Comments: Rig Boom
- John Donnelly (JPT Editor)
- Document ID
- Society of Petroleum Engineers
- Journal of Petroleum Technology
- Publication Date
- December 2008
- Document Type
- Journal Paper
- 14 - 14
- 2008. Society of Petroleum Engineers
- 1 in the last 30 days
- 60 since 2007
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Despite the current global financial crisis and recent steep decline in commodity prices, the market outlook for drilling rigs remains strong. Demand for deepwater units, in particular, remains healthy. Even with a global recession, world energy demand is projected to rise in the medium term and companies are moving to deeper waters and frontier areas to secure new production.
Mobile offshore drilling rig demand in almost all of the world’s major drilling centers have been posting 90%-plus utilization rates, and strong demand and tight rig supply have contributed to strong dayrates. A rig that may have brought in USD 200,000/day a few years ago can now earn USD 500,000/day and recent contracts for deepwater rigs have topped USD 600,000/day. A surge of interest in new drillships, semisubmersibles, and high-end jackups has occurred the past several years and some of those are now entering the market. The best markets for floating rigs have been Brazil, west Africa, the US Gulf of Mexico, and southeast Asia.
In addition, 181 rigs are currently being built or on order, including 85 jackups, 54 semisubmersibles, and 42 drillships, according to Citigroup energy analysts. Of these 181, more than half are currently under contract. While about 69% of the floaters (drillships and semisubmersibles) have contract commitments, only about a third of the newbuild jackups do, so it is unclear how many will become operational.
Some of that newbuild interest is turning toward rigs that can operate in particularly harsh conditions, such as the Arctic, or in ultradeepwater. Rigs in the Barents Sea—where Gazprom, StatoilHydro, and Total are developing the world-class Shtokman gas field—will need to withstand unprecedented harsh climatic conditions and vast icebergs. Shtokman will require three of the largest platforms in the world, ice-resistant and capable of withstanding 25 m waves. Three seabed pipelines will carry the gas to shore to terminals in Teriberka in the Murmansk region, where an LNG plant will be located.
Buoyed by recent discoveries and ambitious development plans, Brazil has emerged as the dominant leader in the drilling rig market. Utilization rates there are at 100% with 31 semisubmersibles and nine drillships in the region under contract. State oil company Petrobras is reportedly in the market for as many as 40 deepwater rigs, even though it has already contracted the majority of the existing ultradeepwater fleet. That indicates that there is still a shortage of deepwater rigs worldwide, even if the global economy and oil demand soften. West Africa rig utilization is nearly as strong, at 97%. And China’s offshore deepwater oil and gas development has also set off rig construction activity.The global credit crunch is limiting the ability of companies to get financing and may slow the pace of newbuilds significantly, however. Higher steel and equipment prices combined with the tighter finance market already appear to have cooled off the speculative newbuild market.
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