By Krishna N. Das

BANGALORE, Aug 20 (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 soccer 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.

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)