Sweden’s Viking Supply Ships, a company providing offshore support vessels to oil and gas companies, is set to lose a contract for one of its anchor handlers.
In a statement on Thursday, Viking Supply Ships said the charter for its Brage Viking AHTS vessel would be cancelled “due to the market conditions”.
The Brage Viking is under a contract with Exxon Neftegas, a subsidiary of the U.S. oil giant ExxonMobil. The vessel is supporting the oil company’s operation in the Russian far east, offshore the Sakhalin Island, under a contract worth up to $100 million including options.
Worth noting, the deal called for the shipowner to make certain upgrades to the vessel, worth between $5-7 million.
The contract, originally meant to last two years and eight months excluding options, started in April 2015. However, the deal will now expire in mid-August 2016, instead in late December 2018, as originally expected.
Viking Supply Ship said that termination represented a loss of income during the remaining firm period of the contract of $33 million in 2016 and 2017.
Not the first time
This is not the first time for the high Ice-classed AHTS vessel capable of operations in harsh environment offshore regions – the Brage Viking – to see its contract terminated in Russia.
In December 2014, Viking Supply Ships received contract terminations for Brage Viking, Magne Viking and Balder Viking vessels.
The three vessels were to support drilling activities of a joint venture company between Rosneft and ExxonMobil, in the Kara Sea, off Russia’s north.
However, sanctions imposed on Russia for its involvement in the Ukraine crisis, also banned the western companies from supporting Russia’s Arctic drilling endeavors.
This, in turn, meant that Exxon had to pull out from the deal, and that the 2015 drilling season in the area would be cancelled, deeming Viking’s ships surplus to requirements.
Also worth noting, Shell ensured that bad news for Viking not only come from Russia. Namely, the Anglo/Dutch oil giant in September said it would cease further exploration activity in offshore Alaska for the foreseeable future. This meant that Shell would not declare the optional period for Tor Viking anchor handler for the 2016 drilling season.
Depressing trend to continue?
During the third quarter of the year, Viking Supply Ships laid up three platform supply vessels, and one anchor handler citing poor market conditions, and the oversupply in the market.
Providing its take on the future, the company in November said the OSV market in general is expected to remain challenging for a prolonged period.
“Despite a significant number of vessels being in lay-up, the market has failed to rebalance and especially the PSV market is characterized by over-supply. The rig activity has been reduced over the last year, and we expect this trend to continue for the next couple of years,” Viking Supply Ships said in its 3Q 2015 statement.
Offshore Energy Today Staff