- Russian sources confirmed that Nord Stream 2 pipelines will be completed in 2021, with the US government having waived sanctions on the Gazprom-led project. The bulk of the twin 1,200 km lines were laid in 2019, with less than 5% of the project outstanding as of 31 March 2021.
- Petrobras launched a tender process for pipelay vessel (PLV) requirements in January, with bids received from DOF Subsea, Sapura, Subsea 7, and TechnipFMC.
- Utilization of the harsh and deep offshore pipelay fleet is forecast to reach 71% in 2023 and 2025, its highest level since 2011. Higher utilization will be driven largely by demand for vessels on large Australian export line projects.
- Utilization of the shallow and benign fleet is forecast to rise to 40% in 2023, its highest level since 2014. The rise will be driven by demand for vessels in Asia Pacific and the Middle East.
Key demand trends
Total installations in 2020 were 61% lower than in 2019, and we expect them to fall a further 7% in 2021, to the lowest annual level recorded since 1988.
Assuming a stable oil price and that COVID-19 restrictions are eased, we forecast a 52% year-on-year (y/y) increase in installations in 2022, and a further 78% rise in 2023.
Key supply trends
The offshore pipelay fleet currently consists of 158 vessels worldwide.
Of these vessels, 100 are aimed at work in shallow and benign waters, with the remaining 58 targeted at harsh and deepwater regions. As low utilization has plagued contractors in the offshore pipelay market for much of the past decade, only two new vessels are currently under construction.
Supply chain implications
Two years of recovery was reversed in 2019–20, with weak utilization of the shallow and benign fleet dragging total utilization down to 33% in 2019 and 29% in 2020.
Utilization is forecast to fall to 27% in 2021, and to rise to just 52% in 2023.
Further vessel retirements are therefore expected over the next five years—but as only 28 vessels have been retired in the past decade compared with 57 new deliveries, at its current pace, retiral of vessels will not be enough to correct the imbalance.
Contract and cost trends
Oversupply is suppressing utilization rates, and therefore day rates and contractor revenue. We currently forecast a 6% y/y drop in harsh and deep day rates in 2021, ahead of recovery in each of the following two years.
While the forecast 7% and 17% increases in average day rates in 2022 and 2023, respectively, look high, it should be remembered that rates are currently very low, and that an increase would still keep them well below even the modest rates of 2015.
Average shallow and benign day rates are forecast to increase slightly in 2021, having fallen as far as is feasible over the previous decade.