CATEGORIZED | News

No easy resolution in sight for jackups’ oversupply headache

Posted on 24 March 2010

Yes, the industry has once again overbuilt its jackup supply, said Gavin Strachan, ODS-Petrodata, at the 2010 IADC Drilling HSE Asia Pacific Conference & Exhibition, held 23-24 March in Singapore.

The industry is projected to have 921 units in its worldwide offshore fleet by 2012. In 1985 – the last time the industry overbuilt – the industry had 755 offshore drilling rigs around the world, he pointed out. “We will have more rigs drilling away, or potentially drilling away, by 2012 than the last time we had too many (rigs).”

This time, however, American drilling contractors did not overbuild. “The overbuilding came partly by cheap financing but also by Norwegians thinking, ‘Aha, here’s a marvelous opportunity.’ The Americans refused to build mostly, unless they had a rig contract in place,” Mr Strachan said.

Considering trends in global energy demand, fundamentals for the oil and gas business remain positive.

Considering trends in global energy demand, fundamentals for the oil and gas business remain positive.

Perhaps in trouble the most are the mat-supported jackups. Mr Strachan commented that not only is it not a good market to be in at the moment, it also “doesn’t look like it’s going to recover.”

If the industry looked at only the independent cantilever units, there are 373 units around the world, and 23% are currently not working. Some might argue that the rigs over 30 years old ought to go away permanently, a total of 68 units. “Magic wand, let’s just get rid of 68 old rigs. It’s simple, isn’t it? Then the market will come back into equilibrium,” he said.

Yet the surprising fact, he said, is that this class of pre-1979 jackups has the highest utilization numbers “because they are working for national oil companies.” In fact, the top five users of offshore rigs are all NOCs: Petrobras, ONGC, Pemex, Saudi Aramco and CNOOC.

Looking at worldwide jackup demand, the industry should see an increase, from an average of 322 jackups needed in 2009 to an average of 340 by the end of 2011. Overall, he predicted that the industry will see a surplus of approximately 80 jackups by the end of 2011.

There is good news, however. First, the fundamentals of the oil and gas business remain “superb,” Mr Strachan said. Energy demand is growing fast around the world, and hydrocarbons remain the dominant energy source. Don’t forget about depletion either, he said, with conservative estimates putting worldwide annual decline at 4.7%.

The second piece of good news is that the oil price “seems to have hit the sweet spot at the moment,” he said. ODS-Petrodata believes that operators are now fixing their project budgets at approximately $75 per barrel. “It’s more or less what Western companies need in order to invest in existing infrastructure, invest in future discoveries and pay dividends. It’s also the price at which most deepwater, West Africa wells for instance, are fully valid. It’s also the price at which tar sands are valid, too.”

Look for the May/June 2010 issue of Drilling Contractor for additional comments from Mr Strachan on the offshore rig market.

Leave a Reply

*

FEATURED MICROSITES


Recent Drilling News

  • 21 November 2014

    Statoil cancels Stena Carron rig contract offshore Angola

    Statoil has decided to cancel the Stena Carron rig contract after fulfilling the work commitments in the Statoil-operated blocks 38 and 39 in the Kwanza basin offshore Angola...

  • 19 November 2014

    Stepwise approach guides Statoil’s North American onshore path

    When Statoil entered the North American onshore industry in 2008, it was a non-operator in a joint venture (JV) with Chesapeake in one shale play. Since then, Norwegian-based…

  • 18 November 2014

    Stilley: Despite challenging outlook, opportunities are plenty in the long term

    Opportunities abound for the drilling industry even in an environment of high costs and falling oil prices, Randall D. Stilley, President & CEO of Paragon Offshore, said...

  • 18 November 2014

    In well control, an ounce of prevention is worth a pound of cure

    It has been more than four years since Macondo, and the long-term effects of the oil spill are still being determined. “Oil is a natural substance that can be degraded...

  • 18 November 2014

    Plaisance: Well Control Institute evaluating priority topics

    The Well Control Institute (WCI) Board of Directors convened on 11 November in New Orleans. Moe Plaisance, who recently retired from Diamond Offshore Drilling, has...

  • Read more news