Offshore Service Vessels: What’s in Store in 2025
After what we would argue has been an incredibly eventful 2024 with massive deals, tremendous dayrate developments, further charterer backlog build, and the first series of newbuild orders in years, now comes the time when we turn our gaze towards 2025. What are some of the main trends we expect for next year, and how do we see the continuation of today's developments impact the year to come. Overall, we find continued strides for the better in the offshore support market although we foresee an industry that will not fire on all cylinders, at least not quite yet.
- The World
From a global perspective, we forecast the overall demand for OSVs will continue to increase in 2025, continuing the clear trend since the market trough in 2017 less the impact of COVID in 2020 and 2021. Yet again do we find vessel demand at its highest level since the previous peak 10 years earlier as demand derived from oil & gas activities are estimated to grow by almost 4% on top of a relatively strong 2024. Furthermore, when applying a broad definition of offshore support and including the vessel demand derived from the offshore wind industry, 2025 is set for the highest vessel activity level ever!
That having been said, this is not equally true for all regions. While the usual suspects of the golden triangle and the Middle East are forecasted to see their respective OSV segments continue to higher demand levels next year, we note weaker project development in key countries in both Northwest Europe and Southeast Asia, as well as rig activity in Australia is expected to develop flat in 2025. Thus, while positive in general, it is a bit of a mixed bag when looking at the different key regions.
- By Region
Political sentiment in the UK ushered in by the new government in the UK hit the market like a hammer earlier this year, and the impact on the local market therein will beyond likely continue to shape the trajectory in 2025. Despite representing a relatively modest O&G production, the UK is by far one of the biggest OSV markets in Northwest Europe, and as such it will have a significantly negative effect on the entire region. As we are writing this, vessels have recently been fixed for less than GBP 5,000 per day, not even covering operational expenditure. Granted, the challenging weather patterns of the winter months certainly have a lot to do with that, but even so we find that the weakened market fundamentals playing a critical role here as well.
Similarly, postponements and failure to approve new projects has seen major developments offshore Malaysia come to a halt. As the definitive largest country for OSV demand in the Southeast Asian region, this too is likely to put a dent in the sentiment for local shipowners. When the Sabah government will make up its mind is anyone’s guess, and while we wait, we understand that several contenders are now tendering for the fourth(!) time on the same project.
Elsewhere, however, the market is charging on with continued growth in OSV demand in 2025. In Brazil, Petrobras recently update spending plan for 2025 to 2029 sees continued confidence in the country’s key role as a driver for activity with E&P budgets revised further up from its previous plan. And while Petrobras is in the market for newbuilds, additional supply will not hit the market for several years even if they are ordered before this article hits print.
Likewise, offshore activity in the Middle East remains encouraging despite all of the rig suspension throughout 2024 – amounting to a total of roughly 30 jackups thus far. In fact, in contrast to our initial take on the impact on the OSVs in the region, which in fact saw a total of 50 vessels go offhire, all of these quickly found themselves back working. Moreover, due to a lot of them being on legacy contracts, the new dayrates they achieved were up to 50% higher, which saw overall dayrates in the region improve significantly. A blessing in disguise for some, a lesson for others. You have to be careful what you wish for these days.
With some of the largest field developments in the Middle East paused for the time being due to prolonged timelines and rising costs, admittedly putting a damper on what could have been. Furthermore, OPEC+ recently announced that it will extend the production cuts for another three months running into April of 2025 with the full unwinding scheduled for the end of 2026. Regardless, our forecast still sees the remainder of the planned activities in the region push OSV demand further up in 2025 on top of already historical high number recorded this year.
In West Africa, big things are materializing as well. Galp Energia recently spudded an appraisal well on its huge Mopane discovery offshore Namibia and has also identified the targets for its third exploration probe in its prolific Petroleum Exploration License 83 in the Orange basin. ENI acquired another four blocks for offshore drilling off Côte d’Ivoire following its announced discovery earlier this year. And going forward we expect offshore activity in Angola to increase, potentially even overtaking Nigeria in the long-term.
Across these high growth regions, the challenge for the charterers in 2025 will be that there are simply no new supply additions coming any time soon. While 2024 brought the first real newbuild orders since the previous boom, these vessels will not be delivered until 2026 and 2027. Furthermore, the current orderbook of PSVs and AHTS sits at a meager 2% with 30 and less than 40 units respectively.
As such, the overall OSV fleet will continue to age in the immediate future putting a further strain on the supply side. For 2025 therefore, we find that both increased demand in key regions, and continued pressure on the supply side overall, will benefit the Shipowners across the globe.
