THE PETERHEAD CONNECTION

The reprinting of this article first written in 1992, seems appropriate this month as the services provided by Asco and others to the oil companies seem to be losing their attraction. See also Sept 2002 News and Views.

In the village which is the oil community in Aberdeen rumors have abounded throughout the year of some sort of liner or groupage service, for the purpose of distributing cargo to installations of different operators from one base. It is not the first time such ideas have been muted, and in past years one or two ship-owners have attempted to initiate liner services using single vessels. Some operators have also shared vessels with moderate success.  

The consensus was that the moving spirit behind the idea was a major ship-owner, the prime motive being to make use of some of the variety of ships which now languish on Blakies Quay waiting for non-profitable spot hires.  

It turned out that every-one was wrong. On 27th August the Aberdeen Service Company, Asco, issued a press release stating that it had set up a "Marine Services Department to provide marine management as a development of their contract Logistics Service. The Department will be responsible for the operational control, fleet planning and chartering of anchor handling, platform supply and standby vessels." It should be mentioned here for those unfamiliar with the local topography, that with typical oil industry logic the Aberdeen Service Company operates principally out of a large purpose built base on the South side of Peterhead harbour.  

The new service has two clients already, BP Exploration and Conoco, both contracts being effective from 1st October.  The already depleted marine team in the BP's Dyce headquarters is effectively to be disbanded and Conoco will also be reducing it's marine staff by redeploying two of the four man team to other areas of their organization.  

On the Logistics side Asco already carries out warehousing operations and looks after the ship to shore interface for BP, having moved its cargo operations from Dundee in the aftermath of the Britoil take-over, and Conoco have announced that it will be moving it's ship operations to Peterhead in December, giving up a long association with the Wood Group in Aberdeen.  

The broad approach to this entirely new concept is that BP and Conoco will hand over all their ship operations in their entirety to Asco, except, it would appear, diving ships. The contracts have been placed "subject to satisfactory service agreements" and one assumes it is in these areas that all the questions about how the service will work will be answered.  

To understand what the new service will do it is first of all necessary to understand what an oil company marine department does. Firstly and most simply it must provide a standby vessel for each installation which requires one which conforms with all legislative and company safety requirements. It must ensure that the standby vessels are well run, suitably manned and that the ship-owners or managers are capable of supporting it.  

Secondly it must provide transport for all materials from the oil company shore base to all the company's offshore installations and mobile drilling units in a way which balances the instant service usually needed by drilling departments with the budgetary constraints of an increasingly efficient industry. This usually involves the long term charter of a core fleet of supply vessels, which may be as few as one, and the hiring of suitable craft from the spot market to deal with urgent cargoes.  

Thirdly it must move the company's chartered mobile drilling units from location to location, using anchor-handlers from the core fleet or hiring them from the spot market. It is a natural requirement that the vessels hired should be suitable for the task, conforming with any insurance requirements as far as BHP and Bollard pull are concerned, and be taken on for as little money as possible.  

In theory, if the oil companies are capable of doing this for themselves there is not the slightest reason why a third party should not do it for them, and it can be said that Asco have the advantage of already providing the logistics service. Hence if BP want 50 pallets of chemicals to be delivered to the Magnus Field, Asco Logistics will take delivery of the containers at the base, ascertain when the next sailing to the area is to take place, deliver them to the first available vessel and eventually they will arrive in the field.  

Uncertainties come to light if the fifty pallets are urgent. The greatest strength in the service must lie in the use of very large platform ships which will wend their way slowly through the Conoco and BP installations delivering cargo and picking up back-load, eventually returning to Peterhead a week after their departure. If the fifty pallets are hot-shot and the only vessel available is a ME303 MkII which will use 50 tonnes of fuel per day at full speed, to ship the cargo individually on this ship rather than on the next "liner" will cost possibly £10,000. Who will pay this cost. No answers are forthcoming.  

If a platform unreasonably delays one of the "liners" disrupting it's schedule and making it's return to base for the next load late so that the Asco Marine Servics Department has to hire a ship off the spot market, who will pay that cost. One assumes that they will know about such delays since the ship-masters will be directly responsible to them, and not to the operators. This change in responsibility should in itself provide some interesting exchanges offshore.  

As well as operational uncertainties the new service has raised questions in the minds of both supply ship owners, and oil companies already working out of Peterhead but not within the new arrangement. There is a close association between Asco and Smit-Lloyd which some feel that Smit-Lloyd will exploit to obtain work for their vessels, and it has been pointed out that even if non of their existing fleet proves suitable for what ever operation the Asco Marine Services Department may have in mind, there is little to stop them, with the current state of the market, from finding a craft of suitable specification and purchasing it.  

The companies already working out of Peterhead are also concerned. Will they be relegated to the distant berths on the North side of the harbour with their limited storage, difficult access and problematical communications, or will they be treated especially well and given priority in the best berths of the South side, since the BP and Conoco operations are captive business. It is Asco's intention that things should go on exactly as they do now, and that berths will be allocated on a first come first served basis.  

This could be interpreted as meaning that there will still be too many ships competing for too few berths, and that the Asco Marine Department will end up lobbying the Asco Operations department in competition with the oil companies working out of the port. It is after all unlikely that Asco is unique in being free from interdepartmental angst.  

Because the commercial aspects of the contracts remain confidential it is difficult to see how Asco is going to satisfy ongoing requirements of the operators, while still achieving the economies of scale which must really be the basis for the service. Analysts in the supply ship companies have evaluated that a combined Conoco and BP fleet may save a single ship, so the realities must be that further customers need to be found to make the service effective.  

Existing charters with both BP and Conoco are to be assigned to the new operation, and indeed the platforms of both companies in the far North have special requirements for which some ships have been converted, but broadly, in taking on new vessels Asco have to decide on the make up of their core fleet which must be the basis for any savings.  

Here there are a number of options and it will be of great interest in twelve months time, when the existing charters have been shaken out, to see what policy they have adopted. Some say that they should take on half a dozen UT705s of any age as long as they have bulk capacity, and charter in anchor-handlers from the spot market for the rig moves. Alternatively they could use a couple of VS476s with their very large cargo-carrying capacity so that they could fulfil the supply requirements when not anchor-handling.  

There is little doubt that by using the most modern tonnage of the largest possible size, some economies of scale can be achieved and periods of waiting for weather, both in supply and rig moving will be reduced. This is efficiency. On the other hand there are numbers of adequate but older ships available. They have less bulk capacity, lower pumping rates and are more likely to lose time in the Northern winters, but their day rates are moderate. This is economy.  

So far decisions made by the operators concerning fleet make-up seem to have depended more on philosophical considerations than on true economics, so for the first time it will be up to the Asco Marine Division to make a real evaluation, and come up with a fleet which will actually provide the best possible service at the lowest real cost.