As the OSV market continues to remain tight into foreseeable future, charterers of OSVs in our industry are scrambling to figure out how to meet their increasing vessel needs. Many industry observers point to a reactivation of the remaining stacked fleet as a means to bring additional supply to the market. When considering the only truly deepwater capable vessels that are stacked, the number of vessels is much smaller than most realize. Reactivation will not yield dozens and dozens of additional vessels and will be very costly to bring those few capable vessels back into service.
Only 18 of the remaining stacked deepwater vessels are Jones Act compliant and could operate in the United States. While this seems like a significant number, when digging further into the history of these vessels, it becomes clear that many or even the majority of these vessels could never be reactivated:
- First, the average age of these vessels is 15 years. While the age of the vessels will present challenges to reactivation, the vast majority of them are inherently inefficient. In the environmentally focused world in which we now live, these vessels are not appealing to the energy companies of today. Furthermore, they are the antithesis of the types of vessels companies must utilize today in order to meet their ESG objectives.
- Second, even more challenging than age and inefficiencies is the amount of time they’ve been stacked. These 18 vessels have been in cold-stack condition for an average of 6+ years. It’s very hard to know all of the challenges that will have to be overcome to reactivate vessels that have been stacked for that long. At a minimum, the expected cost to reactivate even the vessels that are in the best condition could be no less than $4.5 Million. Conservatively, in order to recover these costs in a reasonably timely manner, current daily charter rates would need to increase by $8,000 to $12,000 per day at minimum.
It’s easy to understand why newer, active vessels will remain the preferred choice for most companies. JOO remains very well positioned to take advantage of these improving market conditions and continue the excellent work for our clients.