Liftboats look to fill the gap
  from: Offshore Engineer
  by: Jaime Kammerzell
  Thursday, April 03, 2008

The liftboat sector was one of many in the Gulf of Mexico to feel the impact of the post KatRita hurricane clean-up and repair work through 2006 and most of 2007, which helped drive up utilization and dayrates. Amid signs that the tight liftboat market may ease a little this year, operators are casting their nets wider. Jaime Kammerzell reports.

Liftboats are an alternative to drilling rigs for small-scale well-related operations in less than 200ft of water. If an operator wants to drill a new well, it’ll need to use a rig. But if the operator is doing P&A, workover, structural construction and repairs, slick line, wire line, dive support, or salvage, a liftboat becomes a more attractive. This versatility, coupled with lower day rates, made liftboats a popular choice for platform repair work and P&A after the hurricanes.

With most of the emergency hurricane-related work now completed, high oil prices, spurring operators to rework old fields, were one of the biggest drivers of liftboat activity as the industry entered 2008.

‘Oil prices near $100/bbl motivate oil companies to go back and rework old oil fields to try to get additional production out of the ground, whereas at $50/bbl that may not have been economical,’ explains Gary Russell, senior equity analyst with AIM Energy Fund. ‘A lot of that work can be done from liftboats. One hundred dollars per barrel oil is a macro driver of demand for liftboats to do that kind of work.’

The need to decommission depleted wells is recent a driver of liftboat activity. According to the US Minerals Management Service, more than a quarter of the 4000 or so active platforms on the outer continental shelf are over 25 years old and thus near the end of their service life.

Gulf of Mexico operators are currently removing about 100 platforms each year.

Down but not ‘normal’

‘The market has slowed, but has not returned to normal levels,’ reports Jim Rollyson, vice president of energy research for Raymond James & Associates.

‘Five years ago, liftboat utilization rates had been in the 60% range. That ramped up in 2005 because of Hurricane Ivan, and in 2006 it was just north of 80% due to Katrina and Rita. That number fell off a bit in 2007, but there is still a lot of work to be had.’

In fact, Superior Energy Services announced last month that its subsidiary, Wild Well Control, signed a $750 million decommissioning contract. Subsidiaries of Apache, BP and Chevron hired Superior to decommission seven downed platforms and related well facilities off Louisiana in 85-135ft of water. Two of the company’s largest liftboats will assist in this project.

Liftboats capable of working in water depths of more than 200ft will see the highest utilization over the smaller ones, if properly equipped, Rollyson believes. Superior Energy concurs.

Superior Energy Services’ marine services division sees a stronger utilization of its larger vessels in its fleet. Superior’s fleet is made up of class 145ft and above with the majority of the company’s fleet in 170ft class and above. These larger vessels can handle jobs with intense deck loads that would have required rigs in the past.

Each liftboat operator’s utilization numbers will differ. Randall D Stilley, president and CEO of Hercules Offshore, says his company’s vessels in the 175ft class and below are most in demand, as this is where the majority of the decommissioning work is being done. Utilization rates in 2007 show a higher demand for smaller liftboats than larger ones, Stilley says. ‘The 175ft to 260ft class vessels average about 60% utilization and smaller vessels average about 75%.We assume maximum utilization to be in the 80-85% range’ for 2008.

Newbuild technology

Though liftboats built two decades ago may not appear to be any different than those rolling out of the shipyards today, new technology onboard has improved the safety and efficiency of the vessels. Superior Energy Services says it has made great strides in safety in the last few years.

‘We have a total recordable incident rate of 0.18, which is unheard of in any industry,’ says Jerry Dardar, ISMD/ international technical coordinator for Superior Energy Services’ marine services division. ‘A lot of our success can be attributed to equipment like the electronic anti two block system, which prevents our crane operators from lifting more weight than they should.’

According to Dardar, another new technology helping to improve safety is the automatic identification system, which assists the vessel masters in identifying other vessels around them. Information acquired by this navigation aid includes the other vessel’s name, range, course and speed. In addition, every Superior Energy Services vessel is equipped with a VSAT satellite communications package – with separate internet lines for company and customer use – and an automatic electronic defibrillator for medical emergencies.

International waters

The state-of-the-art technology aboard today’s liftboats enables these vessels to take on projects in uncharted waters. ‘If you dream it, we can do it,’ says Connie Babin, inside sales for Superior Energy.

Projects will most likely be in the Gulf of Mexico, but the liftboats may move to international waters as well. Gary Russell cites Mexico’s largest offshore oilfield – Cantarell in the Bay of Campeche – as one opportunity for liftboats.With Cantarell production thought to be declining by about 15% per year, operator Pemex is hiring a lot of drilling rigs away from the US Gulf in a bid to stem the decline as well as increase natural gas production in other fields.

‘There’s not a lot of incremental demand for liftboats in Mexico yet, but there is a good chance that we will see that trend emerge in the not too distant future,’ Russell says. ‘That will be an incremental source of demand that will work to offset that incremental supply.’

Similar trends have been observed in other parts of the world.

As well as being the largest supplier of liftboats in the Gulf of Mexico, with a 45% share of that market, Hercules already lays claim to operating 90% of the liftboats operating off West Africa. Randy Stilley sees the company expanding into the Middle East too in the next 12-18 months. ‘We are looking at opportunities in the Middle East now,’ he says. ‘Liftboats can work in the Middle East because of its similar shallow water conditions as the GoM and West Africa.’

As for Superior Energy Services, the outlook of book work in 2008 is strong, says Jerry Dardar, noting that the company will see growth as available rigs move out of the Gulf of Mexico. Targeting voids in the US market are the Superior Future and the Superior Liberty, which are due to enter the market this year and will be capable of working in up to 110ft of water.

Looking ahead, the analysts see a liftboat market that appears healthy as bigger boats come into the market and the market expands beyond the GoM. Superior Energy’s Babin reports that the company’s customers still have many productivity enhancement projects, and they will need liftboats to make those projects economically feasible. OE

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