Major Oil and Gas Projects Drive Strong OSV Demand in the Middle East

The Middle East continues to stand out as one of the most active regions for offshore support vessel activity, underpinned by the strategic expansion plans of national oil companies (NOCs) to boost offshore oil and gas production. A series of major projects have recently reached final investment decisions - including the Hail and Gasha gas development in Abu Dhabi, the Zuluf Expansion in Saudi Arabia, and Qatar’s North Field Expansion - creating a solid demand foundation for regional OSV operators.
 
In the United Arab Emirates, ADNOC is pushing towards increasing its overall production up to 5 million barrels per day by 2027, up from roughly 4 million in 2021. In Qatar, QatarEnergy’s total LNG production is expected to reach 142 million tonnes per annum, up from 77 million in 2024.

During the 2020 oil price war, Saudi Aramco announced plans to increase production capacity to 13 million barrels per day. Subsequently, we saw a rise in the Kingdom's jack-up rig count from 49 during the COVID period to 90 by early 2024, raising the demand for OSVs in the region even higher. Last year, a revision of the production target led to the suspension of approximately 30 jack-ups. Although this development was expected to negatively impact the vessel market, a substantial engineering, procurement, and construction (EPC) project backlog largely absorbed the redelivered vessels due to these suspensions, even allowing many shipowners to recontract at higher dayrates.

Fleet Growth Amid Global Market Contraction

Over the past decade, favorable demand fundamentals have contributed to a steady increase in the number of operational OSVs in the region. Specifically, the working platform supply vessel (PSV) fleet has grown from approximately 80 units in 2015 to an estimated 140 vessels by 2025.
Similarly, the working anchor handling tug supply (AHTS) vessel fleet expanded from around 300 units to 330 during the same period. Although these growth figures may appear modest over ten years, it is important to note that key OSV markets such as the North Sea, West Africa, and Southeast Asia experienced a reduction in average working AHTS and PSV numbers, with declines ranging from 25% to 50% over the corresponding timeframe.

The Middle East has maintained higher overall utilization rates than other regions, averaging approximately 80% since 2023 for conventional OSVs. This trend has resulted in significant vessel mobilization from areas such as Southeast Asia to the Middle East, reflecting steady demand. Consequently, the region has absorbed a substantial portion of the Chinese orphan fleet in recent years, estimated to total over 70 vessels in recent years, which has reduced the number of resale candidates at Chinese yards.

While the region’s current average age is around 16 years across the PSV and AHTS fleet, which is fairly in line with global averages, it is important to note that this would have been a lot higher had it not been for the aforementioned entry of the Chinese abandoned newbuilds.  

Newbuilding activity is starting to pick up after a prolonged period of constrained financials for many shipowners, yet the overall regional fleet age suggests significant fleet renewal required towards the end of the decade to follow persistently strict age requirements enforced by the NOC end-clients.

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EPC Backlogs, Drilling Trends and Key Contract Awards

As of early October, market conditions indicate a decline in drilling activity compared to last year's peak, although activity remains robust relative to historical norms. The strong trend in dayrates and prevailing market tightness can primarily be attributed to a substantial backlog of EPC projects.
Among notable contracts, last September saw QatarEnergy awarding Saipem the EPCI of six platforms, including cables and subsea pipelines for the North Field expansion. The contract was worth roughly $4 billion and tied to the aggressive LNG production growth target, leading to strong visibility on OSV demand.

Saudi Aramco has awarded more than $6 billion in offshore EPC contracts year to date, which equates to one of the strongest years on record for its long-term agreement contracting market. Notably, Subsea 7 announced a new award in September, which covers EPCI of more than 100 kilometers of pipelines, topside modifications and hook-up activities, valued between $750 million and $1.25 billion with offshore construction in 2027 and 2028.

Consolidation, Investment Stability and Outlook

Given the healthy market balance in the region, we have seen a string of high-profile enbloc deals and M&A activity. Prior to the general market recovery post-COVID, we saw Allianz Middle East acquiring 21 vessels from the Swissco restructuring. Shuaa Capital then took a leading position in Stanford Marine Group in 2020, followed by the acquisition of Allianz Middle East Ship Management in 2022, creating the one of the leading OSV fleets in the region totaling over 115 vessels.

State-backed ADNOC Logistics and Services also made major strategic moves with the acquisition of Zakher Marine International in 2022. ZMI controlled 62 jack-up barges and OSVs at the time of the transaction, enabling ADNOC L&S to further consolidate its position in the regional market.
Since 2023, we have seen Abu Dhabi Ports picking up 10 vessels in an enbloc transaction from private equity-backed ENAV Offshore, Astro Offshore becoming an 80% owned subsidiary of Adani Group, and Atlantic Navigation’s divesting 20 vessels to a new consortium owned by Greece’s Goldenport, Maas Capital and local shipowner Allianz Marine Services.

Several bolt-on transactions have been excluded, yet the number of completed deals remains high compared to other regions. In today’s market, we do see current valuations at historically high levels, even for aging tonnage, leading to less volume in overall S&P activity.
However, capital available for investment in the sector has generally stayed consistent, influenced by stable activity levels, even with low energy prices for extended periods. Factors contributing to this include political, economic, and regulatory stability in the region’s offshore segment, resulting in risk that is mainly confined to standard industry cycles.

Currently, there is a pipeline of projects anticipated to reach FID over the next few years, including the North Field West project in Qatar and the Dorra, Safaniyah, and Manifa expansions in Saudi Arabia. The combination of ongoing and upcoming projects is projected to support demand through the end of the decade.

Given the present fleet composition, characterized by a negligible quantity of vessels with keels laid after 2015, combined with restricted capital allocation by shipowners in speculative newbuilds, projections indicate that the Middle East can experience stable market fundamentals despite rising global market volatility.

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