| The Malaysian offshore support vessel industry is facing serious challenges heading into 2025. In 2022, in its tender requirements, Petronas extended the age limit for Offshore Support Vessels (OSV) from 15 years to 20. This was in the face of an ageing fleet among OSV owners that support oil & gas exploration and production in Malaysian waters. Some three years on, that age extension has brought only temporary relief for oil majors but no significant solution in the form of investments into newbuildings by OSV owners. The stark reality: "80% of Malaysian vessels is [estimated to be] >12 years in age in 2025”, raising concerns about long-term vessel supply security for oil majors. The resulting upward pressure on charter rates in the past 2 years or so has brought good times to OSV operators. Many are listed on Bursa Malaysia while the handful of Singapore-listed survivors from past years' industry downturn include Marco Polo Marine, Nam Cheong, Pacific Radiance and Vallianz. |
In a new report (Jan 16), Maybank Kim Eng said it expected daily charter rates (DCRs) to stay elevated but may peak soon.
Source: www.rivieramm.com/news-content-hub/news-content-hub/rising-offshore-expenditure-osv-market-on-fire-in-asia-82120Rates are not going to turn down anytime soon -- far from it,but don't expect them to skyrocket further."We expect daily charter rates to peak soon for some OSV players as:
i) end-clients are negotiating for more “stable & sustainable rates”; and
ii) the Malaysia O&G industry may face reduced activities due to potentially lower PETRONAS capex in 2025E."
Maybank analyst Jeremie Yap says oil majors are shifting towards "longer-term charters, i.e. 12-36 months" for security of supply.
An example: Nam Cheong announced RM1.2 billion worth of multi-year contracts in Dec 2024. (See: NAM CHEONG: RM1.22 billion contract wins! News super-charges this stock 19% in 1 day)
Like many analysts, Jeremie attributes continued supply tightness to the limited number of newbuilds entering the market, primarily due to "difficulties in raising financing due to ESG-driven restrictions".
Established OSV owners with secure contracts are more likely to find banks more inclined to finance newbuilds backed by long-term contracts from reliable oil majors.
Newbuilds take about 2 years to be completed.
Below are excerpts of Maybank's report:
Newbuilds take about 2 years to be completed.
Below are excerpts of Maybank's report:
| Though peak-ish, DCRs will stay elevated due to tight market supply Based on our understanding, contracts in the market by oil majors are now skewed towards longer-term charters, i.e. 12-36 months, likely due to the security of supply.  Jeremie Yap, analystThis may help some OSV names to sustain their level of financial performance, where revenue from longer utilisation rates could more than offset potentially lower realised DCRs.Our ground checks have also indicated that vessel supplies are tight, with minimal newbuilds in the market currently due to difficulties in raising financing due to ESG-driven restrictions, limiting loans for non-renewable energy projects. We understand that banks are generally more open to financing newbuilds with locked LT contracts backed by reliable oil majors, in which such jobs (LT contracts from oil majors) is not a norm at the moment. A newbuild process may take 18-24 months before they are fully constructed and ready to be deployed. Aging Malaysian OSV fleet is a concern “80% of Malaysian vessels are >12 years of age” 80% of Malaysian vessels are >12 years in age in 2025, based on MOSVA (Malaysia OSV Owners’ Association) data, according to The Edge. Many vessels will soon reach 20 years of age and they will be deemed obsolete, as PETRONAS has limited the age of OSVs to 20 years (extended from 15 years old in 2022) in its tender requirements. For example, we estimate that Perdana Petroleum and Icon Offshore’s average fleet age are 14 years and 13 years respectively. The long-term security of OSV supply for PETRONAS/Malaysian PACs is a key concern, in our view. From our observation, other than Keyfield, no other Malaysian-listed OSV players are actively building new vessels. |
