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How the offshore helicopter industry is managing the oil-and-gas rebound

By Ken Swartz

Published on: November 14, 2023
Estimated reading time 27 minutes, 19 seconds.

After years of headwinds followed by the unprecedented pressures of a global pandemic, the offshore helicopter sector has seen a sudden rebound. We look at how a new boom brings its own set of challenges.

What a difference a year can make.

In early 2022, the offshore helicopter support business was struggling to stay aloft after eight years of overcapacity, low aircraft utilization, Covid-19 headwinds and relentless customer pressure to reduce costs.

Sales of new offshore helicopters all but dried up, and leasing companies were looking for new work opportunities (like aerial firefighting) to put idle Sikorsky S-92As back to work.

A Heliconia Leonardo AW139 lands at an offshore platform off the coast of North Africa. Anthony Pecchi Photo

Jump forward a year and a half, and the market has completely changed. Oil companies have suddenly discovered there are not enough helicopters to fly the growing workforce offshore, driving up contract rates and helicopter lease rates for the first time in years.

The dramatic reversal in helicopter supply might have begun with the economic recovery at the end of the Covid-19 pandemic, but it accelerated when Russian forces invaded Ukraine on Feb. 24, 2022.

Suddenly, Russia — the world’s leading exporter of natural gas and second-largest exporter of crude oil — became an international outcast.

As sanctions were applied to Russian industry, products, politicians and oligarchs, world oil prices spiked, and European nations scrambled for energy supplies after years of growing dependency on Russian oil and gas.

The Downturn

Oil prices are determined by global fluctuations in supply and demand. Prices grew steadily from 1999 as a result of rising demand from industrializing nations like India and China.

Offshore operators acquired new-generation rotorcraft to support the rapid growth in worldwide deepwater exploration and production activity. This was evident at airports and heliports around the world, as deliveries of new Leonardo AW139s, Airbus EC225s and Sikorsky S-92As augmented older generation single- and twin-engine helicopters.

The new-generation super mediums were developed with the goal of taking market share away from the heavy-lift types, but the downturn delayed their widespread use offshore. Lloyd Horgan Photo

World oil prices peaked at US$147 a barrel in July 2008, collapsed during the global economic crisis of 2007-2008, and then rebounded through 2014. At this point, the Brent Crude oil price hovered in the $100-to-$120 a barrel price range.

The offshore helicopter fleet reached a record level of about 1,800 helicopters in 2014, before an “oil glut” caused by new production sent prices tumbling as low as $30 a barrel. This led to a multi-year industry contraction, as offshore capital expenditures declined, with the offshore fleet contracting to about 1,400 aircraft today.

Helicopter operators and lessors were squeezed as oil companies canceled contracts and demanded lower rates, sending the industry into a downward spiral. Between 2016 and 2019, the world’s three largest offshore operators — CHC, PHI and Bristow — all filed Chapter 11 bankruptcy to financially restructure, slash debt and trim fleets.

The Gulf of Mexico saw a drop of 31 percent in offshore passenger numbers between 2019 and 2020, according to HSAC. Dan Megna Photo

Adding to the challenges, on April 26, 2016, an EC225 LP lost its main rotor and crashed off the coast of Norway, killing all 13 people on board. The fleetwide grounding of the type impacted more than 120 H225s and AS332 L2 Super Pumas — including about 34 H225s and 11 AS332 L2s serving the North Sea.

Most of the offshore H225s and AS332 L2s found new opportunities in secondary markets. In 2018, 21 ex-CHC H225s were sold to the Ukrainian Ministry of Interior, while Air Center Helicopters of Texas bought 16 H225s for utility and government contracts. Iceland and Greenland both introduced search-and-rescue (SAR) configured H225s, and other operators began using the type for aerial construction, firefighting and humanitarian relief missions. A total of 16 H225s continue to fly offshore in China (14) and Vietnam (two).

Through the downturn, the S-92A became the dominant heavy crew change aircraft, with a total of 210 delivered for offshore crew change and SAR use between 2004 and 2020. High inventories, coupled with low demand, caused S-92A lease rates to tumble from a high of $240,000 a month in 2014 to a low of $100,000-to-$115,000 a month after PHI and Bristow Group filed Chapter 11 proceedings in 2019, according to data compiled by Steve Robertson, founder and principle of Air & Sea Analytics of the U.K.

The entry into service of the new-generation super medium (aircraft with a maximum takeoff weight of 15,400 to 22,000 pounds/7,000 to 10,000 kilograms) Leonardo AW189 in October 2014 and Airbus H175 in December 2014 coincided with the collapse of world oil prices. However, the offshore fleet still grew to 37 H175s and 44 AW189s by late 2022, with some contracted to replace S-92As and H225s and others assigned to entirely new contracts.

The Gulf of Mexico offshore helicopter fleet dropped below 200 aircraft in 2021, but flying activity increased in 2022. Dan Megna Photo

Saudi Aramco took delivery of 23 factory-new Leonardo AW139s from Milestone Aviation Group between 2018 and 2022 for offshore use. Production of the hugely popular medium helicopter was not as heavily impacted by the oil downturn, with the new higher gross weight AW139 models replacing the older generation Airbus AS365 N/H155 Dauphins, Bell 212s and 412s, Sikorsky S-76Cs and older Leonardo AW139s for a wide variety of missions.

The lack of significant offshore helicopter orders in 2014 to 2021 can be attributed to four factors, said Robertson — including oversupply, low lease rates, a reluctance by petroleum companies to grant long-term contracts, and the challenge of finding attractive financing.

COVID-19 Pandemic

The offshore helicopter industry took another hit during the Covid-19 pandemic, when passenger traffic dropped by 15 percent — from 483 million passenger miles in 2019, to 410 million passenger miles in 2020 — according to analysts at Rystad Energy.

A Leonardo AW189, operated by Omni Táxi Aéreo, flies to an offshore platform off the coast of Brazil. Omni Táxi Aéreo Photo

While exploration and production platforms kept working through the pandemic, the offshore workforce was slashed by up to 40 percent in the U.K. North Sea. This was firstly to reduce the risk of offshore infections, and then in response to falling oil prices, resulting in further flight and fleet reductions.

The impact of the pandemic was evident in the U.S. Gulf of Mexico, where the Helicopter Safety Advisory Conference (HSAC) reported a drop of 31 percent in offshore passenger numbers between 2019 and 2020 (from 1.1 million to 800,000 passengers). Aircraft movements fell 33 percent (to 275,000 flights), flight hours fell 27 percent (to 120,000 hours) and the fleet shrank by 15 percent (to 234 active helicopters).

In 2021, the region saw a rebound, with passenger traffic up by 23 percent, flight hours up by seven percent and flights up by five percent. Still, the fleet shrank by 15 percent to 197 helicopters — comprising 95 single-engine types, 15 light twins, 55 medium twins, and 32 heavy-lift aircraft.

Historically, the Gulf of Mexico helicopter fleet has been shrinking since its peak of 606 aircraft in 2007, as shallow water oil and gas production declined and companies merged (such as Era and Bristow in 2020). But the 2021 nadir was probably the first time in 50 years the fleet had dipped below 200 aircraft.

“The level of annual flying activity for 2022 increased slightly across the categories of fleet size, passengers carried, hours flown, and landings/takeoffs compared to 2021,” HSAC stated in the preface to its 2022 annual report. “This is the second consecutive year with an increase in flight activity, demonstrating a continued recovery from the pandemic. While there continues to be challenges related to the pandemic, it is welcome news to see the increase in flight activity.”

Production of the medium- lift Leonardo AW139 was not as heavily impacted by the offshore downturn, with the type proving a hugely popular replacement for much of the offshore medium- lift fleet.

The rebound also brought a slight increase in the U.S. Gulf of Mexico fleet, which comprised 103 single-engine types, 13 light twins, 66 medium twins, and 30 heavy-lift aircraft at the end of 2022. Unfortunately, there were five accidents in the Gulf of Mexico during the year, with seven fatalities.

From a global perspective, Rystad Energy said the North Sea accounted for 22 percent of offshore passenger traffic in 2020, followed by Brazil with 11 percent, West Africa and the Gulf of Mexico with eight percent each, Australia with three percent, and the remaining 48 percent spread across the rest of the world.

There has been a steady migration of helicopters to Brazil from other regions to support increased oil-and-gas production, observed helicopter industry analyst Jeremy Parkin, founder of Parapex Media and HeliHub.

That’s because Brazil is leading the world in the number of planned and announced floating production, storage and offloading units (FPSOs), accounting for 29 out of 73 expected to start operations around the world between 2023 and 2028, according to a recent report by Global Data.

Omni Táxi Aéreo has grown rapidly in the past decade to become the largest fleet operator in Brazil, surpassing CHC, Bristow and Lider (which was a Bristow partner until Era and Bristow merged). Sister company Omni Helicopters Guyana Inc., recently commenced a long-term contract to support Exxon Mobil that includes offshore SAR and crew change services using S-92s and AW139s. The first significant oil find off Guyana was in 2015. Now five FPSOs have been sanctioned, with three in service off the coast of the South American country.

Elsewhere, a major realignment of offshore services took place when CHC acquired Babcock’s offshore operations in the Netherlands and Australia, but the U.K.’s Competition and Markets Authority (CMA) ruled against the acquisition in August 2022. In April 2023, South Africa’s Ultimate Aviation Group purchased the operation.

Meanwhile, several major oil and gas discoveries off the coast of the southern African country of Namibia now employ 13 percent of Africa’s offshore platforms, according to Bloomberg.

Energy Security

Oil companies made money during the downturn by tightly controlling costs, with the profits used to pay dividends to shareholders — rather than investing heavily in exploration and the development of new oil-and-gas fields, said Robertson.

There were just 13 uncontracted S-92s in early 2023, according to offshore industry analyst Steve Robertson. Ted Carlson Photo

The sudden global upswing in offshore exploration and production activity caught the entire offshore service industry off guard, resulting in shortages of offshore supply boats, drilling rigs and especially helicopters. These shortages will almost certainly persist for several years.

Energy security is the new buzzword. This is particularly the case in Western Europe, which had become increasingly dependent on the Russian oil and gas that flowed through pipelines under what are now Ukrainian battlefields, or through the Nord Stream 1 and 2 gas pipelines deep under the Baltic Sea. The Nord Stream pipelines were hit by clandestine bombings in September 2022, raising huge concerns that millions of Europeans would freeze during the winter of 2022/23.

“Over the last decade, a good year for major offshore project sanctioning would see between 18 to 26 floating production platforms sanctioned,” wrote Robertson in a recent client report. “In downturn years, this number could be less than 10. In 2016, there were no orders at all for floating production systems. Whilst we will likely not see all the projects with an expected sanction year of 2023 move forward, there is substantial project pipeline.”

Robertson said three projects were sanctioned in 2020 (worth $4.9 billion), 13 in 2021, 14 in 2022 and there could be as many as 25 projects (worth $38.2 billion) sanctioned in 2023, from a list of about 40 projects nearing a final production decision.

It usually takes about five years to build a massive new semi-submersible production platform, FPSO vessel, or floating liquefied natural gas (FLNG) facility.

The demand for offshore helicopter crew transport routinely increases two to three years before a production platform or FPSO arrives on site, when a lot of workers and support vessels are employed on offshore drilling production wells, constructing undersea pipelines and completing other essential infrastructure tasks.

Helicopter shortages are already being felt, which is resulting in a long overdue increase in contract rates. Even with that, some oil company helicopter requests are going unfilled. 

Return to Service

Major helicopter manufacturers, leasing companies and operators were all caught out by the sudden rebound in offshore demand in 2022.

The return to service of helicopters mothballed for years has been a major undertaking, made more challenging by limited maintenance, repair and overhaul (MRO) capacity and a worldwide shortage of parts — especially for the S-92A.

Robertson reported there were 32 uncontracted Sikorsky S-92As stored in Australia, Canada, Norway, Poland, the U.K. and the U.S. in late 2021. This number dropped to 13 uncontracted aircraft in early 2023, creating a scramble to get almost 20 S-92As back in the air.

Sikorsky said the S-92A fleet is currently seeing its highest ever utilization rate.

This hasn’t been easy, since some European MRO facilities are almost on a wartime footing (busy upgrading NATO military helicopters to deter Russian aggression), while a worldwide shortage of S-92A parts has created a major bottleneck.

High parts demand has led several companies like Vancouver-based Heli-One to part out a number of S-92As acquired from banks at the bottom of the market for $3 to $4 million, with the parts flowing to sister company CHC to put other S-92As back to work.

New orders of offshore S-92As dried up several years ago, with the last delivered to Chevron USA in May 2020 for use in the Gulf of Mexico. Sikorsky stopped taking orders for the medium S-76D in 2021, prior to closing its commercial helicopter assembly site in Coatesville, Pennsylvania, in 2022. Outstanding international S-76D orders are being completed in Owego, New York, and S-92A orders in West Palm Beach, Florida.

At Heli-Expo 2023, Sikorsky said the S-92A fleet is seeing the highest utilization rate in history, and it is working with its supply chain to increase spare parts availability. Company executives said they have no plans to extend the S-92A airframe life, which is limited to 30,000 flight hours. Eight S-92As have flown 20,000 hours, and the fleet leader has flown over 27,000 hours.

Three-quarters of super medium H175 deliveries have been to the offshore market, with the timing of the first deliveries at the start of the downturn resulting in a low order intake. There are 36 in service offshore with seven operators (NHV, Offshore Helicopter Services, CHC, OMNI, Pegaso, Heli Holland and Hornbill Skyways), and the majority are owned by leasing companies, reported Robertson.

The H175 is primarily flying in Europe, Brazil, Mexico, Australia and Malaysia, but the aircraft is yet to be certified by the Federal Aviation Administration (FAA) to fly in the U.S.

The Leonardo AW189 was developed to be part of the AW139 and AW169 family of twin-engine medium helicopters for civil and military use.

Some 44 AW189s have been delivered to more than 10 offshore operators (including Bel Air, Bristow, CHC, Falcon Aviation, Gulf Helicopters, OMNI, SonAir, Vietnam Helicopters, Weststar and three Russian operators). In early 2023, the type was working in 14 countries, with the 11 aircraft working with Russian companies now subject to international sanctions that have cut off technical support and spare parts.

The Airbus H160 has entered offshore operations in a “route-proving program” with PHI in the Gulf of Mexico. Airbus Photo

With the S-92A, H175 and AW189 flying more offshore hours than in recent years, the inspection and overhaul of these helicopters has recently hit a bottleneck, said Robertson, who tracks aircraft downtime for maintenance.

For example, it took an average of 35.9 days to complete a standard 1,500-hour inspection on a S-92A in early 2020, compared to 60.8 days in 2023. The turnaround time for an AW189 inspection increased from an average of 36.7 to 41.3 days, while an H175 inspection dropped from 97.6 to 72.6 days following an Airbus campaign that introduced a series of product improvements into the active fleet.

New Products

Four years ago, Sikorsky announced it was developing the S-92A+, featuring a new Phase IV main gearbox with demonstrated extensive run-dry capability. It also proposed an S-92B, featuring the same upgraded gearbox, larger cabin windows and a dual use offshore/SAR interior.

The company is now taking orders for the offshore configured S-92A+, which it expects to certify in 2025 — but it has shelved development of the S-92B due to limited interest. Just where a new Sikorsky S-92A+ final assembly line will land is unclear, but Lockheed Martin said it has numerous sites across the U.S. that could fill the role.

The super medium H175, AW189 and upcoming Bell 525 models were all developed with the goal of taking market share away from the S-92A (and H225). The aim was to offer oil companies a slightly smaller helicopter with lower acquisition and operating costs, but with comparable range.

No H175 orders were placed in 2020 and four in 2021, but Airbus is now planning to increase production to 15 to 20 units a year to meet market demand, and is actively pursuing orders for the military H175M, initially for the U.K.’s New Medium Helicopter requirements.

Production of the AW189 has also been strong, with sales of SAR aircraft to fly for the U.K., the Netherlands and Ireland, and a series of large military sales including a major order from Poland.

FAA certification of the Airbus H160 in June 2023 has opened the door for PHI and Shell to introduce four H160s offshore in the U.S. Gulf of Mexico. This plan was announced in early 2022, but FAA approval lagged European Union Aviation Safety Agency (EASA) in July 2020 by three years.

The Sikorsky S-92A has become the dominant offshore heavy-lift aircraft, with the Airbus H225 largely retasked to utility operations. Paul Bock Photo

Bell first flew the fly-by-wire 525 Relentless in 2015, and while it is still awaiting certification of the type, the manufacturer believes it will soon be achieved. Robertson believes the upturn in offshore demand and the current helicopter shortage will benefit 525 sales. Bell confirmed at Heli-Expo 2023 that it is actively pursuing icing certification of the 525 in parallel with type certification, which is essential for year-round North Sea operations.

Finally, the Leonardo AW609 is also expected to enter service with launch customer Bristow once it receives certification, but the exact role and end use customer have yet to be revealed.

The downturn in offshore helicopter operations between 2014 and 2022 proved costly to helicopter manufacturers and operators alike. However, the sudden rebound in activity has proved equally challenging in terms of helicopter availability, parts shortages, aircraft on ground (AOG) response and the availability of pilots and maintenance technicians. Nevertheless, new helicopter orders are being placed and the offshore outlook looks good for the foreseeable future — even as many nations seek to reduce their long-term dependency on fossil fuels.

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