DRILLING OUTLOOK
“Gulf of Mexico Glow” by artist Crystal Wreden
Buoyed by strong oil prices and
rig demand, offshore drilling to
see continued comeback in 2023
Middle East, South America and US GOM
are all among regions expected to see
tight rig supply and rising dayrates next year
BY STEPHEN WHITFIELD, ASSOCIATE EDITOR
There is growing optimism around the
global offshore drilling market and its
prospects for 2023, with dayrates and uti-
lization both expected to increase and sev-
eral key markets either already rebound-
ing or set to rebound.

As of September, the global contracted
fleet consisted of 378 jackups, 68 semisub-
mersibles and 73 drillships, according to
Westwood Global Energy Group. The firm
is projecting modest increases for each rig
type in 2023, with jackups going up to 395,
12 semis to 75 and drillships to 78. Marketed
fleet utilization this year, as of September,
was 87.3% for jackups, 79.6% for semisub-
mersibles and 93.5% for drillships. In 2023,
utilization is projected to increase to 90%
for both jackups and semisubmersibles
and 95% for drillships, according to Terry
Childs, Head of RigLogix at Westwood.

These expected activity increases will
be directly tied to oil price, he added. As of
13 October, Brent crude was at $94.69/bbl,
which is a high enough level to encour-
age operators to increase activity, and that
should continue into next year.

“In most regions of the world, rig activ-
ity has picked up from increased opera-
tor demand,” Mr Childs said. “Obviously,
increased oil prices play a factor, and as
usual we’re seeing a bit of a lag time with
that – oil prices go up, then utilization
goes up and then, ultimately, dayrates go
up. That’s what we’re seeing right now –
oil prices have been strong, everything’s
going up for most every rig type in every
region, and that should continue in 2023.”
Esgian has a similar view of the offshore
market. It measured the global contracted
rig fleet in 2022 as averaging 317 jackups,
50 semisubmersibles and 65 drillships.

Cinnamon Edralin, Head of Rig Market
Research at Esgian, is also forecasting
modest increases for each rig type in 2023,
with jackups averaging 350, semis at 60
and drillships at 80. This will push mar-
keted utilization for jackups from 76% to
85%, semis from 60% to 80% and drillships
from 82% to 90%.

“It’s really nice to have conversations
with drilling contractors where they’re
actually enthusiastic and optimistic,”
Ms Edralin said. “Not only are they get-
ting to the point where they can just pay
their bills, we’re now seeing that they can
undertake new investment. It’s an exciting
time to be in offshore drilling.”
The Middle East
The Middle East will be the biggest driv-
er of jackup activity, with forecasts calling
for 150 active rigs in 2023, compared with
120 in 2022. The bulk of this increase
will come from Saudi Arabia, which is
planning to double its offshore fleet to 90
jackups by the end of 2024 as part of its
drive to boost production capacity by 1
million bbl/day. To that end, Saudi Aramco
has awarded 30 rig contracts since March
2022, with the majority of contracts going
for five years each.

Ms Edralin said this push from Saudi
Arabia could have a trickle-down effect
on other countries in the Middle East, par-
ticularly Qatar and the UAE. Both of those
countries have also expressed interest in
contracting additional rigs to bolster their
production, but Aramco may effectively
drive up dayrates to a point beyond which
those countries are comfortable paying.

NOVEMBER/DECEMBER 2022 • DRILLING CONTRACTOR




DRILLING OUTLOOK
Dayrates currently average between
$70,000 and $120,000 for jackups in the
Middle East, and they’re expected to range
from $80,000 to $140,000 next year. While
Esgian does not have country-specific
dayrate breakdowns, Ms Edralin said
Saudi Arabia’s dayrates are generally clos-
er to the high end of that range, while
Qatar and the UAE are closer to the low
end. However, with Saudi Aramco con-
tracting higher-spec jackups in the region
at higher dayrates, other countries may
soon have to offer higher dayrates in order
to stay competitive.

“With all these rigs going into Saudi
Arabia, those dayrates are going to be
higher than the dayrates you’re seeing
in Qatar and the UAE, and that’s going to
have a big impact on what they might do,”
Ms Edralin said. “It’s putting those other
countries in a sensitive area where they’re
going to have to decide if they’re willing to
pay higher dayrates, or are they going to
stick with the fleet that they have?”
Asia Pacific
in Malaysia, followed by Indonesia and
Vietnam. Some of the increase in activity in this
region is actually also being driven by
the uptick in the Middle East, Mr Childs
noted. “Some of these other operators (in
the Asia Pacific) are looking at all those
jackups being absorbed in the Middle East,
and they’re thinking, is there anything left
for us? It’s prompted these companies do
some things maybe a bit earlier than they
intended to,” he said.

Southeast Asia only has four active drill-
ships, and one unit is scheduled to leave
for India shortly. Dayrates for new drill-
ship fixtures had been around $200,000,
but Westwood said two recent fixtures
were both over $375,000. One deal saw a
rate of around $408,000, but that included
managed pressure drilling (MPD) services,
which can add $50,000 or more to a con-
tract. For upcoming fixtures, dayrates will
likely improve, but there are currently only
10 drilling programs planned that desig-
nate a drillship.

There are 12 semisubmersibles located
in the APAC region – seven in Southeast
Asia and five in Australia. Four of the
seven units in Southeast Asia are work-
ing, but only two of the four are firmly
contracted beyond 2022 , and three of the
four have options that could extend their
available dates further into next year.

Dayrates for semis in this region
remain below $200,000, although that
will change going forward. Mr Childs
noted that Southeast Asia has nine drill-
ing programs in the rig inquiry stage,
but only two of the nine are scheduled to
last more than 100 days. These numbers
likely ensure no semisubmersible supply
growth in 2023, and some units might
even leave the region next year. All four
of the semisubmersibles currently work-
ing in Australia are contracted into 2024.

Leading-edge dayrates have improved
from around $265,000 early this year to
the $325,000-$379,000 range for more
recent fixtures.

According to Westwood, the rig market
in the Asia Pacific (APAC) region, which
comprises Southeast Asia and Australia,
got much busier in 2022, and 2023 could be
more of the same, primarily due to a strong
jackup market.

Marketed utilization for jackups has
already improved from 78% at the begin-
ning of the year to 90% currently, and it
could increase to 95% in 2023. However,
this number can be a bit misleading, Mr
Childs said. Of the 45 marketed jackups in
Southeast Asia that are contracted or com-
mitted, six are destined for Saudi Arabia
next year as part of Saudi Aramco’s con-
tracting frenzy. An additional four new-
builds are also slated to move there. By
the middle of 2023, it’s projected that 15
jackups will have moved out of Southeast
Asia for contracts with Saudi Aramco.

Dayrates for jackups in the APAC region
ranged between $67,000 and $90,000 dur-
ing the first half of this year, but more recent
fixtures have been as high as $120,000, and
that could increase further in 2023 due
to the amount of potential activity. The
region currently has more than 40 pro-
grams in some stage of rig inquiry, includ-
ing 13 in Australia. In Southeast Asia, the
largest number of jackup requirements are
DRILLING CONTRACTOR • NOVEMBER/DECEMBER 2022
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