Analysis -Battling football's best, deepsea robots catch the eye

BANGALORE (Reuters) - They were the eyes of the world on BP's Gulf of Mexico oil leak, and grainy videos of their work 5,000 feet below the ocean surface scored almost as many YouTube hits as the football World Cup final highlights.

Now, Remotely Operated Vehicles (ROVs) are set to be a growth niche market as oil majors beef up the safety of their offshore operations under tougher government rules likely to demand more inspections of underwater equipment.

The high profile of the role played by ROVs in the months-long BP underwater drama is likely to attract new entrants into a market dominated by a handful of companies.

Market leader Oceaneering International, the operator of the ROVs that provided live feeds of the BP well spewing millions of gallons of crude into the sea, has raised its third-quarter profit view and is well placed to be a major beneficiary of market growth.

Analysts noted the decent returns available in the ROV sector, where a day's rental of ROV packages -- including cameras and control and maintenance vans -- is $5,000-$6,000 (3,224 pounds-3,870 pounds).

There are around 720 ROVs operating globally, each costing $3-$6 million. Oceaneering has a leading 35 percent market share.

The World ROV Market Report 2010-14 forecasts rapid recovery and expenditure from a 2009 low, growing to $3.2 billion by 2014.

ROVs -- linked by cables that carry electrical power, video and data signals between the ship-board operator and the submersible -- can operate in water depths of more than 10,000 feet, well beyond the safety limits of a human diver.

Top oilfield equipment maker FMC Technologies, which owns 45 percent of ROV maker Schilling Robotics, has been touted as the most likely to serously challenge Oceaneering, which is working with NASA to mimic human physiology in a robot.

"It's a relatively tough business to get into. When you're dealing with offshore, things are generally 10 times more expensive than onshore," said Neal Dingmann at Wunderlich Securities. "Customers are not going to try a new, small guy."

Dingmann said it was possible a bigger services player such as Schlumberger Ltd, Baker Hughes Inc or Halliburton Co may seek to gain market entry.

"Large companies would want to get into the business, but don't currently have the expertise to build or service ROVs. They would likely buy a company like Oceaneering or Subsea 7 to jumpstart the business," he said.

Oceaneering's London-headquartered rival Acergy SA agreed in June to buy Subsea 7 to create a leader in the undersea engineering sector battered by the Gulf of Mexico oil spill.

As of 2009, Acergy had about 31 work class and observation ROVs.

MORE INSPECTIONS, MORE ROVS

The BP disaster forced oil majors to concede they cannot guarantee fail-safe offshore operations, prompting the likelihood of tougher underwater equipment inspections.

"More inspections would require more ROV days," said Michael Marino of Stephens Inc. "There will certainly be some opportunity to benefit from whatever new regulations are put in place."

Stung by a barrage of criticism, companies including Exxon and Royal Dutch Shell have said they will spend $1 billion to develop a new oil spill containment system in the Gulf, consisting of subsea containment equipment connected by manifolds, jumpers and risers.

"This type of solution will require ROV systems to support operations," Peter MacInnes, VP at Schilling Robotics, wrote in response to a Reuters e-mail. "ROVs will also be at the forefront of helping inspect, maintain and repair subsea equipment."

Oceaneering CEO Jay Collins has said that while regulations would generate additional opportunity, it would be "pure speculation" to try and put a dollar value on that.

While a U.S. moratorium on deepsea drilling has driven some work away from the Gulf, wherever the rigs go the ROVs go, too.

"For 2011, Oceaneering could see increased business given improving international offshore rig business and the need for up to 3 ROVs on any Gulf well given increased regulation," said Wunderlich's Dingmann.

(Additional reporting by Vinay Sarawagi, Editing by Ian Geoghegan)