Charter rates for North Sea supply boats and anchor handlers are now so low that most vessels are sailing at a loss and, in some instances, apparently with “insufficient crew and fuel” aboard.
It means that the companies that own them are in danger of sinking into a mire of debt and default; even going bankrupt or being forced into mergers.
It is claimed there are now so few British seafarers on the ships . . . they are being replaced by cheap, Third World labour . . . that they have become an “endangered species”, according to a leading North Sea trade unionist.
Also, it is said some captains have such a poor command of English that they pose a safety threat during offshore operations.
These situations are considered to threaten North Sea offshore safety and that a serious accident is possible.
Starting with seafarers, RMT official Jake Molloy said that he was deeply worried by the driving down of wages paid on the vessels.
He alleged that ship-owners were, wherever they could get away with it, sidelining British and other EU seafarers and hiring cheap labour from India, Indonesia and The Philippines.
Molloy said the situation had become much worse as a result of the oil price slump and because of Norwegian regulations that enable tonnage not working in home waters to carry foreign crew paid “homeland” wages. The Norwegian International Ship Register Regulations date from 1987.
This worked well for many years. But not anymore, according to Molloy. He believes the situation is out of hand and that some Norwegian OSVs are, in effect, flag of convenience boats.
“The way these guys are being paid and treated aboard more and more supply boats is Dickensian,” Molloy said.
“They are working at below International Transport Federation (ITF) rates . . . they’re slave labour rates. I’ve gone aboard such vessels on ITF inspections and what I’ve seen is appalling.
“British seafarers (who are paid more and are increasingly being displaced) will become absolutely wiped out . . . a kind of ethnic cleansing in reverse.”
If true, then such behaviour also flouts the Maritime Labour Convention that came into force last year.
Molloy complained too about the collapse in OSV charter rates . . . in some cases from £6,000 or thereabouts per day to well below £2,000 per day.
He said this market-driven situation was unsustainable and threatened to wipe out the effort and £millions invested in recent years on developing the competency of British seafarers as multi-skilled assets, including being trained for fire-fighting, cargo handling offshore and rescue & recovery.
“The UK offshore industry says it will never compromise safety; yet it seems there are, in some cases, skippers and crews of supply boats who can’t speak English properly and are lacking in competence,” warned Molloy.
“That is downright dangerous when working a PSV beside a platform or rig. That’s wrong!”
Molloy, who serves on the board of Step Change in Safety said the organisation’s hands were, in effect, tied as it had so much on its plate already. Similarly Oil & Gas UK and the HSE.
Molloy added that he will be in Oslo on December 9 for an ITF taskforce to discuss such issues and seek solutions that will properly protect seafarers.
Turning to the vessels, there are around 105 laid up in North West Europe – 67 PSVs and 38 AHTS (anchor handlers) as of a few days ago. More and more owners are tying up tonnage rather than run it at a loss. It is also possible that some cannot afford to bunker their vessels as the oil price situation gets increasingly desperate.
Those still in the game will benefit in that fewer vessels competing should mean better spot market dayrates.
Overall, dayrates have dropped so much that they often no longer cover the daily running costs of vessels.
An authoritative source told Energy: “There is hardly an OSV operation that is making profit and most are losing money. That means shipowners are in danger of breaching financial covenants to their lenders.
“Offshore support vessel dayrates are currently way below daily break-even operating costs, due to an oversupply of tonnage and a drop in activity; this is unsustainable in the medium term.
“Also, many charterers as a matter of course counter the rates of their ‘preferred vessel’ further increasing shipowner losses.
“Charterers with an intermittent need for tonnage are contracting vessels on the basis of day by day to seven or ten days, but as soon as the vessel is not required they expect to put it on a ‘zero dayrate’ until it is again required, admittedly within the original contract period, but it is outwith the spirit and intent of the contract.”
Energy can report that, on one occasion a charterer contracted a vessel at £1 per day, as it’s owner was desperate to get the vessel involved some work.
Our source remarked: “What would the MD of the chartering energy company have done had there been an incident during the charter? Was he even aware of the derisory dayrate?”
And it gets worse.
We have learned that some charterers are refusing to put fuel on the vessels unless they are contracted for a fuel run, but that they expect a vessel to have sufficient fuel aboard for the duration of the spot contract. On some occasions charterers have loaded fuel aboard vessels for an offshore location, but not all of it has been discharged as there wasn’t enough storage capacity offshore.
As a result, instead of receiving ‘charterhire’, such shipowners have sometimes ended up owing the charterer for the surplus fuel they never wanted.
“In one notable instance, a charterer took a vessel on-hire at an agreed fuel price, but after some time, the vessel was bunkered by the charterer, at a lower fuel price, which they insisted was the price for all the fuel consumed during the charter,” said our source.
“The owners suffered a loss of circa £100 per metric tonne for the bunkers already aboard the vessel at on-hire.”
We were advised that it is only a matter of time before maintenance and crewing aboard OSVs suffers.
Our source warned: “There is a consequent increase in risk to offshore installations and the personnel aboard.
“Oil companies do not realise that they are contributing to increasing the risk of an accident offshore that could risk lives and production.
“This is amazing when you consider that, when you are in their offices, you are required to hold handrails when on staircases and have tightly fitting lids on coffee cups when walking from the coffee machine to the meeting room.
“Yet they condone by default increasing risk levels offshore with far more potentially serious consequences?
“Charterers need to adopt a more responsible approach. Charterhire should really be at levels that cover daily operating costs, and charterers and shipowners need to recognise that fact before someone is injured or other disastrous consequences occur.”
As far as we know, ERRV (emergency response and recovery vessel) fleets are not yet under the same pressure as supply boats and anchor handlers.
This is because they generally operate on long-term contracts. But that protection could end if there is no substantive recovery in the North Sea by the time they come up for renegotiation.
Energy coaxed a comment out of Oil & Gas UK, bearing in mind the industry’s resolve to be among the safest anywhere; and the vessels that serve the UKCS are a part of the supply chain.
Mick Borwell, health and safety director with Oil & Gas UK, said: “While companies in this sector are represented by other associations, Oil & Gas UK is always concerned for the safety of all those who work in the industry.
“We would therefore welcome any specific information that would allow us to raise concerns with the relevant bodies that do represent this sector. Safe operations must remain at the heart of all that we do.”
Euan Simpson, chairman of the Marine Safety Forum, said in a brief initial reply to the issues raised in this article: “While I personally wouldn’t agree with all the comments/claims; we (MSF) would need time to consider an adequate response.”
Simpson said MSF remains committed to its aims and that safety is the primary objective. Others are: to air marine safety issues in an open forum of service users and providers; to highlight areas of particular concern and reach consensus on action required to minimise risk of major incidents; take pre-emptive action on minor issues which have the potential to escalate; to represent marine concerns within the Step Change in Safety initiative and to work together to share safety information and good practice.
Jonathan Roberts, head of communications at the UK Chamber of Shipping said: “11,000 Scottish seafarers work in our shipping industry – they are highly skilled and valued people. We of course recognise there are constant challenges regarding the oil price and its knock-on effect on the offshore sector, but the Scottish shipping industry has some of the highest safety standards of any maritime nation anywhere in the world.
“Industry and trade unions work very hard, every day to improve safety at work further still, and while we recognise there are areas where we can improve, Mr Molloy’s comments are frankly hyperbole, and help neither seafarers, nor the industry.
“Nevertheless, the UK Chamber is working very closely with its members, and with Scottish, UK and European lawmakers, to find ways of easing the impact of low oil prices on Aberdeen’s vital offshore sector.”
Turn to the December edition of Energy for the full story including reaction.