When does a boat die ?When does a boat die ?

Mike Meade

M3 Marine Pte Ltd

Singapore OSV Conference September 005

PreamblePreamble• SEA Market ‘dominated’ by AHTSSEA Market ‘dominated’ by AHTS• PSV’s will have influence on this PSV’s will have influence on this

market as they appear over time or market as they appear over time or displace vessels from other marketsdisplace vessels from other markets

• There is a newbuilding boomThere is a newbuilding boom• Is there enough capacity to absorb all Is there enough capacity to absorb all

this new equipment ?this new equipment ?• What will happen to all of the old What will happen to all of the old

boats ?boats ?• When does a boat die ?When does a boat die ?

Some relevant numbers…….

Photo courtesy of Nomis. Dea Lingue blt 1973, still operating successfully in Asia

Smaller AHTS (4-7000 BHP)Smaller AHTS (4-7000 BHP)490 in service, average age 22 years490 in service, average age 22 years31+ vessels under construction31+ vessels under construction

Age Profile Smaller AHTS vessels

0

10

20

30

40

50

60

70

80

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

Year

Boats

Yards

Ships

Courtesy RS Platou

Age Profile Medium Size AHTS vessels

05

1015

2025

3035

40

45

Year

Bo

ats Yards

Vessels

Courtesy RS Platou

Medium AHTS (7-12000 BHP)327 in service, average age 22 years47 vessels under construction

Large AHTS Vessels

02468

101214161820

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

Year

Bo

ats In yard

Boats

Courtesy RS Platou

Large AHTS Market, 12000+ BHP182 vessels in operation, average age 11 years37 vessels under construction

…….and the PSV’s.and the PSV’sSmaller PSV’s (1000 – 1500T Smaller PSV’s (1000 – 1500T

DWT)DWT)298 in service, average age 24 298 in service, average age 24 yearsyears3 vessels under construction3 vessels under construction

Medium PSV’s (1500-4000T Medium PSV’s (1500-4000T DWT)DWT)342 in service, average age 11 342 in service, average age 11 yearsyears60 vessels under construction60 vessels under construction

Large PSV’s (>4000T DWT)Large PSV’s (>4000T DWT)87 in service, average age 5 years87 in service, average age 5 years28 vessels under construction28 vessels under construction

..and the Rigs..and the Rigs

Courtesy UOBKayHian

Conclusion on Numbers……Conclusion on Numbers………....”simple sums for simple sailors”…....”simple sums for simple sailors”

Existing Small / Medium AHTS plus smaller PSVs account for some Existing Small / Medium AHTS plus smaller PSVs account for some 1,115 vessels with an average age of 23 yrs.1,115 vessels with an average age of 23 yrs.

There are 50 rigs on orderThere are 50 rigs on order

There are a total of 115 AHTS and 91 PSV’s on order (total 206 units)There are a total of 115 AHTS and 91 PSV’s on order (total 206 units)

At a conservative ratio of 2 vessels utilised per new rig, the new rig At a conservative ratio of 2 vessels utilised per new rig, the new rig fleet will absorb 100 new vessels (maybe less with increased fleet will absorb 100 new vessels (maybe less with increased efficiencies)efficiencies)

Thus around 105 of the newer vessels will displace ‘X’ old vessels.Thus around 105 of the newer vessels will displace ‘X’ old vessels.

Displacement would seem inevitable ? But how many ?Displacement would seem inevitable ? But how many ?

What to do with an old What to do with an old boat ?boat ?

• Sell to CompetitorsSell to Competitors

• Sell outside of the IndustrySell outside of the Industry

• Lay upLay up

• Involuntary ScrapInvoluntary Scrap

• Voluntary ScrapVoluntary Scrap

Voluntary scrappingVoluntary scrapping

• Markets are India, China, Bangladesh, Markets are India, China, Bangladesh, Pakistan, China and TurkeyPakistan, China and Turkey

• Currently pricing based on LDTCurrently pricing based on LDT

• On a 600t LDT boat at $300 / ton you On a 600t LDT boat at $300 / ton you would raise US$ 180,000…..would not would raise US$ 180,000…..would not even pay the mobeeven pay the mobe

• Imaginative scrapping……Imaginative scrapping……

Voluntary Scrapping Continued…Voluntary Scrapping Continued…

• Value in a ‘boat’ is in its machineryValue in a ‘boat’ is in its machinery

• Sell basis equipment value rather than Sell basis equipment value rather than LDT?LDT?

• Emerging nations could use machinery Emerging nations could use machinery for infrastructural developmentfor infrastructural development

• ““Club” (ISOA ?) together to send vessels Club” (ISOA ?) together to send vessels to scrap en masse (economy of scale).to scrap en masse (economy of scale).

• More artificial reefs (environmental More artificial reefs (environmental lobby plus no $$)lobby plus no $$)