As offshore renewables momentum builds, so a growing number of companies in the oil&gas supply chain are re-evaluating where it is they want to play.
One such company is SeaJacks, a specialist provider of jack-up service tonnage – lift-boats – based in Great Yarmouth, right on the doorstep of significant windfarm construction activity.
SeaJacks is a relatively new company. It is registered in Bermuda and recently took delivery of two new vessels. According to managing director Blair Ainslie, the original investment and business plan was based largely on the oil&gas sector. This is hardly surprising given the track record of the firm’s top team.
“It was on that basis that we were able to raise private-equity funding somewhere over $100million and secured bank financing to build two self-propelled jack-up vessels at Lamprell, in the Middle East, to the tune of $180million,” Ainslie told Energy.
“We’ve gone through the construction phase on time and on budget, and it is during that period that there has been a surge in the renewables sector. No one could foresee back in early-2007 just how quickly things might start to ramp up.”
Ainslie had been casually observing the dawn of offshore wind since about 2000. That interest grew, in part because of the UK Round One offshore wind project known as Scroby Sands, which is on his doorstep.
It was initially very stop-start – nothing to get excited about. But the past two years have witnessed a sea change.
“With UK Government and European backing and commitments, there has been a surge in opportunities emerging,” said Ainslie.
“What we find now is that the windfarm development companies have come to the table, seeking contractors – keen, eager, ready to make commitments way in advance of their project start-ups at good dayrates.”
With that as a catalyst, Ainslie started to review the SeaJacks business plan.
“To return best value to my shareholders, I’m duty bound to take notice of that and give it the attention it deserves. And we’ve done that and been successful winning contracts. We’ve secured contracts with Fluor on Greater Gabbard … originally, we were scheduled to just do turbines, but we’ve been asked to do transition pieces, too. That will last 14-16 months. And we’ve secured a contract with DONG Energy for Walney I and Walney II.
“This represents 18 months of backlog for us with both vessels … Leviathan, which is now on Greater Gabbard, and Kraken.”
In the latest investors’ presentation, the total contracted backlog for the two vessels is noted as being some $166million.
“The future for us is firmly in renewables, and yet our background is in oil&gas. That market still exists, but it’s being usurped by the hunger of the renewables sector now that projects momentum is building.”
However, Kraken started out working on an oil&gas contract – the client was ExxonMobil, the location the Sable Project offshore Nova Scotia.
She will soon be back in the North Sea, but still on oil&gas business, this time carrying out well intervention for Taqa in the Dutch sector of the North Sea. That is a two-well workover.
“They’re progressive and we’re very pleased to be working for them,” said Ainslie.
“I must say that the process of securing work with Taqa was a good experience. They’re very proactive and we came to an agreement rapidly. As a forward-thinking company, they recognise the value in picking a self-propelled vessel.”
Does that mean that other oil&gas players are slow off the mark when hiring contractors like SeaJacks?
Yes and no; for sure, they’re now allowing themselves to be “gazumped” by power utilities looking for competent offshore construction experience, and they have twigged that oil&gas experience fits the bill.
“What we have is that the offshore wind industry has come in with such vigour that they’ve more or less taken the wind out of the sails of the oil&gas sector. They’re able to commit early and to good rates,” said Ainslie.
“We have the market advantage in the wind sector in that we have very up-to-date tonnage capable of handling both markets.
“What they are not is the equivalent of a lot of ports and harbours kit that has been used by wind developers, at least up to now.”
Ainslie emphasised the relevance of oil&gas to offshore renewables.
“We know the issues that relate to HSE and safety cases. Despite the fact that we’re choosing to work in the wind business, both our vessels will have approved UKCS safety cases.
“I believe that, within a short period of time, the UK Health & Safety Executive – its Offshore Safety Division especially – will soon be taking a closer look at what’s happening in the offshore wind business.”
However, he pointed out that, at least until very recently, developers have had little option but to use ports and harbours kit because oil&gas contractors showed little interest anyway, or were deemed too expensive.
That was just about manageable with Round One projects as they are in shallow water anyway.
However, already in Round Two turbines are being installed in 25-30m of water, which is a considerable depth and requires better equipment.
“As we know, Round Three will be announced in November and those projects will be in up to 50m of water,” said Ainslie.
“And that requires vessels such as the Kraken and the Leviathan.”
This is potentially transformational for SeaJacks.
“When we looked at the design of the vessels back at the end of 2006, we were focused more or less on oil&gas, with offshore wind at the back of our minds.
“Today, were we to redesign, we might come up with a vessel that’s almost identical, but it would be driven by offshore wind, with oil&gas in second place.”
Ainslie wants to see contractors such as SeaJacks brought in at an early stage as offshore wind technologies advance and the turbines get bigger – if for no other reason than how they are installed and serviced over time has a bearing on future installation/service-vessel design.
“The feedback I’m getting from manufacturers and developers talks about output, but they haven’t necessarily talked about a match in size.
“Just because you go to 5MW or 10MW doesn’t necessarily mean that you’re increasing the size and weight of many of the components.
“There’s talk of direct drive and getting rid of the gearbox to save on weight and maintenance. Another part of the market that is also not getting the attention – certainly from the vessel perspective – is maintenance. However, I’m sure that our existing two vessels will be very good for the purpose.
“That’s a very interesting market and it’s one that we’re watching closely.”
Does this mean SeaJacks is planning to build more vessels? The answer is yes.
“We’re looking at further new units, plus we’re looking at what the market might demand in the future … that could mean slightly bigger vessels. There are quite a few designs out there for much bigger vessels. But I think it’s a little early in the development of the offshore wind industry to pinpoint exactly what is required.
“I’m certain that there’s not a one-shoe-fits-all answer to this. One thing that we do know is that craneage is an issue, and we will certainly look to somewhat bigger cranes with any further new tonnage going forward.”
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