SOV and CSOV Market in Transition as Sale and Purchase Activity Grows

The market for service operation vessels and commissioning service operation vessels is in transition, cooling after several years running hot as new vessels enter service. Analysts report the fleet has shifted decisively toward purpose-built Tier 1 vessels, while consolidation has begun and barriers to entry have risen. Sale and purchase activity is reshaping ownership, with Edda Wind's exit leaving Esvagt, North Star and Norwind Offshore as dominant owners, though longer-term demand is expected to enjoy a resurgence.

 

The Shifting Market

 

The market has cooled after a sustained boom. For several years, the newbuild vessel market ran hot. It has cooled recently as new vessels enter service. The market is also adjusting to structural problems elsewhere in the industry. This has prompted a broader transition in the sector.

Several dynamics are reshaping the market simultaneously. The type of vessels being ordered has evolved over time. Consolidation has begun to take place among owners. Barriers to entry have risen for new participants. Despite this, longer-term demand is expected to recover.

 

The Rise of Purpose-Built Vessels

 

The fleet composition has changed significantly. The commissioning vessel fleet was initially dominated by converted vessels. These were subsea and platform supply vessels with rental gangways. As the industry grew, a new segment developed. This featured purpose-built ships designed for offshore wind.

These purpose-built vessels have expanded their role. They were initially built for the operations and maintenance phase. Increasingly they are also built for the construction phase. This reflects the maturing requirements of offshore wind. Purpose-built tonnage now dominates the market.

 

The Tier System

 

Analysts categorise the market by vessel quality. Clarksons divides the market into distinct tiers. Tier 1 ships offer higher efficiency and operability. They also provide better technician accommodation and lower fuel consumption. This compares favourably with Tier 2 units and the ad-hoc fleet.

The market has become fundamentally a Tier 1 market. Purpose-built vessels for offshore wind now dominate it. These were the primary investment focus for several years. Long-term contracts and technical requirements supported this. Tier 2 vessels play a diminishing and increasingly opportunistic role.

 

Convergence of Vessel Types

 

The two main vessel types have grown more similar. Historically, SOVs and CSOVs served different purposes. SOVs were customised for specific windfarms and long-term operations. CSOVs were built for installation and commissioning phases. They typically worked on shorter contracts of three to twelve months.

Recent years have seen these distinctions blur. Most newbuildings now feature flexible gangways regardless of size. The cost difference is limited and flexibility is valued. Most vessels are also built in the 90 to 120 person range. Some SOVs are entering the spot market while some CSOVs take long-term contracts.

 

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Consolidation and Sale and Purchase Activity

 

Sale and purchase activity is reshaping ownership. Recent transactions suggest the early stages of consolidation. Owners are looking to optimise fleet composition and capital allocation. Early movers have divested first-generation vessels to recycle capital. This capital is reinvested into newer, often speculative vessels.

Ownership has become increasingly concentrated. Edda Wind sold its vessels and effectively exited the market. This left Esvagt, North Star and Norwind Offshore as the largest owners. Together they control approximately a third of the active fleet. This gives them a sizable lead over other owners.

 

Chartering Strategies and Rates

 

Ownership type influences chartering approaches. Private-equity-backed owners favour predictable revenue over high margins. Around half of their fleets are fixed on contracts of at least three years. This compares with around 20 percent for other owners. Many have renewed efforts to secure long-term charters recently.

These strategies affect vessel availability and rates. Fewer vessels may become available for spot charters. Current spot day rates sit around 50,000 to 65,000 euros. This is close to the limit charterers will pay. Longer fixtures offer savings, with 10-year rates around 25,000 euros.

 

Outlook for the Market

 

The near-term picture shows possible oversupply. The segment is still absorbing vessels from a recent newbuilding spree. Some oversupply may occur outside prime construction season. The oil and gas industry is showing interest in these assets. However, it is not absorbing enough supply to prevent oversupply.

The longer-term outlook is more positive. Demand for long-term SOV contracts is expected to grow. This follows the expanding installed base of offshore windfarms. Bottom-fixed and floating-wind activities should accelerate in the 2030s. This is expected to create a shortage, signalling a need for further newbuildings.