Pipe Laying Vessel & Services

Pipe-laying vessel (PLV) or pipe-lay vessel is a marine vessel that is used for submerged laying of pipe. In most of the cases (depending on the vessel design) the same vessel can be used for other subsea tasks, such as subsea installation, cable / umbilical laying and heavy lift operations if it equipped with a heavy lift crane. Pipe-laying vessels could be Derrick lay barge (aka anchored vessels) or Dynamically positioned (DP) which is required to ensure vessel stability during operations offshore. DP vessels bring more stability but cost significantly more than anchored vessels

Barge
Dynamic positioning (DP)
CRA Welding

IMPORTANCE

LEVERAGE STRATEGIC ROUTINE BOTTLENECK

BUYER POWER

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WEAK

BUYER POWER

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BALANCED

BUYER POWER

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STRONG

Category Description Image

Category Description

Pipe-laying vessel (PLV) or pipe-lay vessel is a marine vessel that is used for submerged laying of pipe. In most of the cases (depending on the vessel design) the same vessel can be used for other subsea tasks, such as subsea installation, cable / umbilical laying and heavy lift operations if it equipped with a heavy lift crane. Pipe-laying vessels could be Derrick lay barge (aka anchored vessels) or Dynamically positioned (DP) which is required to ensure vessel stability during operations offshore. DP vessels bring more stability but cost significantly more than anchored vessels. A number of other support vessels are generally required during pipe laying operations, such as barges for transporting pipes (with concrete weight coating when required), vessels for touch-down monitoring and diving support vessels if required. 

There are various methods for offshore pipeline installation, namely: 1) S-Lay, 2) J-lay, 3) Tow-in and 4) Reel barges. S-lay and J-lay vessels are equipped with a firing line, whereby pipe joints are welded, inspected, coated (if required), as the pipe moves slowly through the working line, with various stations and lowered to the seabed from the back of a vessel.

When using the S-Lay method, a pipe is submerged and curved in ” S” shape from the back of a vessel, till it reaches the seabed, also known as a “touchdown point”. A device called stinger helps to control the curvature of the pipe, to ensure it does not bend or get damaged. Effective tensioning techniques are used to ensure the pipe is not buckled. S-lay method is limited to the water of the depth of around 2,000m.








 

Source: Huisman Equipment Source: heavy lift news

 

J-Lay method is very similar to S-Lay, except the fact that the pipe is submerged almost vertically. This technique reduces stress on the pipe; allow working in deeper waters and more hostile subsea environment. J-lay is a slower method compared to other techniques and not suitable for shallow waters. 






Source: Huisman Equipment Source: Huisman Equipment

 

Tow-in method literally involves towing pipes that are afloat. Generally, tugboats are used for this laying method. Further on, it could be a surface tow, mid-depth tow, off-bottom tow and bottom tow.







Source: Heavy Lift Specialist Source: Drilling Formulas

 

Reel barges and Flexi Lay are vessels that have horizontal or vertical reels to which small diameter pipe, cable, the umbilical and flexible pipe is spooled.  A vessel with horizontal reels can only do the S-lay installation, whereas vertical reel barges can do both methods, J-lay and S-lay. To reduce installation costs, pipe or cable is reeled onshore and lifted to an installation vessel either in a port or offshore, using fitted cranes and a transport barge.



Source: Huisman Equipment Source: Royal IHC

 

In the Middle East, S-Lay is the commonly used pipeline installation method, with Reel barges used for cable/umbilical laying. In some instances, the same S-Lay vessel can be used for the installation of cable and umbilical, and largely depends on the nature of a given project.

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Risks & Opportunities

  • Poor risk allocation will result in large cost escalation of as much as 40%, in particular during the high times in the industry 
  • Weld repair rate is a KPI to look at, as it tells two things: 1) Track record and how good a contractor is in welding and 2) Like-hood of longer project duration and subsequently late startup, as a result of welds repairs 
  • Welding of CRA pipe is highly precise and requires guarantees of zero-defects with sustainable production afterwards. Hence, verified details and track records of CRA welding expertise is critical to understand the capabilities of the contractor 
  • Job timing planning is key. When it comes to GCC and India, those two markets are complementing each other in terms of 1) Vessel specifications required and 2) Weather windows when most of the work is done. Projects in India are done mostly during November-May, after which monsoon season starts and lasts till September - October. In contrast, most of the offshore work in GCC happens between May-October, during a workable weather window, with more productive time. November-April periods in the Arabian / Persian Gulf produce around 30%-50% of non-productive-time
  • Weather risk. Consider managing the weather risk on a case-by-case basis. There may be times when the client will be in a better position to bear this risk, than a contractor.
  • Diving Support Vessel (DSV). When it comes to laying cable, umbilical or flexible pipes, standard diving support vessel (DSV) or a construction vessel can be used, which is a much more cost-efficient option. A good size DSV would be in the area of $50k-$100k per day, compared to the range of $150k- $400k for a pipe-laying vessel. 
  • Procurement of materials. When a pipe-laying project involves significant quantities of materials to be procured, assess the rationale and opportunities to conduct procurement and free-issue the materials, in particular when the materials are very standard. There are two main reasons: 1) Suppliers prefer to work directly with an oil company, thus may give better prices and delivery; 2) Pipelaying companies generally have heavy debts and in order to fund the procurement of required materials, a markup and the cost of loan will be included, which could equate to as much as 10%-20%

Supply & Demand Dynamics Image

Supply & Demand Dynamics

Demand

Unlike cable-lay / reel barge vessels which are used in the offshore wind industry as well, the demand for pipe laying vessels is directly affected by offshore project developments in the oil and gas industry. Many players report projects that are postponed and not cancelled and expect their enabler assets to be busy in the 2nd half of 2020. 

 

Supply

The market for pipe laying and heavy lift vessels is geographically clustered, with a fairly large majority of vessels used only in certain parts of the world due to 1) Water depth and size of projects/facilities, 2) Transit distance and time and 3) Weather windows. Yet, there are vessels that a “global” or cover wider geography and used for multiple purposes globally. Generally, those vessels tend to be with lower crane capacity (below 3,000 ton).

While most of the companies’ own vessels, a significant proportion of the fleet is on charter terms from other owners, be it a bareboat charter or fully crewed, especially during the high times. Shipbuilders, in particular in China, are well known for this model, whereby a vessel is released on bareboat charter to major contractors.

Another important element of the supply side is welding services, which could reach as much as 40% of the daily spread cost. While some companies would have welding capabilities in-house (or have a shareholding in a company), a large number of contractors would outsource welding services on their vessels to specialized welding companies. While the list might be fairly diverse when it comes to standard pipe welding, welding of pipes with corrosion resistance alloys (CRA) is extremely complex and there are a limited number of 3rd party companies who are qualified to do it. Serimax, Magnatech and CRC-Evans are the key 3rd parties suppliers of CRA welding services. McDermott and Saipem have CRA welding capabilities in-house, with TechnipFMC owning a part of Serimax.

As of Q3 2020, the average utilization levels of pipelay vessels is between 60% to 75%, which is a fairly good level of utilization, given the current business environment in the offshore sector. Vessels that are enablers and can be used globally for various jobs generally show higher utilization, compared to less robust vessels. 

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Key Players

Over the years, the market went through various cycles of consolidation, growth and bankruptcies. There is a solid segmentation in the market, between global and regional players, as well as fully integrated and not. Below is the list of global and integrated companies with full expertise in-house (or subcontract some portion of it) 

  1. All Seas
  2. COOEC
  3. McDermott International
  4. TechnipFMC
  5. Saipem
  6. Subsea 7
  7. Sapura 

It shall be noted that McDermott, TechnipFMC and Saipem historically have been major players in the Middle East, each generating more than 50% of their revenues from the Middle East & Africa. In contrast, Subsea 7, Sapura, COOEC and All Seas have no or very little presence in the Middle East. However, in 2017 and 2018 Subsea 7, Sapura and COOEC have been very active in the GCC for prequalifying, tendering and winning projects. Their presence in the region, in particular in Qatar and Saudi Arabia, is expected to sustain and strengthen.

Smaller and niche companies specializing in pipe-laying and subsea work and/or a particular geographic area, with some engineering and construction capabilities. NPCC, Dynamic Industries and Larsen & Toubro (L&T) are active players in the region.    

  1. NPCC
  2. Telford Offshore
  3. GEOCEAN Entrepose
  4. Hydra Offshore Construction
  5. Heerema Marine Contractors
  6. GSP Offshore
  7. Van Oord
  8. Boskalis
  9. Larsen & Toubro

 

Vessel fleet in GCC. As of Q3  2020, the following vessels are used ( or might be used) in the GCC and their location   

Vessel Name  Owner/ Operator Crane(mt) DP Capabilities Latest Location Area of Operations
DLV 2000 McDermott 2,000 DP 2 South America  Global
DB 27 McDermott 2,200 None, Derrick Lay Barge KSA MiddleEast
DB 30 McDermott 2,800 None, Derrick Lay Barge Qatar MiddleEast, SEA & India
DB 32 McDermott 1,500 None, Derrick Lay Barge Qatar MiddleEast, SEA & India
Global 1201 TechnipFMC 1,200 DP 3 Indonesia MiddleEast, SEA & India
Telford - 34 Telford Offshore 800 DP 3 Mexico  Global
Telford - 25 Telford Offshore 800 DP 3 SEA Global  
Sapura 3000 Sapura Energy 3,000 DP 2 SEA Middle East, SEA & India
Sapura 1200 Sapura Energy 1,200 DP 3 SEA Middle East, SEA & India
Sapura 900 Sapura Energy 900 None, Derrick Lay Barge West Africa  Middle East, SEA & India
DeHe 5000 Saipem 5,000 DP 3 UAE Middle East, SEA & India
Seven Champion Subsea 7 2,200 DP 2 UAE Middle East, SEA & India
DLS 4200 NPCC 3,800 DP2 &  Derrick Lay Middle East Middle East & India
DLB 1000 NPCC 1,200 None, Derrick Lay Barge UAE Middle East
DLB 750 NPCC 750 None, Derrick Lay Barge UAE Middle East
Geocean Protis GEOCEAN Entrepose 520 None, Derrick Lay Barge Middle East Middle East 

External ScanningImage

External Scanning

 
 
New Entrants is Low 
  • High CAPEX required  
  • Learning curve and technology constraints
  • Experience & Track record is critical 

 

 

 
Supplier power is Low
  • Many players 
  • Common technology  
  • Market activities are low
  • Growth is marginal  

 

Competitive Rivalry
  • Highly competitive market 
  • Battle for markets 
  • Currently, there is large oversupply and low utilization of resources and vessels 

 

 

Buyer Power is High  
  • Easy to switch 
  • Spend is high  
  • Can offer long-term relationship
  • Market is oversupplied and fairly utilization levels  

 

 

 
Substitution is High 
  • Using flexible pipelines using normal DSV vessels 
  • Open up room for Flexible pipe manufacturers to offer installation services as well
  • May result in a very significant reduction of project costs 
 

Cost & Price Analysis Image

Cost & Price Analysis

Price

Generally, day rates for pipe-laying vessels are opportunistic and may not be driven by bottom-up cost approach. Driven by many factors, fleet utilization and financing being the key. In addition, many contractors are very flexible (within limits) on day rates and can work on different rates, depending on what the vessel is used for. E.g. if a pipe laying vessel was used to lay a pipeline, with subsequent subsea installation work, a contractor may choose to use the same vessel on lower rates (equivalent to a DSV) to do diving work, to keep revenues in-house or cover the costs.

Day rates for pipe-laying vessels range from $100k to $400k per day, depending on a variety of factors, such as vessel type, project duration, time of the year, the appetite for risk and jobs, fleet amortization and utilization, availability of roll-over projects and relationship with customers. Derrick lay barge (aka anchored vessels) are significantly lower prices when compared to DP vessels.

Current industry downturn places significant pressure on day rates, yet this may be offset by a higher demand in offshore wind/cable industry and heavy lift services. 

 

Cost

The total average direct operating cost of the pipe-laying vessel is between $80k and $300k per day, depending on size, age and equipment setup. 

The cost of welding services is between $30k to $100k, depending on the setup ( one vs. two lines) and type of welding. E.g. alloy clad pipe would be double the cost of carbon steel. 

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Strategy

The decision on the contracting approach is largely driven by project objectives, complexities and internal capabilities of an oil company. It can be a simple EPC / Lump Sum or a more robust project alliance. Yet, particular features of each project should be well understood, to compare and decide which contracting approach and risk allocation work best. Below is a summary contracting and project features that may drive the prices by up to 40%. 

  • Effective risk allocation. Consider managing the following risks, using more deliberate thinking process:
  • Weather
  • Fuel/diesel price
  • Currency exchange rates
  • Warranty periods and obligations
  • Unrealistic liabilities
  • Clear scope and responsibility matrix of who is doing what
  • Let contractors do what they are best at and avoid micromanaging
  • Deploy the most effective contracting strategy that serves the purpose of a particular project
  • Avoid, if possible, stipulating dynamic positioning (DP) requirements as a must. This criterion sends a very clear message to the market that no other options available and derrick lay barge (which are lower cost) cannot be used as an alternative. This, in turn, means that competition is only amongst DP vessels and their respective price range. 

Comparison of contracting options:

Technical InsightsImage

Technical Insights

 

 

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