Firms providing offshore accommodation solutions to the Middle East discuss the state of the market.
As oil prices fluctuate, so do the markets of a number of oil and gas services. One such industry is offshore accommodation. Recent high oil prices and a swathe of strategic investment decisions have resulted in an increase in offshore activity, and this in turn means more beds are needed for the higher number of workers employed on rigs in the waters of the Gulf and beyond.
For this reason the success of offshore accommodation providers are also a bellwether for the overall offshore market, although this is not an exact science. Other factors such as tightened regulations and increased number of inspection of offshore rigs can prompt an increase in the number of offshore accommodation units used, as oil companies will hire units while maintenance and upgrades are underway.
Order Books
A firm which can boast a healthy order book in the region is Millennium Offshore Services, a company which operates across the Middle East. “We’re spread at the moment. We’ve got a rig on a long term contract in the Gulf of Suez in Egypt, we’ve got a rig that’s just come out of Saudi and she’s about to go into a contract in Abu Dhabi,” says Robert Duncan, managing director, Millennium Offshore Services.
“We already have two rigs in Abu Dhabi. In terms of visibility in the Middle East, where we see the most growth in the market is Abu Dhabi.”
Other firms in the sector are also reporting strong demand for their services. “Business is currently very good for the HIRE division with our Offshore Hire Fleet on a large number of our fleet lines running at 100% utilisation,” explains John Fraser, HIRE business development manager for MENA at Specialist Services, a firm which works in both rental and purchasing of offshore accommodation solutions.
“Demands for our hire fleet are being driven by the current oil price and large projects being executed due to the continued rise in the pricing levels of oil.”
However, for Specialist Services, business has not been as good for its EPC division. “Business has been a bit slow for the EPC division albeit with the promise of great potential.
The demand driver for this division comes from offshore field development projects of major oil and gas producers in the GCC region looking to increase the output, upgrade facilities and refurbish projects,” says David Smith, global business development manager for EPC at Specialist Services.
As an example, Specialist Services was recently appointed by ADMA-OPCO and Total to provide engineering, procurement and fabrication services for the refurbishment of existing offshore accommodation and technical modules.
“This appointment is a significant achievement for our business and further reinforces our position in the offshore market sector despite challenging circumstances,” says Smith.
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Competition
With demand reasonably high, particularly in the rental sector, there is the potential for more companies to move into the sector. This may be competition from the Far East or Europe, and the companies already prospering in this region are wary.
“We face a large amount of competition in the market, but the trick is to differentiate your offering,” says Mike Bradley, director of sales and business development at HB Rentals.
“Our main competitors in the region offer a different type of accommodation unit that doesn’t provide the versatility or benefits and advantages that our accommodation units offer. We have experienced significant growth in a relatively short period against an established competitor as a result of us offering a more superior product and service.”
In an environment ripe for new entrants, companies like HB Rentals, are finding ways of standing out from the crowd.
“Our design offers more bed space per square meter and ton of weight, freeing more deck space for our client’s platforms and vessels compared to competitor products. Plus we offer installation hook-up and commissioning capability as well as accessories like walkways, stairways, sewage systems, water making, power distribution and generation,” says Bradley.
“The Specialist Services HIRE fleet stands out because of our emphasis on quality. We build sturdy fleet with quality materials as opposed to Far-Eastern built fleets that are far less expensive, but with sub-standard quality,” says Fraser.
“A thorough understanding of the Middle East market and local climate further cements our competitive edge. Our extensive experience gives us detailed knowledge of the harsh offshore climatic challenges MEA operators face.”
Duncan says competition which is looking to enter into the region will not find it easy.
“At some point in time external competition could come into the region. But I should add that it’s very, very difficult as a new owner and a new operator to come in and set up and break water with the operators in the Middle East, it’s not a straightforward procedure,” says Duncan.
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Differentiation
Competition is reduced by the subtle differences in which the offshore accommodation providers operate. Millennium for example, has its own area of work which others do not offer a service in.
“If you have field maintenance ongoing we’ll put a jack up rig in next to the installation, put a 30m walkway between the installation and our rig and accommodate anything up to 450 people. On average we accommodate about 230 POB across the fleet. 220-230 is the average,” Duncan says.
“What we’ve seen more so in the last 12-18 months particularly is long term inspection and maintenance repair requirements,” he adds.
Far from seeing the market as saturated, Duncan believes that one of the main challenges for the offshore accommodation sector is that it is undersupplied.
“The market in my view is undersupplied. Initially when Millennium was set up in 2007 the market was in an undersupplied position at that point. Then the oil price fell away and the market became tighter. I would say since mid-2011 it has gone back to being a suppliers’ market again,” he says.
Another challenge for the sector is regulation. As with all industries involved with people, safety must be paramount.
“Middle East regulations are similar to regulations in other parts of the world for operation in hazardous areas offshore. In the Middle East, regulations vary depending on country. Generally, here we have regulations that extend to include air conditioning and humidity control, H2S gas detection, living space specifications and requirements,” says Bradley.
However, Specialist Services says that it would like to see more to be done to harmonise regulations in the Middle East with other parts of the world. “As a company that operates on a global basis, we would like to see the GCC region embrace constructive and robust practices common to regions like the North Sea and Americas.
Practices like ‘preventive maintenance’, pioneered by Specialist Services in the GCC region, is a well established and accepted trait in Europe and North America. This particular strategy is executed through Specialist Services’ assets management solutions also referred to as ‘Fleet Management System’ (FMS),” says Smith.
The FMS stores critical product specific information such as ID numbers, manuals, drawings and certification. It sends automated E-mails to users at the client’s end when certifications are due to expire and when service visits are due.
Millennium’s Duncan also sees a difference in the regulations in the Middle East compared to other parts of the globe. “We’ve noticed that up until March this year, we’ve only been working in the Middle East and North Africa region. We’re now working with ConocoPhillips in Australia,” he states.
“The HSE standards or the QHSE standards that are required by an operator like Conoco who are a global operator, are the highest we’ve ever seen.” “We’re now using that as a benchmark for our company. I’m not saying the standards in the Middle East are less stringent, they are different, but what we’ve started to do is roll out the same QHSE standards fleet wide.”
One issue which the industry may consider to be a pleasant challenge is expanding operations. Lack of supply has led some companies to look for ways to expand rapidly.
“Our objective in the short term is to bring another asset into the business,” Duncan says. “It will likely be deployed in the Gulf. It’s not a simple process, the process of an acquisition and a simple conversion is six to nine months. We’re actively looking in the market for acquisitions right now.”
“We’ve just completed a nine month project that came out on time and on budget. Between acquisition and conversion and coming out of the yard it was a 12 month project in total. In our experience nine to 12 months is the lead time I’d say,” he adds.
Offshore accommodation is a market with bright prospects, and rig operators have plenty of options when looking for that home from home as the region seeks more offshore.
