Jack Up Barge & Liftboat

Supply & Demand Dynamics

The demand for Liftboat's continues to be driven by the world's increased energy demands. According to BP Energy Outlook energy demands will continue to grow at a pace of about 1.2% per annum until 2040 with oil and gas remaining the dominant source (circa 55%). Further demand for Liftboat's is created from the increased uptake in renewable sources - offshore wind farms - with renewables expected to be the fastest-growing source of energy over the next 20 years. 

Demand Outlook

Demand for Liftboats and/or Jackup Barges within the oil and gas industry is closely linked to oil price and the investments of oil and gas companies. Despite growing investment in the offshore wind energy sector demand remains weakened following the global pandemic and the low oil prices. Following the events of H1 2020, many Liftboat owners reported downward trends in rates and utilization. 

The Middle East, despite downward pressure on rates, continues to support stronger utilization than other regions somewhat protected by the large National Oil Company presence. In recent years the Middle East market has become a major source of demand for owners, becoming progressively more competitive at the same time. Markets in South East Asia and Africa are much less penetrated than the Gulf of Mexico, Northern Europe, and the Middle East. 

*Average global penetration SCM Daleel estimates

Supply Outlook

As of Jan 2021, globally there are circa 221 Liftboats operating (and circa 10 with unknown / under construction status). More than 65% of the Liftboats in operation are used in oil and gas only, 35% are used in both oil and gas and the wind industry, and the remainder (circa 5% ) used only by the wind industry.

*based on publicly available information and SCM Daleel estimates. There may be more vessels, but information on them is not in the public domain. 

Key Players

Below are the global key companies, suppliers and contractors currently operating 5 or more Liftboats and jackup barges around the world. 

Detailed Liftboat Fleet Listings:

• Middle East Fleet - Q1 2021
• Northern Europe Fleet - Q3 2020
   

Portfolio Positioning

It is typical to see spend within the Liftboat category sit in the “Leverage” quadrant of the Kraljic Matrix (low supply risk, high value).

At present buyers are in a strong position with low demand, and high competition between owners.

Cost & Price Analysis

Low oil prices placed significant downward pressure on hire rates and day rates, which went down from $50k-$90k per day in 2014 to $25k-$50k in 2020, depending on the class and location. Below are indicative average charter day rates for liftboats and jackup barges around the world.  Figures may vary depending on the owner, yet this represents the market and its competitive dynamics. 

·       Small Class - $ 12,000 $ 23,000 per day 

·       Mid-size Class - $ 35,000 - $ 45,000 per day

·       Large-size Class - $ 40,000 - $60,000 per day  

Total Cost of Ownership

Strategy

Given the current market conditions, any strategy should be focused on increasing competition and maintaining flexibility in the market. Below are a few options to consider:

• Aggregate Demand - It can often be difficult to get a clear picture of Liftboat demand within an organization due to the mixture of projects (maintenance, installation, well intervention, accommodation, and asset integrity) and different departments responsible for the projects. This often leads to multiple spot charters at shorter notice and higher prices. Try to aggregate demand into campaigns to deliver the best rates. Depending on the demand it may be cheaper and more effective to contract Liftboats full time over individual spot charters.
• Specification and Scope - For marine construction contracts be clear on who is responsible for what in terms of services (ie. are you providing any services), materials  (ie. are there any free-issue materials) and risks (ie. who pays for weather downtime). Where the Liftboat is being time chartered be sure the Liftboat can cover all your scope needs (deck area, cranes, accommodation, water depth). 
• Maintain Flexibility - The most competitive prices will be achieved through short to mid-term charter durations (6 months to 18 months) with Owners reluctant to lock in low for long. Always retain flexibility to exit the charter on short notice (no more than 90 days).
• Competitive Tender - Whether it is a lump sum price for an agreed scope or multiple projects on a daily hire rate competitively tendering in the current market maximizes competition and will drive the lowest rates. 
• Contract Selection - Time charters or Marine Construction agreements are the preferred choice of contract in the oil and gas Liftboat market. Below is a table of the contracting options available for consideration.

Technical Insights

Jack up Drilling Rig vs. Liftboat - Moving on to Location