The Asia Pacific OSV Market: Downshifting for the Long Haul

Compared to 2024, the composite dayrates, calculated as a weighted average across size categories, declined by approximately 16% for PSVs and 14% for AHTS vessels. In tandem, utilization also softened, with the number of working vessels down 19% and 8% respectively, a direct reflection of weaker underlying demand.

Across geographies, this theme was evident as global markets cooled from the momentum of earlier strong years. From the waters of Southeast Asia to the coasts of Australia, the industry pressed pause on some of its largest bets with projects such as North Ganal, Lang Lebah, Dorado, and Browse seeing their final investment decisions pushed back from their initial planned dates. On the surface, these headlines may appear negative, but these deferrals have also helped spread out the investment cycle, creating a more balanced pace for the rest of the decade.

Towards 2028, we expect to see a modest but meaningful uptick in the number of FID announcement, primarily driven by deepwater FPSO developments in Indonesia and Australia. These projects are uniquely positioned to lead the next growth phase, offering compelling returns and longer lifespans, making them a cornerstone of future investment.

This increased focus on deepwater projects will complement the ongoing, essential role of conventional shelf projects – both remaining vital pillars of the global energy mix for decades to come. As new projects gain momentum and deferred developments are eventually revisited, demand is poised to rise. In the near term however, contracting activity will maintain a cautious posture well into mid-2026.

In the medium term, the regional drilling landscape presents a rather nuanced picture. Demand for floating rigs remains on solid ground, supported by ongoing deepwater drilling campaigns across the region that align with the global pivot toward deeper developments. For jack-up rigs, we anticipate a temporary dip before a recovery gathers pace later in 2026 and into 2027.

This divergence in the drilling outlook will likely create a clear split in dayrate performance across vessel classes. For instance, dayrates for standard, shelf-oriented PSVs and AHTS, particularly mid-size PSV and smaller AHTS, are expected to remain soft through the first half of 2026. In contrast, demand for high-spec assets such as DP2/3 subsea vessels and large PSVs depends on a more distant catalyst: the firm sanctioning of deepwater FIDs and the revival of previously delayed drilling campaigns.

Critically, neither an FID nor a campaign announcement translates to immediate vessel demand. A typical 12 to 24 months planning and engineering gap follows, during which operators finalize rig contracts, procure long-lead items, and secure specialized support tonnage. Consequently, while the FID and drilling program pipeline is expected to strengthen from late 2026, the tangible uptick in deployment and dayrates for these premium vessels will likely only materialize meaningfully from 2027 onwards, aligning with the first phase of active drilling operations in the field.

Macro Backdrop and Structural Drivers

This market trajectory, characterized by measured growth, regional divergence, and pending FIDs unfolds against the broader economic backdrop. As of early February 2026, Brent crude is averaging in the high USD 60s per barrel. The near-term consensus points to a softer 2026 average, likely settling in the USD 60s as inventories build. Crucially, this price range remains a powerful enabler for offshore projects. Thanks to a decade of efficiency gains and technological advances, breakeven costs have fallen significantly. Conventional shelf projects now average around USD 40 per barrel, while deepwater projects have reached a competitive threshold just below USD 40 – securing a comfortable margin within the current pricing window.

On the supply side, OPEC's spare capacity stands near four million barrels per day at the end of 2025, a slight decline from the previous year. Current projections, including the latest outlook from the US EIA, suggest this buffer could tighten further through 2026 and 2027.

This gradual reduction naturally raises two questions regarding market stability and supply shocks. First, is a significant price spike likely? The prevailing view suggests it is not. The market appears to have priced in this gradual drawdown, and sufficient non-OPEC supply growth is expected to provide a counterbalance.

Second, could a resurgence of Venezuelan production alter the equation? While the country holds substantial resource potential, the consensus remains sceptical. The significant geopolitical and operational risks under the current administration present a formidable barrier to the rapid, large-scale investment and drilling activity required to materially impact global supply in the near term.

Also, it is worth pointing out that the pivot toward deepwater did not occur in a vacuum. Rather, it is the acceleration of a trend set in motion years ago, with 2023 marking the strongest year for greenfield deepwater sanctions on record, a pattern now firmly taking root across the APAC region. Here, operators are prioritizing “fast-to-market” strategies, where subsea tiebacks lead the way, favoured for their compelling economics and shorter development cycles.

For shipowners, this evolution translates into a clear, phased opportunity. The immediate demand will centre on subsea assets. Over the longer term, this wave of projects will generate sustained demand for vessels supporting the ensuing drilling campaigns and long-term production phases. Crucially, this is not just a story of more vessels but instead the focus is on the shift toward more capable ones. The move into deeper, more remote waters will amplify demand for higher specification units that are engineered to operate reliably in harsher sea conditions.

Regional Divergence and Fleet Discipline

While the broader shift toward deepwater sets the stage, the real-world impacts are playing out differently across Asia Pacific. In the region's largest market, Malaysia, vessel demand is softening, influenced by escalated tensions between Petronas and Petros. This is reflected in Petronas latest outlook, which suggests broadly flat rig and OSV activity year-over-year versus 2025, with potential exploration upside reserved for the 2028 window.

Specifically, Petronas’s guidance for jack-up rigs in 2026 has softened to nine units, down from 11 previously projected a year ago and below the 10 rigs used in 2025. This signals a clear directive for owners: budget cautiously, focus on multi-market coverage and be ready to pivot toward other regional market if domestic demand slows.

Beyond emerging growth markets like Indonesia and Vietnam, India cemented its role as a crucial regional stabilizer in 2025, absorbing Southeast Asian tonnage during periods of localized softness to provide a vital outlet for surplus capacity. Vessel moves from Southeast Asia to the Indian Ocean region increased by 73% year-on-year, with PSVs showing the largest proportional increase in response to their sharper demand contraction in Southeast Asia. Together, these markets provide a crucial balancing mechanism for regional vessel supply, mitigating the impact of demand fluctuations in any single country.

Shifting focus to the other side of the equation, the vessel supply outlook points toward a tightening market as we approach the decade's end. The newbuild orderbook, which saw a brief resurgence in 2024, slowed sharply last year as cautious capital retreated amid weaker market sentiment. Demonstrating remarkable discipline, traditional OSV owners have largely avoided speculative ordering. Consequently, net fleet growth will be negligible if positive at all. Factoring in retirements, the effective fleet count is poised for a decline, with only the first wave of 2023–24 orders delivering by year-end and into early 2027.

Compounding this tight supply are local content and cabotage rules in the region, which remain defining structural factors. In practice, contracting is governed by a complex web of local registration, certification categories, and in-country support requirements. These rules can severely narrow the pool of commercially deployable vessels, creating a bottleneck that supports higher dayrates for compliant tonnage even when regional fleet totals appear ample on paper. Consequently, the effective supply is always less than the theoretical supply, leading to tighter conditions and rate support for eligible vessels during concurrent project peaks.

This dynamic creates a precarious long-term balance. The industry's fleet is still largely defined by the last major building boom from 2011-2015. With these assets now aging and some needing replacement, the current low orderbook – a product of post-boom discipline – fails to match that need. While an ideal market would see vessels retired at the same rate new ones are built, the absence of a new construction wave now risks a severe bottleneck later this decade, underpinning a firmer market for shipowners who have the right vessels in the right places.

In summary, 2026 and 2027 are best viewed as a strategic interlude – a time for the industry to recalibrate on the cusp of its next upcycle in the Asian Pacific region. This period of strategic investment and recalibration will pave the way for a recovery that is further amplified by national energy security priorities, unfolding against a backdrop of rising global energy demand and improved market fundamentals.