Germany: Offshore Wind Sector to Face Vessel Shortages

Wind turbine installation projects will face greater competition from oil and gas projects for chartering specialist vessels.

Offshore wind farm developers in Europe and their contractors for engineering procurement, construction and installation are likely to struggle to secure specialist tonnage in the mid and long terms despite some current easing in the market due to project delays, delegates at the Windforce 2012 conference in Bremen heard last week.

Tonnage shortages in the segments of jack-up installation vessels, tugs, supply vessels and barges could be driven by a bunching of project start-ups and increased competition for vessels from the global offshore oil and gas sectors, experts warned.

“We advise clients to secure the charter vessels they need two or even three years in advance,” commented Philippe Schönefeld, managing director of German Renewables Shipbrokers. Specifically, he was commenting on tonnage requirements for offshore wind farms in deeper waters and with large turbines of more than 3.6GW.

The most advanced wind turbine installation vessels (WTIV) in terms of jack-up and heavy lift capabilities were needed for projects in the German exclusive economic zone in the North Sea, which tend to be a long way from the coast.

More than 60% of the planned German offshore wind farms will be located in water depths in excess of 25m and equipped with large and heavy turbines of more than 3.6GW, according to German Renewables Shipbrokers. Formed in 2011, it is the first German brokerage to focus solely on tonnage for offshore wind, tidal and wave energy projects.

Schönefeld said only three of 21 existing jack-up installation vessels in the European market today fully match the requirements of German deep-water wind farm projects. The supply of ships is expected to increase considerably by 2014, however, with 15 extra-large turbine installation vessels coming up for delivery, all of which can operate in waters deeper than 25m and lift the latest-generation offshore turbines.

Schönefeld acknowledged that the fleet outlook for 2014 “could be interpreted today as a possible overcapacity”.

The latest tenders for installation vessels carried out on behalf of offshore charterers had shown a slight decrease in daily hire rates.

“We have noticed some pressure on rates in recent tenders because some of the expected wind farm projects have not gone forward,” Schönefeld said.

Most industry experts in Germany believe the government target of 10,000 MW in installed offshore wind power generation capacity can no longer be achieved as projects are pushed back due to unresolved liability issues and grid expansion delays.

Generally, daily hire rates for large WTIVs are currently hovering between €125,000 and €165,000 ($158,000 and $209,000)/day depending on period durations, he pointed out.

Accurate supply/demand projections in terms of operating days forinstallation vessels were impossible because of project uncertainties and as yet undefined logistics and vessel deployment concepts by charterers, he explained. Although some operators/charterers have covered forward positions at rates lower than expected, competition for tonnage could quickly accelerate again – both from within the offshore wind sector and the offshore oil and gas segment.

With some of the earlier projects off the German coast postponed, there is a risk that more projects than forecast are going to be ramped up simultaneously later on. The offshore vessel market may then be swamped with too many orders for ships.

“If project start-ups begin to build up, shortages can arise very quickly,” Schönefeld said. Wind farm developers should also be aware that they could be facing stiff competition from other offshore energy markets in the Far or Middle East.

This goes not only for high-specification installation barges but also for offshore supply, crew transfer or cablelaying vessels that also assist in the construction process. Between 20 and 30 vessels of different types are often operated alongside each other in the same wind farm, Schönefeld said. He cited the case of a platform supply vessel that his brokerage recently sourced from Brazil for a north European client.

“There were no ships available in the North Sea. The market is completely dried up now during the peak season. It meant we had to compete with oil and gas charterers in Brazil to get a ship for offshore wind farm work in North Europe.” Positioning the supply vessel across the Atlantic on the charterer’s account cost a six-digit sum, he pointed out. “Once the oil and gas market gathers full momentum, more tonnage must be expected to migrate,” Schönefeld warned wind energy clients.

Even so, the slowdown in orders and installation activity by German offshore developers has fuelled expectations among offshore equipment suppliers of a short-term easing in certain vessel segments.

Thorsten Schwarz, managing director of offshore cable producer Norddeutsche Seekabelwerke, said: “The situation is being reversed. If we see further delays, there is going to be an increase in costly idle times for cable-laying vessels.”

Jean Huby, chief executive officer of offshore turbine producer ArevaWind, said that logistics and shipping constraints seem to have eased up for those who are still active. “There are no critical bottlenecks at the moment, there is only a basic need to improve logistics in general,” he commented.

Outbound cargo volumes for Areva’s production facility in the port of Bremerhaven have increased considerably, he said – from six offshore turbines per annum a few years ago to 17 last year and 55 this year.

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Offshore WIND staff, July 30, 2012; Image: German Renewables Shipbrokers