Newly formed Shelf Drilling stakes claim in shallow-water markets

Posted on 09 January 2013

The GSF Parameswara jackup, which can drill in up to 300-ft water depths, is operating offshore Indonesia. It is one of 38 rigs Shelf Drilling acquired from Transocean in November 2012.

The GSF Parameswara jackup, which can drill in up to 300-ft water depths, is operating offshore Indonesia. It is one of 38 rigs Shelf Drilling acquired from Transocean in November 2012.

By Katherine Scott, associate editor

Although a good portion of the E&P industry has set its sights on deepwater as the next frontier, David Mullen, Shelf Drilling CEO, points out that shallow water still accounts for 70% of today’s offshore production and notes that his company has no plans to divert focus away from jackup operations. “Shelf Drilling is not going to start building deepwater rigs. We’re not going to start acquiring floaters. We want to focus on jackup operations. We want to build an organization that is fit for purpose,” Mr Mullen said. The company was established in September 2012 upon reaching a definitive agreement with Transocean to acquire 37 independent cantilever jackups and one swamp barge for approximately US $1.05 billion. The deal officially closed on 30 November 2012.

“Immediately upon closing, we took over operations of seven rigs; four in Egypt and three in Indonesia,” Mr Mullen said. “We are in a very prominent position; we have a market-leading position with a dedicated focus on shallow-water drilling jackup operations. We are the third-largest fleet of independent cantilever jackups in the world. The next question is, how are we going to make this a better business than what it is today?”

Of the 37 cantilever jackups, four are operating in Nigeria, one in Gabon and one in Angola, which is “a pretty good footprint in West Africa,” Mr Mullen said. In the Middle East, the company has five rigs operating in Saudi Arabia, four rigs operating in Egypt with another one stacked, and two stacked rigs in the UAE. In Southeast Asia, four rigs are operating in Thailand, one in Vietnam, two in Malaysia with two others stacked, and three rigs operating in Indonesia, with plans to add a fourth in the coming months. There are also six rigs operating in India.

“In today’s market, we see opportunities to work all of these rigs. Our first priority is to reactivate our stacked fleet,” Mr Mullen said. “Later, we’ll look at growing through newbuilds,” which he said the company would start in the next 18 months to two years.

In particular, Mr Mullen believes there will be opportunities to improve on current jackup designs. “We’re going to build something that doesn’t exist today. We will start by looking at the ways in which jackups are inefficient.” For instance, he said, current jackups are not very mobile, making the moving process weather-dependent and problematic. “We see that there’s a way to re-engineer and create new benefits. That’s why I would like to have 18 months before we order newbuilds because we want to build something that’s going to enhance the rest of the market.”

Market-wise, Mr Mullen said he sees tremendous growth potential in West Africa, Southeast Asia and the Middle East. “Mexico is also a very big market, but to put one asset working in Mexico when we have such a concentration of assets in the Middle East, West Africa and Southeast Asia wouldn’t make economic sense,” he said. “It serves to keep the focus on these markets rather than spread ourselves too thin.” Further, he said that most of the company’s customers are interested in longer contracts, allowing Shelf Drilling the opportunity to keep their rigs working for the same operator. “We see a very strong correlation between operating efficiency and enhanced performance when we have operations for the same customer over a long period of time.”

Although these markets all have certain challenges, Mr Mullen acknowledged, sometimes they become a differentiator between companies and “that it’s all a matter of knowing how to navigate them.” For example, he said, a number of international companies are exiting Nigeria shallow water. “But we have no intention to exit. We see that market as a very strong market. In Nigeria, and in Egypt, we employ a very strong local content, and I think that’s really what helps more than anything else.”

Mr Mullen is also confident that the jackup market is not overbuilt, noting that much of the newbuild supply is being directed toward either high-spec markets such as the North Sea and Norway or markets where Shelf Drilling does not participate, such as China and Iran. “The amount of rigs that are going to compete with our fleet are relatively few, and we certainly see incremental demand more than offsetting incremental supply. I believe that the market in the jackup sector will remain strong for some time to come. We see this as a very attractive time to be entering the business.”

Leave a Reply

*

FEATURED MICROSITES


Recent Drilling News

  • 31 July 2014

    Eni discovers gas and condensates offshore Gabon

    Eni has made a gas and condensates discovery in the Nyonie Deep exploration prospect in block D4, approximately 13 km offshore Gabon and 50 km from the capital city Libreville...

  • 31 July 2014

    Blue Ocean Technologies: Subsea well intervention completed in 6,700- ft record depth

    Blue Ocean Technologies has set multiple records in subsea well intervention by intervening in, and subsequently plugging and abandoning, a production gas...

  • 30 July 2014

    Fugro’s DeepData pod provides data for deepwater riser monitoring

    Fugro has delivered a motion dataset from the BOP stack and lower riser of two deepwater wells in the Barents Sea using its DeepData pods. The DeepData pods...

  • 28 July 2014

    SDI completes 500th MagTraC MWD Ranging project

    Scientific Drilling International (SDI) has completed the 500th MagTraC MWD Ranging project. MagTraC was introduced in 1998 to target challenging applications...

  • 28 July 2014

    Modular offshore rig design reduces deployment costs

    William Jacob Management (WJM) has introduced an offshore rig design that reduces deployment costs and improves speed-to-market for upstream operations. The 3,000-hp...

  • Read more news