Navigating challenges, seizing opportunities in a dynamic OSV market

By Jyoti Singh, MarketsandMarkets

Offshore support vessels (OSVs) play a crucial role in supporting operations at sea, including offshore installation, oil exploration and construction activities. These vessels are instrumental in providing supplies, transporting equipment and facilitating personnel involved in oil exploration and drilling activities. OSVs are categorized based on their specific functions, including seismic vessels, crew vessels, standby and rescue vessels, multi-purpose support vessels, platform supply vessels, anchor-handling tug supply vessels, and chase vessels. These are designed to operate in both shallow-water and deepwater environments.

In the offshore oil and gas and renewable energy industries, OSVs are vital for ensuring efficient logistics, shipping and additional services such as platform support, rescue operations, standby duties and anchor handling.

The growth of the OSV market is driven by significant investments in renewable technologies and offshore oil and gas exploration. However, the market faces challenges from volatile crude oil prices, which have led to an oversupply of vessels, potentially hindering market growth over the forecast period. Additionally, government regulations and high operating risks continue to pose obstacles to the OSV market. 

Overview of offshore industry

Countries such as Saudi Arabia, Brazil, Greece and nations in Africa are tapping into their offshore oil and gas reserves to boost production. Meanwhile, the energy shift is accelerating toward renewables, with the share projected to rise from 10% in 2019 to 65% by 2050, according to the BP Outlook 2023. Offshore wind farms are central to this transition, as evidenced by projects like the 1,400-MW Sofia wind farm in the North Sea. Such initiatives highlight the growing investments in offshore renewables, supporting the expansion of the OSV market to accommodate increased energy production activities. 

Technological advancements

Technological innovations in vessel design, propulsion and automation are revolutionizing OSV capabilities. Modern vessel designs emphasize fuel efficiency, stability and operational versatility, which is evident in hybrid OSVs and unique configurations like the Ulstein X-Bow, which enhances seaworthiness. These advancements enable OSVs to perform complex tasks in challenging conditions, increasing their appeal to operators across diverse maritime sectors.

Propulsion technology developments, including dual-fuel engines and azimuth thrusters, play a key role in boosting vessel performance. Dual-fuel engines offer flexibility in fuel choice and lower emissions, while azimuth thrusters provide exceptional maneuverability for dynamic positioning. Together, these technologies ensure safer and more efficient operations for offshore support tasks.

Automation is also transforming OSV operations. Advanced sensors, AI systems and remote operation capabilities reduce human intervention, exemplified by projects like Kongsberg’s Yara Birkeland, an autonomous vessel that enhances efficiency while cutting crew requirements. These advancements expand OSV applications, from traditional oil and gas exploration to supporting offshore renewable energy projects, propeling the maritime industry toward a more sustainable, technologically advanced future.

Supply-demand gap

The OSV market is grappling with a persistent supply-demand imbalance, where the number of vessels far exceeds the current demand. This oversupply has heightened competition among OSV companies, driving down prices and squeezing profitability across the sector. The market’s challenges are tightly linked to the oil and gas industry’s cyclical nature, which has seen significant fluctuations over the years. A surge in oil prices previously fueled the demand for OSVs, prompting companies to add new vessels. However, the sharp downturn in oil prices starting in 2014 led to a steep decline in demand, leaving many companies burdened with excess capacity.

The overcapacity issue was worsened by the delayed cancellation of new orders placed during the peak period, forcing companies to bear the cost of these vessels despite the reduced demand. This has resulted in fierce competition among OSV companies, leading to price pressure, reduced profitability and financial instability.

To address the overcapacity problem, some OSV companies have reduced their fleet sizes by scrapping or selling vessels or delaying the delivery of newbuilds. In 2020, Tidewater, Hermitage Offshore Services, BOURBON, Seacor Marine and POSH Terasea sold 61 OSVs worth $180 million. The COVID-19 pandemic further compounded the problem, reducing global offshore activity and leading to a 30% drop in vessel utilization. Many smaller operators faced bankruptcy, while several vessels were either laid up or stranded due to operational restrictions. This ongoing oversupply issue remains a significant barrier to the market’s recovery and growth.

Market outlook

The global OSV market is estimated to grow from $25.52 billion in 2024 to $36.18 billion by 2029, at a CAGR of 7.2% during the forecast period. This growth is primarily driven by increasing global energy demand, especially in emerging markets, leading to higher investments in offshore exploration and production (E&P). Offshore reserves are attractive due to their significant oil and gas volumes, making them key to addressing rising energy needs. Additionally, spending on E&P is projected to increase by 11% in 2023, with offshore activities seeing a substantial 20% rise, according to BP stats insights.

Governments and energy companies are increasingly focusing on offshore fields to meet energy requirements, recognizing their potential to supply the growing global demand. This expanding offshore activity, coupled with new technological advancements, positions the OSV market for steady growth as it supports essential services in both traditional oil and gas exploration and the burgeoning offshore renewable energy sector.

OSVs play a crucial role in various aspects of offshore activities, including transportation of personnel and supplies, towing, anchor handling, and emergency response. With technological advancements and rising energy prices, the market for OSVs is expected to expand further.

Three factors influence the OSV market:

• As countries explore new offshore oil and gas fields, the demand for OSVs to support these operations increases.
• Technological advancements in vessel design and propulsion systems are enhancing the efficiency and capabilities of OSVs.
• Higher energy prices make offshore exploration and production more economically viable, driving demand for OSVs.

The growing OSV market presents significant opportunities for both vessel owners and operators as well as the broader maritime industry. As the demand for offshore support services continues to rise, the OSV market is anticipated to remain a key driver of growth in the years to come.