Australia’s offshore oil and gas exploration and development has been growing since the 1960s peaked in 2009.

Exploration activities in the seismic, drilling, and geotechnical markets, along with large construction projects for Blacktip, Pyrenees, Henry, Ningaloo and Pluto fields, and the emerging infield maintenance and repair market for ageing subsea hardware placed incredible stress on available human resources, port services, accommodation services, and helicopters.

With the confirmation of the Gorgon LNG Development last year, a number of commentators were openly wondering how Australia could muster the resources required to build a project worth tens of billions of dollars on an island that, despite 40 years of operations, was supported only by landing craft and barges.

Before the global financial crisis, the industry had seen a three-year offshore support vessel (OSV) building frenzy. The result of the economic downturn has been an ever-increasing number of newly-built OSVs without a home to go to.

The anchor handling tug supply fleets of two established global players in Australia swelled dramatically in response to high demand but even their fleets were unable to support the growth. The influx of vessels required to support the activities in the market came predominantly from Singaporean and Malaysian companies, such as EMAS, Otto Marine, Eastern Navigation, Hako Offshore, and RK Offshore.

Entering Australia

However, these non-Australian established owners faced various barriers to entry and challenges in Australia. These are as follows:

Restrictive immigration rules

Immigration laws with regard to working rights aggressively restrict the ability of low skilled labourers to be sponsored to work in Australia. There is an option to import Deck Officer and Marine Engineer labour but this requires a considerable financial investment by the sponsor to train Australian employees.

Quarantine

Quarantine rules concerning importation have an impact on everything from, for example, the pot plant that the captain has in his office and the ballast water in the tanks, to the food in the cool store and the timbers on the deck. Combined with marine invasive species checks, quarantine regulations can result in a vessel being turned around to undergo rectification.

Asbestos

Asbestos content on vessels has been an ongoing problem in Australia, especially for OSVs coming out of China, Indonesia, Malaysia and Singapore. It is also an issue for vessels that are built elsewhere but serviced regularly in South East Asia. The ongoing supply of chrysotile-based gasket material in the region presents a challenge to each and every vessel considered for operations in Australia. Under customs law the importation of asbestos, whether loose or in situ, is illegal in Australia. The shipyard asbestos free certificate is not given any value by customs officials at the time of importation.

Any OSV operators wanting to work in Australia need to be able to be able to provide management and technical support in the relevant time zone, and provide applied technical support in some very remote places.

Australian labour laws

The greatest challenge for OSV operators that have not previously entered into Australia is not that of placing their vessels into management of Australian companies or maintaining management, but engaging Australian labour. Australian maritime labour is unionised and those owners who do not have their own labour force in Australia are currently funneled into using one of the three Australian crewing agents with union agreements.

To some extent, the system is enforced by the oil companies who would prefer not to lose a day of operation through industrial action than assist a system that raises barriers to entry. Using a crewing agent with low exposure to OSV operations, and only a small permanent workforce during a boom time can be problematic because the available labour will be of poorer quality and not focused on promoting the company.

The OSV fleet in Australia at the peak of the boom in 2009 comprised around 80 vessels, spread from the Timor Sea to the Bass Strait. This represented a maritime workforce of around 2,400 people. About 50 per cent of this workforce has permanent employment in the industry.

Whilst there has been a softening in the market since January 2010, there will be a sharp rise in the third quarter as a new round of construction operations in the Bass Strait and Apache’s Reindeer pipelay commence. Gorgon’s dredging program and wharf construction will absorb smaller support vessels but the real impact of Gorgon will not be realised until the pipelay programs commence in the coming years.

Future opportunities

In essence, the barriers to entering the burgeoning Australian market require owners and operators who are not in a position to invest in human capital by operating directly from Australia to partner up with existing operators. Australian operators who also run their own fleet and manage vessels provide the best entry point for new tonnage OSV owners looking to enter Australia and take advantage of opportunities.

The infield maintenance and repair market will continue to be a growth sector in Australia but because these vessels are high end, the way they are positioned in the region requires a significant risk evaluation.

There is no doubt that there are opportunities for vessel owners. However, poor planning and ignoring the realities of the systems and distances in Australia rather than accepting them will lead to poor financial and reputational outcomes.