The document provides an overview of the offshore shipping industry, including: 1) It traces the history of offshore shipping from the first offshore oil well in 1947 to the development of dedicated offshore supply vessels. 2) It discusses the development of India's offshore industry, including key milestones like the first offshore oil discovery in 1974 and policies to develop India's fleet. 3) It describes the current state of the global and Indian offshore markets, noting declining dayrates in India and oversupply issues globally due to low oil prices that have impacted demand.

1. Welcome to the Presentation
on
OFFSHORE SHIPPING
By
Capt K Devadas
Fellow CMMI and
Former Director (T&OS), SCI

2. History of World & Indian Offshore Industry
 The oil and gas industry marked a milestone in 1947 with the drilling of the first offshore
well in the open waters of the Gulf of Mexico, 45 miles off the Louisiana coast. And with that
innovation, a new need was created for vessels to work in harsh offshore environment.
 Initially, fishing boats and retired World War II military vessels were pressed into service
delivering the tons of equipment, men, and supplies needed to support offshore facilities.
Then in 1955, the first dedicated offshore supply boat was launched.
India
 1974: Exploration & Production (E&P) efforts started in Bombay High.
 Initial 8-9 years, only foreign flag vessels operated in Bombay High region due to absence of
Indian flag vessels.
 Around 1980~81: GOI (Ministry of Petroleum and Ministry of Shipping) felt the need for
creating a fleet of Indian flag vessels to cater to Indian E&P operators’ needs.
 5 Indian shipping companies (SCI, Great Eastern, Garware Offshore, Essar Shipping (Tag
Sea Logistics) and Varun Shipping) agreed to invest in the offshore support vessel sector by
acquiring 25 vessels to cater to the long term needs of ONGC.
 Vessels were mobilized between May, 1983 and February, 1985
 ONGC also acquired 33 vessels between 1983–1993 for offshore logistic operations. 2

3. India’s Oil Discovery & Exploration Story
 1866 Detected oil traces in the feet of an Elephant
Carrying logs in Jaypore – Upper Assam
 1889 W.L. lake of Assam Railway & trading Co. started
“DIGBOI” well.
 1899 AR&T formed a new oil company Digboi refinery
commissioned in the State of Assam (India)
 1901-02 Disboi refinery commissioned in Assam
 1911/12 Burmah Oil Company comes to India take over
Assam Oil Company.
 1956 Oil & natural gas commission established (terms as
autonomous body in 1959)
3

4. India’s Oil Exploration Story
 1956 - Oil India (P) Ltd., incorporated/registered
and commences its operations
 1960 - Oil stucks at Ankhleswar (Gujarat) and
Rudrasagar (Rajasthan) in the western onshores of
India
 1974 - Drillship Sagar Samarat strikes oil in
Bombay High – A historic moment for E&P
operations in India
 1981 - 1st well spudded in Godavari Offshore (Oil
discoveries extends to East Coast of India)
 1986-87 - Oil stuck in Tapti oil fields by ONGC in
the Western Offshore region in India
 1998 - New Exploration & Licensing Policy (NELP)
adopted in India by Directorate General of
Hydrocarbon (DGH)

5. India’s Oil Exploration Story
 The Hydrocarbon Exploration and Licensing Policy (HELP) replacing the erstwhile New
Exploration Licensing Policy (NELP) was approved in March 2016 and the Open Acreage
Licensing Programme (OALP) along with the National Data Repository (NDR) were
launched in June 2017 as the key drivers to accelerate the Exploration and Production (E&P)
activities in India
 More than 1,20,000 sq km has now been made available for exploration in the recent years under
the OALP.
 The OALP, a critical part of the Hydrocarbon Exploration and Licensing Policy (OALP),
provides uniform licences for exploration and production of all forms of hydrocarbons, enabling
contractors to explore conventional as well as unconventional oil and gas resources
 Fields are offered under a revenue-sharing model and throw up marketing and pricing freedom
for crude oil and natural gas produced.
 NDR has been created to provide explorers’ data on the country’s repositories
5

6. Offshore Activities
 Oil exploration installations
 Wind Energy mills installations
 Deep Sea Surveys
 Laying up pipe lines
 Seismic and Geotechnical survey
 Fishing and aquaculture
 SBM and transfer of goods
 Coastline Patrolling (ODAG)
 Light house establishment etc
6

7. What Offshore Vessels do?
 Logistic supports to Oil Platforms and rigs ( Man, material, fuel, water, provisions etc)
 Oceanography surveys and research
 Rescue & Salvage
 Under water inspection, maintenance and repair of pipe lines & Offshore structure
 Light house Maintenance
 Towing & Anchor handling
 Diving operation
 Fire Fighting
 Helicopter Operation
 Storage facility/ Accommodation facility
 Heavy Duty Crane facilities
 Stand by duties and Coastline Patrolling Boat etc.
7

8. Opportunities for Shipping Companies
 Manning and Management
 Technical operations
 Consultancy services
 Project Operations & assistance
 Supply vessels services
 Storage Tanker
 FPSOs (Floating, Production, Storage and Offloading)
 Offshore Drilling
8
World Offshore Fleet
Year (Thousands of DWT) %age of World tonnage
2017: 77,845 4.2%
2018: 78,228 4.1%
Growth: 0.49%
Share of value of Offshore fleet in the world fleet is about 19.6%
Source: Review of Maritime Transport, 2018

9. Market Performance of Offshore Industry is the mirage of World oil price.
Brent Oil Trend from 2010 to till date…
0
20
40
60
80
100
120
140
Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15 Apr-16 Apr-17 Apr-18
Highest
128.40
Lowest
27.10
Average
81.43 9

10. Oil price continues to be sluggish, investment and production has picked up
Source: Clarksons / DNV-GL
CAPEX Offshore Oil & Gas
billion
USD
60
100
20
0
120
80
140
160
180
40
20182010 20142012 2016 2020
7%
10

11. Inactive Units per Offshore Segment:
Source: Clarksons
% inactive vessels
11

12. The competitiveness of unconventional oil production (viz., Shale oil) has
proved much more harmful for the offshore supply market.
Source: Clarksons / DNV-GL
Drilling Rigs Dayrate Index OSV Dayrate Index
40
140
80
60
100
120
160
2017 20182011 20152010 20162012 2013 2014 2019
100
120
80
140
160
180
20142013 2015 20192010 2011 20162012 2017 2018
12
Jan 2005 = 100

13. Indian Offshore Market
$10,500
$9,500
$9,400
$9,783
$7,000
$5,391
$3,508
$-
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
Aug/10 Aug/11 Aug/12 Aug/13 Aug/14 Aug/15 Aug/16 Aug/17
ONGC Charter hire rates - 80 T AHTSV
$12,990
$14,850 $14,490
$12,300
$4,581
$-
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
Oct/12 Oct/13 Oct/14 Oct/15 Oct/16 Oct/17
ONGC Charter hire rates - 120 T AHTSV
More than 80% of offshore vessels employment on Indian Coast (Indian ocean) is for requirement of
ONGC’s offshore exploration activities, directly or indirectly
13

14. Indian Offshore Market
$12,990
$12,330
$13,700 $13,140
$10,400
$6,600
$3,508
$4,000
$-
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
Jun/13 Jun/14 Jun/15 Jun/16 Jun/17 Jun/18
ONGC Charter hire rates PSV
 ONGC rates for 120T AHTSVs of SCI has fallen from US$ 14,450/day in
2015-2016 to presently at US$ 4,581/day.
 ONGC rates for PSVs of SCI has fallen from US$ 12,330/day in 2015-2016 to
presently at US$ 4,000/day.
14

15. World Offshore Orderbook
Offshore Orderbook per Segment (in # units)
 Still many offshore units in the orderbook
– Only 50% to 60% of those units could eventually
see the market
– Gap between contracted value and market value
 OSV:
– More than 50% of the orderbook have been
launched for over a year
– High “re-activation” costs associated with delivering
longer-term launched units
 Rigs
– Over 70% of the orderbook has been launched
– Many yards have moved their rigs into stacking
zones and rededicated space to other sectors
11
44
103
24
104
130
149
AHTS + AHT
Other OSV
Accommodation
Construction Units
Mobile Drilling Units
Mobile Production/ Storage Units
PSV/Supply
Source: Clarksons / DNV-GL
15

16. Newbuilding contracting
16
Newbuilding Contracting
Source: Clarksons / DNV-GL
0
50
100
150
# units
20142013 2015 2016 2017 2018 2019 2020 2021 2022
FORECAST
Contracts 2018 per Segment
FPSO
FSO
3
2
Jack-up
Production
Self-
elevating
Lift/
Construction
Semi-sub Drilling
Semi-sub Production
WTI
7
6
2
2
7
16

17. 17
Source: ABS

18. 18
Source: ABS
OUTLOOK
Demand Outlook
– Annual Change

19. Attractiveness of different Asset Classes across the
Offshore Value Chain
Source: OECD shipbuilding review 2015; Expert interviews; Clarkson Offshore reviews and yard monitor, ONGC 2030 perspective 19

20. ONGC News Desk:
 Nine oil & gas fields of the state owned ONGC was planned & came tantalizingly close to being
sold to private & foreign players lately. This was said to be stalled due to strong opposition from
ONGC & from within the Government itself. Besides the 9 fields, 149 marginal fields were to be
clustered & bid out. The proposal was to boost stagnant output from ageing fields of the PSU,
which has been scrapped now.
 ONGC is said to be planning to invest $500 million in its flagship asset of Mumbai high. They plan
to use Enhanced Oil Recovery (EOR) methods to improve oil recovery from the ageing fields in
Mumbai high, which had 1659 million tons of oil reserves. The break-even cost of 3 consecutive
redevelopment phases since year 2000 in Mumbai high north had escalated from US$30 to US$53
per barrel according to ONGC.
20

21. SCI Nalanda and SCI Yamuna on Mars Mission
Vessels were positioned suitably in the South Pacific Ocean (approximately 17,000 km from
India) to track the crucial separation of the 3rd stage and the ignition of 4th stage of the rocket.
The tracking of satellite remained crucial for ISRO at this point of time as the launch vehicle
went out of range from all the ground stations which were tracking the satellite.
21

22. Towing of MOL Comfort by SCI Urja
 SCI Urja was involved in towing the container vessel MOL Comfort. This
vessel had broken into two parts on 27.06.2013 due to rough sea.
 Aft part sank and Forward part was towed by SCI Urja to her destination.
 Forward part got fire on the way due to explosion of chemical containers
loaded on this vessel.
 The tow eventually sunk in the ocean during towage and SCI Urja saved
due to parting of the towing wire.
22
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23. 23

24. 24

25. 25

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27. 27

28. Key Takeaways
 Cycle: After multi-year downturn and worst market since 1986, we seem to have “hit the bottom” in
2017. Sentiment has improved but structural challenges remain.
 Oil price: Improvements in 2018 with support from OPEC production quotas. But shale oil is responsive
and output is still growing
 Costs: Field development costs have come down over 30% (so has OPEX). However offshore needs to
remain competitive against shale
 Lay-up and stacking: stabilising and falling in some regions but still at high levels. Rig utilisation
improving
 “Stranded” orderbook: Yards looking for solutions to the significant stranded inventory. Over 50% of
orderbook already launched
 Rates and Prices: Rate environment showing marginal improvements (e.g North Sea OSV and Harsh
floaters), but still most rates at (or close) to OPEX globally
 Restructuring, Consolidation, M&A and counter cyclical opportunities: Still further waves of
restructuring. S&P activity increasing but still room for wider consolidation
28