EDITORIAL COMMENT
Jack-up rig market is in deep water
Sevan Driller, the newbuild circular deepwater drilling rig shown when it was under construction at Cosco Shipyard, Nantong. An example of new design in the deepwater market (Credit: Sevan Marine/Cosco Shipyard).
W
ith oil prices stabilising at the US$80 range in recent months and some explora-
tion and production spending budgets rising from 2009 levels, most offshore rig markets around the globe appear likely to either stabilise in the coming months or announce a recovery plan. Te jack-up rig newbuild count is likely to rise at a steady pace throughout 2010 but the fleet will still share challenges with other areas of the offshore market over the coming year. It is believed that some regions and rig types will fare better than others. Tom Kellock, head of consult-
ing and research at leading analysts ODS-Petrodata told the International Association of Drilling Contrac- tors (IADC) at its annual meeting in November that the industry faced a huge surplus (over supply of jack-up units) with little near-term prospect of return- ing to a balance. Tere was, as he put it, ‘no longer a correlation between gas prices and jack-up activity’. Te best business prospects for drilling
contractors going forward is to move into the ever popular arena of deepwa- ter, particularly ultra-deepwater. Kellock signalled that the days of shallow- water drilling were numbered: “The only obvious explanation, and the one I would support, is that this [shallow- water jack-up rig market] is a mature market, the prospects are just not there any more.” ODS-Petrodata forecasts that in the final quarter of 2015 there will be a gross
jack-up supply of 506. Even if this figure is slightly exaggerated, from other more conservative suggestions of 280, Kellock predicted a massive oversupply of jack-ups that can only be solved by mass scrappings and long-term lay-ups.
“The current
situation is that the market for jack-ups is mature and in recent years there has been an excess of supply”
One country that looks likely to
increase demand for offshore drilling is Iran. According to National Iranian Drilling Company (the contractor) Iran is targeting 500 offshore wells under its five-year development plan. This will mean increasing the number of active rigs from 13 to 35. In order to meet this requirement National Iranian Offshore Company (the operator) plans to build as well as purchase additional units. However, Iran cannot soak up the surplus supply on its own. Will others follow suit? It remains to be seen. According to a presentation given
by Rod Hutton of ODS-Petrodata in Aberdeen late last year, the total
Offshore Marine Technology 2nd Quarter 2010
contracted jack-ups in utilisation have fallen sharply. Te current situation is that the market for jack-ups is mature and in recent years there has been an excess of supply. Nowadays, due to rapidly falling utilisation and day rates the market is not looking too healthy. Deepwater rigs on the other hand have reported stabilised day rates and there is some availability for rigs. Te main player in this area is Brazil-
ian national oil company Petróleo Brasileiro SA – or Petrobras to you and me. Petrobras announced in 2008 that it will hire 40 deepwater drillships and rigs in the coming years. Te plan foresees the construction and delivery of the 40 units through to 2017, with the company giving priority to building the vessels in Brazil. Additionally, Petrobras announced
plans for 146 support vessels to be built to support exploration and production activities in Brazil making it the main contender for deepwater exploration worldwide. Te main area of deepwater focus over the coming years is the area known as the ‘golden triangle’, made up of West Africa, Brazil and Gulf of Mexico. In the editor’s humble opinion it looks
like the market for shallow-water jack-up rigs is in trouble and we can expect to see many lay dormant in the next five to ten years. Unless oil companies invest in the further exploitation of shallow-water reserves the number of jack-ups sitting idle will continue to grow as deepwater exploration increases. OMT
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