Dufour, Laskay & Strouse, Inc.

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Vessel Lay Up…At What Cost?

07/15/2020

Due to the price of oil and COVID-19, there are vessels in lay up all over the world.

Taking a vessel out of service can be both a short term and long term decision. The short-term call is usually the simple – it will cost more money to run than it will make. Then the harder call is shall it be “warm stacked” with a reduced crew and all major systems maintained, or  “cold stacked” as a dead ship with possibly an area watchman for partial security, some vital systems prepped for disuse, and dehumidifier systems set up around expensive electrical and electronic equipment.

The daily difference in cost between the two is significant. But part of a long-term decision is what will be the cost to reactivate the vessel in cold lay up?

One of the first decisions is to where the vessel will be laid up. Internationally the huge harbor of Singapore is popular, among other economically favorable Asian sites. But vessels sitting in the tropics are more subject to deterioration from humidity and damage from possible typhoons. The problem of bottom growth is exacerbated in tropical water which is of concern with the growing number or countries/regions that are enacting biofouling regulations. A year or two of bottom growth will also cause a great deal of drag and increased fuel consumption with a resulting increase in engine emissions. There have been European owners who have chosen to lay their ships up in the cold waters of North Europe to greatly reduce deterioration due to heat, humidity, and biofouling even at the cost of higher daily layup charges.

In the U.S., operators of OSV’s have the reactivation puzzle to solve. There is a glut of equipment in almost all offshore oil sites in the world. Day rates are very low. As demand for some service vessels returns, decisions will have to be made.

What vessels will be placed back into service at a reactivation cost that, for modern high technology vessels requiring delayed Special Surveys, may be in the range of $3,000,000 to $5,000,000? And will the day rate cover both the cost of operation and the cost of that $3-5MM outlay?

Norman Laskay
nlaskay@DLSmarine.com