numbers of new entrants, but how many will succeed in the long term? Huss anticipates imminent consolidation in the sector. He says there are at least a couple of vessel operators out there that "can’t make enough money to reinvest".

Nadolny sees a certain amount of consolidation as an inevitable development. "Some consolidation and a few mergers would be natural as some companies have developed from ‘one-man companies’ to medium-sized companies in a relatively short time," he says.

According to GL’s Phillips, it takes considerable muscle to achieve the standards required ultimately to succeed as an offshore wind vessel operator. "There is some scope for consolidation, especially as contractors from the world of oil and gas start to take this sector more seriously," he says. But he sounds a warning for newcomers: establishing a track record in the sector will take time; it can take several years from commissioning to the point where a vessel has overcome teething issues and is considered by the market as a proven asset.

An additional challenge for vessel operators is that the market is demanding ever-higher specifications for offshore wind vessels. Even players who have assets with an established track record "cannot rest on their laurels", says Phillips.

Demand and supply

There seems to be an intrinsic disconnect between the requirements of project developers and those of vessels operators. High utilisation rates are essential for expensive jack-up vessels: "We need more than 300 days a year," says A2Sea’s Huss. This can be difficult, especially with adverse weather sometimes affecting projects for up to four consecutive weeks. "This is very hard for the project developer, we understand that," he adds.

The answer in many cases has been for developers and vessel operators to develop a close ongoing relationship whereby each can support the other through demanding circumstances and unexpected difficulties. "We closely examine the market and are well informed about new initiatives," says Siemens’ Nadolny. "At the same time, we are in dialogue with vessel owners to look into new developments and discuss new features and systems."

Looking ahead, as wind turbines get bigger, foundations get heavier and projects move to deeper waters, upgrades to crane capacities and leg lengths for jack-ups, for example, will be needed. But even crew transfer vessels, which by definition do not require as much specialist equipment, need advances in design and construction to minimise the amount of weather downtime, for instance.

Some providers of installation services are also developing vessels for crew transfers, so that they can offer the developer a more complete package. Another exciting development is wind support vessels that can carry out different functions. CTruk’s 50T design, due to be ready in 2014, features a ‘pod’ design to allow the vessel to switch from crew transfer mode to one featuring a large deck area suitable for transport of components.

Further down the road, vessel operators are aiming for bigger, heavier vessels that can operate farther from shore and in most weather conditions. A2Sea, says Huss, has struck a partnership with shipping company Teekay to convert some of its Norwegian tankers into dedicated offshore wind vessels. Plans are in place to convert a 246-metre tanker into a new installation vessel. "We just need a firm commitment of one year’s worth of work," says Huss. "We’re ready to push the button in 2013, which means the new vessel would be available in 2016." That could be very good timing for some of the larger projects due for construction in the North Sea around that time.

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