6 asia offshore wind day seoulmay 01, 2019 · fantastic beasts • wtg, fou and cab installation...

ENERGY

"FANTASTIC BEASTSAND

WHERE TO FIND THEM:

A PERSPECTIVE ON VESSEL AVAILABILITY AND SUITABILITY FOR OFW PROJECTS"

6TH ASIA OFFSHORE WIND DAY

SEOUL

9 MAY 2019

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EXPERIENCE

INTRODUCTION

Wind – Onshore & Offshore

Solar – Grounded, C&I & Floating

Skills –WTG, Foundations, Cables and T&I Contracts (EPC, Split/Wrap and Bespoke)

Chambers Asia Pacific Guide – “recognised practitioner”

under “Projects & Infrastructure: International - Singapore” in 2018 and 2019

Ivan Chia, Partner

D: +65 6411 5207

M: +65 8121 7562

[email protected]

mailto:[email protected]

INTRODUCTION

Do think of HFW if you need advice on…

• WTG, Foundations, Cables and T&I contracts

• Maritime & Insurance issues

• OFW related M&A and JVs

• OFW related disputes

A WORD OF THANKS…

A WORD OF THANKS…

• Formosa Transnational (Taiwanese Counsel)

• Nishimura & Asahi (Japanese Counsel)

• All errors are mine

OUTLINE

• Introduction

• OFW Growth in Asia

• Fantastic Beasts

• Vessel Suitability

• Site Suitability

• Nature of Beasts

• Number of the Beasts

• Cabotage

• Focus: Taiwan

• Contractual Considerations

DEMAND & GROWTH OF OFW IN ASIA

• Started with Taiwan about 5 years ago

• Opportunities in Japan and South Korea emerging

• Demand for capacity

• Availability of equity and debt

• Demand, debt and investment needs to be supported by a bankable supply chain

VESSEL AVAILABILITY & SUITABILITY

• Focus shift from relevant but common topics

– e.g. bankability, financing structures, PPA and general discussions on EPC contracts widely ventilated

• Decided on “availability and suitability of purpose built installation vessels”

• Extremely crucial but perhaps underappreciated aspect for OFW construction packages

• Hope to raise greater awareness


• Low supply and high demand

• Lack of options and interchangeability

• Thin margin for error

• Limited viable weather windows


• “Best-drafted contracts”, “most favourable terms”, “best technical solution”, “best quality”, “best capacity factor” and “best policy” could all become moot

• No project if there is no vessel solution – i.e. vessel does not show up or unsuitable

• Inordinate delays, costs and disputes; spilling over to next available window

• Vessel spread is a critical and complex issue

• Need to raise greater awareness and appreciation of this crucial piece puzzle

BRITISH DOMINANCE & NAVAL POWER


https://www.historyextra.com/period/georgian/how-did-britain-come-to-rule-the-waves/

https://www.historyextra.com/period/georgian/how-did-britain-come-to-rule-the-waves/


• British dominance and control of the world’s oceans in the 18th and 19th century was built on its naval powers - see above references for interest

• Clear parallel between naval might and success of OFW business

• Contractor (no matter which package) who has the installation vessels will get the contract

• Employer who has a vessel solution (by himself or with his contractors) will deliver a project

• These Fantastic Beasts are indeed magical…….

• Vessel solution should be one the earliest and dominant hurdle topics during the deployment phase of any OFW project

TREMENDOUS

POWERFUL

BEAUTIFUL

RARE

AND BLOODY EXPENSIVE…..

…….BUT CAN DELIVER MAGIC

FANTASTIC BEASTS

FANTASTIC BEASTS

• "Asian Hercules II", "Asian Hercules III", "Giant 7", "Bokalift 1", "Scylla", "Leviathan", "Kraken" and "Aeolus“

• Absolutely beastly names

• Large, powerful and overwhelming

• Tremendous strength and size

• Beasts of machines and engineering marvels

• Inspiration for title of my presentation

FANTASTIC BEASTS

• Each beast is unique

• Foundation Installation Vessels

• WTG Installation Vessels

• Cable Laying Vessels

• Others (e.g. dredgers, trenchers, rock dumping fall pipe vessels and support vessels)

FANTASTIC BEASTS

• WTG, FOU and CAB installation vessels being the most specialised and most limited in supply

• Those available and fit for purpose are rarer still

• Undoubtedly fantastic but “where to find them” and “when to find them” are key

FANTASTIC BEASTS

• Not all creatures are created equally

• Not all installation vessels are suited to installing both WTGs and foundations

• Not all WTG installation vessels can handle the larger WTGs

• Not all cable installation vessels have the right cable turntable or carousel capacity

• See my favourites

“BOKALIFT 1”

FANTASTIC BEASTS

"

3,000 TONS DP-2 CRANE VESSEL

40,000 GT

3,000 tonnes crane capacity

Dimensions : 216m x 43 m

“AEOLUS”

FANTASTIC BEASTS

Offshore installation vessel

12,000 GT


Dimensions : 140 m x 45 m

"SCYLLA"

FANTASTIC BEASTS

Offshore installation vessel

24,000 GT


Dimensions : 139 m x 50m

“NDURANCE"

FANTASTIC BEASTS

Cable Laying Vessel

Turntable capacity of 5,000

tonnes

“NDEAVOR"

FANTASTIC BEASTS

Cable Laying Vessel

Turntable capacity of 2,000

tonnes

“VOLTAIRE"

FANTASTIC BEASTS

Coming soon:

Offshore Jack-Up Installation

Vessel

COSCO Shipping Heavy

Industry in China

3,000 tonnes crane

FURTHER INFORMATION

FANTASTIC BEASTS

https://boskalis.com/markets/offshore-energy/renewable-energy.html

The above is a link to an interactive webpage which provides a good overview of the specialist vessel spread typically required for the

construction of an OFW project.

https://boskalis.com/markets/offshore-energy/renewable-energy.html

SIZE DOES MATTER – THE EVER GROWING BEASTS

VESSEL SUITABILITY


VESSEL SUITABILITY

• WTGs are only going to get bigger

• FI and FII are on 6MW and 8MW platforms

• 10MW and 12 MW platforms are on the way

• Question is whether there is a technical limit to WTG size and whether we have reached it?

• Similarly, WTG manufacturers also need to consider whether there is a technical limit to vessel size and crane capacity and whether we have reached it?

• WTG size is invariably constrained if not limited by technical limits of vessel and crane.


VESSEL SUITABILITY

• Bigger WTGs means increase in :

– Foundation dimensions

– Crane capacity

– Deck capacity

– Larger and more advanced installation vessels which are future ready

– Logistical complexities

– Overall construction risks

• Such larger and more advanced installation modern vessels are even more limited in supply

SITE SUITABILITY ANALYSIS

SITE DATA & SITE SUITABILITY ANALYSIS

• Vessel must “withstand the loads caused by the most adverse environmental conditions expected for the area and season through which it will pass”

• SSA needed to determine these conditions

• SSA in turn determines the vessel suitability based on technical qualities such as vessel type, classification, crane and deck capacity, hull strength, mooring systems, motion response etc.

• SSA depends on availability and completeness of Site Data

• Highly technical area



• Link between SSA and vessel choice is obvious

• However, disconnect will arise if:

– lack of Site Data (whether in accuracy or completeness); or

– delay in the availability of Site Data; or

– delay in the completion and release of SSA

• Site Data risks allocation is commercially negotiated but stakeholders must:

– have timely access to Site Data; and

– be able to rely, to a reasonably extent, on the correctness and completeness Site Data



• Timing of availability of Site Data and completion of SSA is absolutely crucial

• Early collation of Site Data and completion of SSA and release of the same would benefit all stakeholders

• Fundamental to establishing a clear base-case vessel scenario as basis for contractual negotiations and FID

PURPOSE-BUILT VESSELS

NATURE OF THE BEASTS

• Rare purpose-built vessels

• Expensive to build and hire

• Daily Charter Rate = upwards of €xxx,xxx/- i.e a 6-digit Euro amount.

• Reserved and committed years in advance

• Limited availability and not readily replaceable – not just a cost issue

• Demand and competition is intense from other markets e.g. Europe and North America

THIRD PARTY VESSELS


• Third-party vessel is an option

• Stakeholders may not always own the installation vessels

• Or where necessary to fulfil specific functions or specifications

THIRD PARTY VESSELS


• Requires careful consideration in respect of:

– Suitability

– Availability

– Economic viability

– Liabilities

– Flexibility or possibility for further options

– Associated project-on-project risks

– Compliance risks

THIRD PARTY VESSELS


• BIMCO “SupplyTime” Contract

– Very limited performance related obligations on vessel owner

– Basic form concerned with conformity with specifications (as opposed to performance or function) and seaworthiness

• Limited scope for “back to back” obligations and liabilities with vessel owner

ESTIMATED SUITABLE VESSEL SPREAD IN ASIA PACIFIC

NUMBER OF THE BEASTS



• 322 OFW Installation Vessels? Unclear as to breakdown between WTG and FOU

• 171 Cable Laying Vessels?

• Numbers must be viewed in context



• Need to exclude and disregard the following:

– vessels dedicated to oil and gas activities

– "unbankable" vessels with no track record




– vessels with low or inadequate technical and performance specification such as:

i. DP rating of DP2 and above (where "DP" means dynamic positioning)

ii. vessel speed

iii. crane capacity tonnage

iv. deck space and vessel length to carry foundations and blades

v. suitability for new generation of 8MW or greater WTGs




– Chinese fleet which are solely active in China (they are generally unavailable and cannot be deployed in Taiwan)

– Committed vessels:

i. Reservations are committed years in advance

ii. Competition for capacity from other markets e.g. the North American market

– market strategy and focus: preference to stay in or avoid established or other markets over a particular market

– policy or regulatory restrictions



• Our Estimate of suitable and available for OFW campaigns in Asia-Pacific to be:

– approximately 12 or less WTG installation vessels which are suitable for installing the new generation of 8MW or greater WTGs; and

– approximately 30 or less heavy lift vessels with crane capacity of 800 tons and above which are suitable for the installation of foundations and of these 30, approximately only 8 to 10 have crane capacity of 2,000 tons or above.

– About half to two-thirds of these vessels are PRC built.

– Limited vessel spread becomes even more limited if any cabotage issues or other policy restrictions applied



Caveat

• Our estimate is based on confidential informal surveys with various stakeholders

• Welcome any more formal or scientific data to challenge the estimates



Caveat

• However, different stakeholders who responded independently were largely consistent with their response on the following:

– Number for available vessel spread in Asia Pacific is dramatically lower than 322 (installations) and 170 (cables)

– Most responded that there are not more than a dozen suitable installation vessels

– At least half to two-thirds are PRC built

– Reasoning that PRC yards are considered the only yards where such large purpose-build vessels can be constructed at an acceptable quality level and a reasonable cost compared to other jurisdictions

• Happy to hear experience of teams who have recently concluded or are negotiating projects in Taiwan to test the correctness of our estimates

PRINCIPLES

CABOTAGE

• Restriction of the operation of sea, air, or other transport services within or into a particular country to such country's transport services

• Implemented by way of flagging requirements, foreign ownership restrictions or other policy restrictions

• Nationalistic and protectionist policy for sovereign nations over its own waters or air space e.g. Jones Act in the USA

ILLUSTRATION

CABOTAGE

• Brief and high-level fact sheet in the next slide for illustration and your information only

• This is a specialist subject which varies from jurisdiction to jurisdiction and will require dedicated advice

• Cabotage requirements are invariably open to interpretation and subject to policy changes even if there is no change of law

CABOTAGE REQUIREMENTS - SUMMARY

CABOTAGE

Taiwan South Korea Japan

Local Flagging Requirements? No. Generally, no local flagging requirement at

present save that vessel must not be PRC flagged

or PRC built (National Security Joint Review).

Yes. Generally, there is local flagging

requirement.

Yes. Generally, there is local flagging

requirement.

Foreign Flag Dispensation? Technically inapplicable since no flagging

requirements in the first place.

Exceptionally on a discretionary basis. Exceptionally on a discretionary basis.

Foreign Ownership Restrictions? Yes, if Taiwanese flagged.

At least half the capital of vessel-owing company

must be held by Taiwan nationals.

Chairman and half of directors must be Taiwan

nationals

Yes, Korean nationals must be controlling

shareholders.

All of the "representatives" of the company

are Japanese nationals, and at least two

thirds of the executive officers (directors,

etc.) are personnel with Japanese

nationality.

Shareholding by a foreign company will not

generally affect a reflagging.

Local Crewing Requirements? Yes but unclear as to what ratio and exceptions may

apply to OFW.

Yes but unclear as to what ratio and

exceptions may apply to OFW.– numbers

can range from 1 to 8 per vessel depending

on total number of seafarers on board.

Yes but unclear as to what ratio and

exceptions may apply to OFW.

Readily available local vessel

spread?

Extremely limited. Available jack ups and liftboats are primarily

from the O&G market but not generally

accepted as suitable for OFW. Hence,

spread is extremely limited.

Similar to the situation in South Korea.

IMPLICATIONS

CABOTAGE

• Exclusive System

– Naturally reduces the already limited vessel spread

• Discouragement to Market Entrants

– Compulsory reflagging requirements are likely to discourage OFW installation vessel owners from entering such markets.

– Curtailment of other market opportunities

• Complexity

– Cabotage-compliant structures are complex and practically difficult to implement

– Need to rebalance effective control and economic interests of the stakeholders

– Residual structural risks

TAIWAN VESSELS?

FOCUS : TAIWAN

• Taiwan Vessels

– Taiwan's efforts to increase and accelerate localisation level

– Whether OFW construction should be limited to only Taiwanese vessels?

TAIWAN VESSELS

FOCUS : TAIWAN

• Taiwan Vessels

– See link below for Edgare's excellent article on this subject and my considered response to the same: https://www.linkedin.com/feed/update/urn:li:article:7068392368564486123?commentUrn=urn%3Ali%3Acomment%3A%28article%3A7068392368564486123%2C6519821397773127680%29

https://www.linkedin.com/feed/update/urn:li:article:7068392368564486123?commentUrn=urn%3Ali%3Acomment%3A%28article%3A7068392368564486123%2C6519821397773127680%29

PRC BUILT

FOCUS : TAIWAN

• PRC Built Vessels

– Since end of 2018, PRC built vessels is regarded as a "national security concern" in Taiwan

– Foreign Flagged Working Vessels Operations in Taiwan Guidelines (申請非本國籍工作船來臺作業要點)

– Foreign-flagged vessels built in PRC which are intended to be deployed in Taiwan, require a “Results of National Security Joint Review” by "competent authority", confirming that such vessel is not regarded as a "national security concern"

– This development was not a change in law but a change administrative policy: Foreseeable?

PRC BUILT

FOCUS: TAIWAN

• Further developments?

– Compulsory flagging and further ownership restrictions?

– Greater extent of prohibition?

▪ Content? E.g. raw materials, components, equipment, cranes?

– More focused approach?

▪ Redefined to cover only specific aspects of PRC built vessels?

▪ E.g. only against specific yards (based on track record or other reasonable grounds), vessels below certain specifications or vessel age or specific sensitive components such as telecommunication components.

– Remains to be seen….

PRC BUILT

FOCUS : TAIWAN

• Further developments?

– The current situation in Taiwan already severely limits an already limited pool of suitable vessels as illustrated above

– Any further developments along the lines of the above will worsen the situation and create a supply chain gap which it cannot independently fill at the moment (including the lack of a viable Taiwanese fleet)

– I would urge a more cautious, incremental and focused approach to balance against the drive for localisation

CONTRACTUAL CONSIDERATIONS

• Contractor’s Equipment

• Responsibility for Vessel Availability

• Distinguishing Traditional EPC Model


• Delay & Idle Time (non-default scenarios)

– Prolonged suspension by employer (up to 84 days - based on FIDIC form);

– Prolonged force majeure delay (up to 84 days or multiple of 140 days or even 365 days - based on FIDIC form);

– Delays by associated works;

– Delays by adverse weather conditions; and

– Timing of Marine Warranty Surveyor decisions and actions.

*A Marine Warranty Surveyor is a person appointed by the employer who shall act on behalf of the employer's insurers reviewing and issuing certificates of approval for marine construction and transportation project operations and issuing advice and recommendations to the employer and/or the contractor in respect of the same.


• Demobilisation/Remobilisation & Latest Vessel Availability Date

• Collaboration & Coordination between associated works contractors

• Managing overlapping works and delays between associated works contractors

• Buffer and option periods to ensure vessel availability

• Risk and cost allocation is a separate discussion to be negotiated on a case by case basis

END

Ivan Chia, Partner

D: +65 6411 5207

M: +65 8121 7562

[email protected]

THANK YOU FOR YOUR TIME

mailto:[email protected]

6 asia offshore wind day seoulmay 01, 2019 · fantastic beasts • wtg, fou and cab installation...

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