Ultra-deepwater drives thriving activity, higher-capacity rig designs at established shipyards as Brazil makes a splash
By Katie Mazerov, contributing editor
The world’s offshore rig fleet is getting a makeover. The recovering global economy, healthy commodity prices, a burgeoning ultra-deepwater market and plans to venture into more harsh-environment fields have converged in a perfect storm of newbuild activity at the world’s major shipbuilding yards. Add to the equation an aging jackup fleet and a push by operators for rigs with state-of-the-art technologies and increasing automation, builders are touting a bullish outlook reminiscent of the boom years of 2004 to 2005, when the newbuild trend began, only to be interrupted by the global recession.
Post-recession, the newbuild story has again picked up with strong demand for high-specification jackups, semisubmersibles for harsh-environment drilling and drillships that can accommodate heavier subsea equipment for high-pressure, ultra-deepwater reservoirs in the Golden Triangle – Gulf of Mexico (GOM), West Africa and Brazil.
“A trend that is quite clear on the rigs being designed for high-pressure, ultra-deepwater drilling is the increase in derrick ratings, with both the drawworks and the derricks getting bigger and heavier,” said Karsten B. Meling, sales director for National Oilwell Varco (NOV). “Derrick ratings have gone from 1,000 tons to 1,250 tons of maximum lifting capacity, but on the new drillships being ordered, we’re seeing dual derricks, with each drill center having a rating of 1,400 tons that can lift 1,250 tons in the elevator that hangs below the top drive, and both centers with active heave compensated drawworks.”
At the center of this evolution is anticipation of the 20,000-psi blowout preventer (BOP), which in turn is impacting the weight of all related systems and equipment. “Today’s vessels have BOPs rated for 15,000 psi, and the systems related to that rating have a certain weight,” Mr Meling said. “Four years from now, BOPs will be rated for 20,000 psi. They will be three to four meters taller and weigh between 150 and 200 metric tons, more than the current 15,000-psi stacks, resulting in the need for increased capacity of the BOP-handling equipment, riser and derrick.”
These changing needs are resulting in increased levels in specific designs from both the shipyards and firms such as Moss Maritime and Friede & Goldman (F&G), following a period where standardization of many features played a key role in delivering on-time and on-budget jackups and drillships from some shipyards, said NOV’s David Reid, chief of sales and senior vice president for global accounts. “That previous trend meant investment companies were able to fund growth cycles, allowing them to take risks to invest on speculation in jackups that were attractive to drilling contractors,” he said. “Standards have not been as prevalent in semisubmersibles unless they are led by a specific driller who repeats a unique design.”
Beyond rig design trends, another change is on the horizon. Brazil is revitalizing its shipbuilding industry in a big way, with 11 shipyards currently under construction in attempt to meet the production needs of what is poised to become the world’s largest offshore market. Brazil’s move deeper into the rig-building industry is in line with the government’s desire to bring work into the country, said Mr Reid, who also serves as IADC’s division VP of drilling and well services. He notes that many of the Brazilian shipyard ventures have formed partnerships with the more prolific rig-building companies.
Largest shipyard in Americas
OSX, a subsidiary of Brazilian conglomerate EBX Group, has formed an exclusive partnership with Korean shipyard Hyundai Heavy Industries (HHI), which has a 10% stake in developing the massive OSX Açu Shipbuilding Unit in São João de Barra, in the northern sector of the state of Rio de Janeiro. OSX operates in the naval and offshore segments and provides integrated solutions for the oil and gas E&P sector.
“Hyundai, a global leader in naval construction, is providing OSX with state-of-the-art technology and know-how, bringing the latest-generation Asian technology to Brazil,” said Carlos Bellot, CEO of OSX. The São João de Barra facility, which is scheduled to begin operations in the first half this year, will be the largest shipyard in the Americas, with 3.2 million sq meters. It will have a steel-processing capacity of 180,000 tons/year, expandable to 400,000 per year, and the capacity to integrate up to 11 floating production storage and offloading (FPSO) units and eight wellhead platforms simultaneously, with a 2,400-meter waterfront, expandable to 3,525 meters.
Although OSX is not currently building any drilling rigs, the company’s portfolio encompasses FPSOs, fixed platforms, special vessels and oil tankers for Petrobras and OGX, as well as service companies like Malaysia-based SapuraCrest and Kingfish do Brasil, according to Mr Bellot. Of the 23 orders, 18 vessels are scheduled to be built and/or integrated at the OSX shipyard.
For the near term, however, HHI has scaled back its outlook for demand in Brazil. “The Brazilian market is developing differently than what we had expected,” said Kang Young-Seog, senior vice president for HHI’s Ship Sales Department. “Petrobras announced recently that it will be concentrating more on existing field production capacity rather than exploring the pre-salt areas, as they had planned earlier. Therefore, we don’t expect high demand from the Brazilian market, at least for awhile, unless Petrobras changes its strategy.”
Due to the large number of rigs currently under construction around the world, with many still seeking contracts, Mr Kang also anticipates contractors taking a “wait-and-see” position for the time being. “I understand that 47 out of 75 drillships under construction globally have secured contracts, meaning 40% remain unchartered,” he noted. “Therefore, our outlook on demand depends on how early and the terms drillers can secure charter contracts for newbuilds deliverable in the year to come. Longer term, however, I think the deepwater newbuild market will be bright due to continuing high oil prices, providing incentives for operators to invest in deepwater exploration.”
Demand in golden triangle
HHI currently has 13 drillships under construction for Diamond Offshore Drilling, Rowan Companies, Noble Drilling and Fred Olsen Energy, along with two semis for Fred Olsen and Seadrill.
“Drillers are seeking drillships that can drill deeper than 10,000 ft and accommodate heavier subsea equipment, such as 20,000-psi blowout preventers,” Mr Kang said. “They also prefer purpose-built and operation-friendly designs, like the HHI-Gusto P10000 we are building, that reduce downtime.” The rig is capable of operating in water depths up to 12,000 ft and features two complete ram BOP systems. It is equipped
with a 165-ton, heave-compensated crane to enable deployment of subsea production equipment. HHI also has developed a wider beam design, the HD 12000, which features an eco-friendly, high-capacity new hull form for deeper waters and
heavier subsea equipment.
“When it comes to semis, it is obvious that drillers prefer robust rigs, suitable for operating in harsh environments like the North Sea, Australia and Canada,” Mr Kang continued. “With this market trend in mind, we took a semi design, the CS60, from Moss Maritime, to build two semis, one at our Gunsan Shipyard, the other at Hyundai Samho Heavy Industries, our sister
company in Samho-eup,” an administrative division in southwestern Korea.
HHI’s customers typically have their own technical requirements and operational philosophy, customizing their newbuilds with features to give them competitive and operational advantages, he added. “Once they standardize their own fleets, they are not inclined to take other rig designs for the purpose of avoiding any inconvenience in the rig operation and maintaining commercial advantage,” Mr Kang said. The company is seeing a heightened focus on safety, with drilling contractors asking for such features as upgraded and/or spare BOPs for well control systems on newbuilds and even existing fleets.
Jurong Shipyard, a subsidiary of Sembcorp Marine, ventured into rig building in 2003 and has since delivered a series of semisubmersibles, including 12 units of the F&G ExD design, two units of the Bingo 9000 design, and two units of the Moss Maritime CS50 MKII harsh-
environment design. It has also completed several jackups, including four units of the Pacific Class 375 design and a Gusto MSC CJ70 harsh-environment unit.
Current orders include nine jackups, comprising six F&G JU3000N units, two F&G JU2000E units and a Gusto MSC CJ70 harsh-environment unit, and four semisubmersible rig projects. In
addition, more than $6.3 billion in contracts has been secured for the Brazilian market by Sembcorp Marine’s new yard, Estaleiro Jurong Aracruz, currently under construction by Jurong Shipyard in Espirito Santo and scheduled for completion by the end of 2014. Its contracts include seven drillships worth $5.3 billion for Sete Brasil to be chartered to Petrobras, as well as module construction and integration for two FPSOs for the Petrobras-led consortium Tupi BV.
“The construction of Estaleiro Jurong Aracruz will substantially strengthen our capabilities in meeting the needs of Brazil’s offshore sector in developing the giant pre-salt oil and gas reservoirs,” William Gu, general manager for Jurong Shipyard’s offshore division, said. “We have two decades of experience servicing Brazil’s oil and gas industry, and the new yard will further reinforce our position as a leading player and key partner for the country’s E&P sector. There is a huge demand for platforms in the region, and we are extremely pleased to be part of this significant growing industry.”
Maintaining market position
Sembcorp Marine also is building a new 206-hectare (0.8 sq miles) shipyard in Singapore’s new port development, Tuas View Extension. First-phase construction, which spans 73.3 hectares (.28 sq miles), is under way and scheduled to begin operations in the second half of this year. The yard will more than double the group’s current ship repair, conversion and offshore capacity of 1.9 million deadweight tons, and will provide faster turnaround time, increased productivity, improved logistics, efficient workflow and introduction of new automation.
Mr Gu sees the current market turnaround as a trend going forward due to strong fundamentals in the offshore arena. Demand in all sectors is up, and he sees a shift among major drilling contractors to order more rigs on speculation, rather than wait for a contract. “The push is coming from the major operators who want rigs that are less than five years old,” he said. “Contractors want to maintain their market positions by replacing aging fleets with higher-capacity assets that can accommodate features such as high-pressure BOPs.” This is in contrast to the years preceding the recession, when the spec rig market was driven by investors, he noted.
He also sees a remaining niche for lower-specification models even as high-spec rigs gaining popularity among operators. “We have a broad mix of customers, with some wanting more automated features and others not. It depends on where they are drilling,” Mr Gu said. “More automation means the crews need to be well-trained, and that can mean higher operating costs.”
Jurong Shipyard anticipates a continued uptick in rig building in the next 12 to 18 months, he indicated; good news since rig building accounts for more than 50% of the shipyard’s revenues.
The jackup market is especially strong in Asia Pacific, Mexico, India, Southeast Asia and the Middle East. Jurong Shipyard is also seeing more demand for heavy-duty, harsh-weather rigs, Mr Gu said, noting that some Arctic exploration will commence this summer.
The shipyard is building a second Gusto MSC CJ70 harsh-environment jackup for Seadrill, with delivery set for Q4 this year, and a harsh-environment Moss Maritime CS60 ultra-deepwater semisubmersible for North Atlantic Drilling, with delivery scheduled for Q1 2015. The semi, being designed for year-round drilling, will have a water depth rating of 10,000 ft, a maximum drilling depth of 40,000 ft and the ability to operate in -25°F and strong winds. Other projects include an intervention semi for Helix in the GOM and two accommodation semis for Prosafe, for North Sea harsh-environment conditions.
Jurong Shipyard also has a robust upgrade and conversion business, currently upgrading one semisubmersible for Diamond Offshore Drilling and converting two FPSOs. “Some choose to convert and upgrade as the turnaround is relatively faster compared to newbuilding. To them, time is money,” Mr Gu said, adding that Jurong Shipyard is the only yard in the world constructing newbuilds and carrying out rig conversions at the same location.
Daewoo Shipbuilding & Marine Engineering Co (DSME) has seen an uptick in demand over the past year, both in actual newbuild activity and in inquiries, for deepwater and ultra-deepwater rigs, said Justin Y.S. Joe, general manager and head of offshore marketing, drilling. “Many drilling contractors want to retire their older, inefficient semi and jackup fleets, and we believe they will be investing more capital in deepwater drilling units,” he said. “This is especially true for the large and mid-size drilling contractors, but the smaller companies will need to replace their older units, as well.”
DSME currently has 15 deepwater units under construction, including five semisubmersibles and 10 drillships. Mr Joe attributes the increasing demand to indicators that suggest prices will remain strong, a result of industry’s focus on deepwater drilling.
“We’ve seen newbuild orders and inquiries continue to increase, especially in the fourth quarter of 2012 and the first quarter of this year,” he said. “Newbuild orders aren’t at the levels of 2011 but definitely are coming in at a higher pace than in 2009 and 2010, when the industry experienced the downturn due to the recession and subsequent fall in oil prices.” In 2011, DSME saw a 10-fold increase over 2010 in the number of inquires from potential clients, then an additional 30% increase in inquiries in 2012.
“We think the number of orders this year will be similar to where they were in 2012, mostly from existing clients but also from new customers ordering rigs on speculation and new players who want to be part of the ultra-deepwater market,” Mr Joe continued. “Our analysis shows that many of these units won’t be drilling in ultra-deepwater reservoirs yet, but companies want to be ready for that market when it starts to take off.”
Taking a long-term view, customers are requesting rigs to accommodate dual derricks, dual BOPs and 20,000-psi BOPs. “In 2004 and 2005,
when the newbuild boom started, rigs featured primarily single-derrick designs, but dual-drilling packages are now the trend,” he noted. “Operators may not require the dual BOP packages and 20,000 psi now, but they want to have that capability in the future.” Of the rigs under construction at DSME, half will be delivered in 2014 and half in 2015. Most of the drillships targeted for 2014 delivery will be contracted this year, he said.
Mr Joe also sees an emerging market for harsh-environment mid-water semisubmersibles. “Normally, harsh environments require semis, not drillships,” he said. “The existing aging mid-water semi fleet needs to be replaced, and it is unlikely that stacked units will return to the market due to safety, cost and efficiency reasons.
“The newer and relatively lighter semisub designs for mid-water will be required for this type of drilling,” he continued. “In addition, there will be more interest and demand to drill in Arctic areas, with some operators moving into this sector already. We may see some newbuild activities for the Arctic area in the near future.”
While DSME has not been active in the conventional jackup space for many years, the company is anticipating a return to that sector after receiving a number of inquires for heavy-duty jackups for high-end markets in harsh environments, Mr Joe indicated.
Keppel Offshore & Marine, another established company in the offshore rig-building space, has 36 jackups under construction and is anticipating strong demand for newbuilds driven by sustained high oil prices, exploration in new arenas and a shortage of high-spec rigs. “Analysts are estimating that the jackup market will
remain undersupplied over the next two years, and there is still high demand for high-spec jackups,” said Wong Kok Seng, managing director, offshore, for Keppel Offshore & Marine and managing director of Keppel FELS. “Even after accounting for some 80 deliveries by 2015, more than half of the world’s jackup fleet will be over 30 years old, driving the replacement cycle for further rig orders and upgrades.
“Post-Macondo, the industry is more acutely aware of the importance of safety and reliability,” he continued. “This has resulted in a rig replacement cycle being driven by operators’ growing preference for newer, high-spec rigs that boast strong safety and efficiency features.”
Other features include longer leg lengths, from 350 ft to 400 ft; bigger spud cans for soft soil conditions and harsh climates; accommodations for up to 150 people; higher hookloads for the drilling package; better escape means and protection from the drill floor; and an increase in mud pit tank capacity and design density. The company also is manufacturing CJ70 jackups, six DSS 38E semisubmersibles, one semi tender drilling rig and two floating accommodation vessels. Rig modifications are specific to site conditions, and upgrades are done to meet new contract requirements and regulations in specific markets.
PEMEX’s recent announcement to increase its jackup fleet and ongoing business from Brazil, particularly in the repair, maintenance and rig upgrade sectors, as other indicators of demand. Keppel also is building several harsh-environment jackups for the North Sea and is seeing interest in expanding fleets in the Caspian Sea, Asia Pacific and West African markets.Over the past decade, Keppel has invested more than $1.5 billion in expansion and upgrades of its shipyards, including the addition of new floating docks in some yards, and enhancing facilities with increased technology and automation, including automated pipe shops. The company also is embarking on the phase two expansion of the Keppel Nantong shipyard in the Jiangsu Province of China to increase the yard’s capacity for offshore projects.
DSS is a trademarked term of Keppel FELS.