Oil industry drives N. Sea helo fleet expansion

 - September 15, 2006, 8:15 AM

The upsurge in oil and gas activity is putting increasing strain on helicopter operators’ ability to serve their offshore customers, and highlighting a potential shortage of aircraft.

Aberdeen, Scotland-based Bristow Helicopters has raised that concern, noting that in addition to ordering new helicopters for their fleet, managers now have to scour the globe for used aircraft and the crews and technicians to support them. With delivery of new helicopters taking up to two years and training of personnel taking between five and seven years, it appears that all providers of rotary-wing assets are facing similar problems.

Bristow director of European operations Willie Toner suggests that oil and gas companies could improve the situation by including helicopter provision earlier in their planning.

“In the same way that drilling rigs are booked well in advance, long-term consideration of future helicopter requirements would ensure that the risk of any shortfall in availability is significantly reduced. We make every effort to anticipate future demand but, in a highly competitive market, serving an industry that is subject to wide variations in activity, it would be helpful if the helicopter operators could be part of clients’ overall logistical planning from the outset.”

Since the peak of oil and gas activity in the 1980s, the number of daily flights offshore from Aberdeen has been reduced by half, with providers of helicopter transport adjusting their resources accordingly and re-deploying aircraft to support development of new oil resources around the world.

Toner says that closer liaison is the key to matching future supply and demand. “Bristow is investing significant sums over the coming years in fleet expansion, personnel recruitment and training to meet current requirements, and we want to avoid any future problems by being more closely involved in our clients’ forward planning,” he said.

Commercial manager Mike Duncan said the problem has been developing for a while. “The oil companies naturally want us to be competitive in a volatile market, and we have to move assets to where they are needed most. The market is no longer willing to pay for spare capacity. We all work closely with our clients to plan activity levels, but we are finding that these plans are being significantly outstripped by actual demand, and sometimes only over a matter of months. [In fact, within six months, one requirement increased by 50 percent–Ed.]

“When we squeeze our assets, the extra flying brings forward maintenance requirements and the crews start running out of hours. We then face the strategic decision of whether we need to commit more aircraft to the operation.”

Long-term Planning Needed

North Sea operators have new aircraft on order and, at around $20 million for a heavy machine, they represent significant investments. Bristow Eurocopter EC 225s and EC 155D1s will start arriving toward the end of this year; the company holds additional options, but taking them up represents a significant risk. (Bristow has also ordered two S-92s and is the first operator to have that helicopter and the EC 225 in its fleet.)

When the company ordered these aircraft two years ago oil was around $30 a barrel and managers judged that it would probably increase, but not quite to recent levels of nearly $80 per barrel. They had to take a risk that the demand would be there. An unexpected surge in required activity can affect the decision to take up more options.

Duncan believes that one way around this is to plan farther ahead. “Would an oil company be involved in a drilling project– exploration is far more volatile than production–without knowing it had a rig available? Probably not. So what we’re saying is, consider your helicopter support at the same time that you are planning rigs. It’s nothing to do with a lack of preparation per se–just a change of emphasis. We need to work longer term.”

The ultimate price of not addressing this problem, argues Duncan, is that projects might end up being deferred or delayed. “We have already had to turn work away. We no longer fly ad hoc for non-contract customers because we have to husband our resources.” As an example, he said that Bristow turned away a company asking for helicopter support with 10 days’ notice, adding “No one can be that flexible in the current market.”

Bristow says it is not looking for certainty–that’s a luxury none of the parties can enjoy. It just wants to see a little farther ahead. As its 10 new aircraft start arriving in September the problem will ease, but the season of peak activity is lasting longer than it used to and, last year, extended well into the winter.

Spirit of Cooperation Encouraged

Oil companies have posited another solution to the problem. BP head of logistics Brian Cavan thinks that part of the answer lies in closer cooperation among the providers. Although BP’s main supplier in the North Sea is Bond Offshore Helicopters, which says it can meet all its customer requests with its four Super Puma Mk 2s, the oil company has transport links with all three rotorcraft providers in the northern and southern sectors.

“We try to plan our requirements 18 months to two years ahead, but sometimes we are caught out as well. These occasions are much more likely during the summer months. Ad hoc charter is the usual way around the problem, but I acknowledge that our helicopter providers can become stretched.

“We have to juggle assets as well, especially when it comes to hiring drilling rigs, so we understand the problem. As an industry we are taking steps to make the most of our helicopter resources, whether or not they are contracted to BP.” The oil and gas industries’ Mutual Hold Harmless [MHH] program, which ensures customer and supplier who are not mutually contracted remain responsible for the safety of their own people–thus avoiding expensive litigation in the event of an accident–has recently been extended to include workers traveling in helicopters. “MHH allows greater flexibility; now a BP worker can take up a free space in a Bristow Super Puma, for example, if it has a spare seat and is more conveniently placed than the regular aircraft from Bond,” said Cavan.

Getting highly competitive operators to share the necessary passenger load information has proved a thorny issue. Nevertheless, a system for tracking the movements of personnel working offshore has recently been extended to helicopters as well. The Internet-based Vantage POB– a centralized pay-as-you-go system for tracking the movements of offshore personnel–is now a tested way of improving productivity. Its most telling contribution has been to lower the cost of transporting individual passengers; since its 2004 introduction, the “pax” rate, paid per passenger by the oil companies, has dropped from £4.18 to £2.39 and is expected to remain less than £3 ($5.50) for the foreseeable future.

Whether Bristow customers accede to its request for earlier involvement in the contracting process remains to be seen, but clearly both customer and supplier have to juggle their resources to remain competitive. The days of an oil company calling for an extra helicopter on Friday and expecting it to turn up on Monday are gone forever.