Rig markets are showing only slight changes, but the initiation of new international projects suggests an upward swing.
Executives from oil services companies weighed in at the Banc of America Securities 2003 Energy and Power Conference last month. There was increased emphasis on developing new commercially viable and sophisticated technologies.
Jay Swent, the new CFO at Dallas-based Ensco International Inc., reiterated the rig upgrade and enhancement program as the best use of its capital. The company is nearly finished upgrading its international jack ups and is now focusing on the Gulf of Mexico fleet. Ensco has spent $625 million on rig upgrades since the mid-1990s.
Ensco's average jack up rate for third quarter 2003 was $47,800/day, an improvement over the second quarter rate of $46,900/day, and approaching the $48,000/day rate from a year ago. Utilization of Ensco's jack ups was 88% in both second and third quarters this year.
GlobalSantaFe's worldwide summary of current offshore rig economics (SCORE) for October is down 0.2% from the September SCORE. The jack up SCORE decreased to 46.7 from 47.0, while the semisubmersible SCORE increased to 36.1 from 35.2. By area SCORE, only the North Sea and Southeast Asia showed gains in October, while the Gulf of Mexico and West Africa showed declines.
Andreas Vietor and Benjamin York, Denver-based equity research analysts with Stifel Nicolaus (part of Stifel Financial Corp.), said in late October that the industry is nearing a worldwide recovery in the shallow-water drilling market. They based this assessment on the number of rig tenders, the worldwide supply and demand balance for jack ups, and positive commentary from contractors, and suggested that "2004 could be a rosier year." They also pointed out that the expected incremental demand is still looming and not yet realized.
Rig counts
The Baker Hughes International rig counts issued at mid November showed that US land drilling was up 40% and US offshore drilling was up 3% from a year earlier. The US land rig count stood at 987 rigs and offshore count was flat at 109 rigs.
Grant Borbridge, an analyst with Prudential Equity Group Inc., forecast the US land rig count to average more than 1,000 rigs in the fourth quarter of 2003 and to improve further in the first half of 2004.
The BHI international rig counts showed 558 land rigs drilling in October, up 47 from a year earlier, and 232 offshore rigs drilling, down 3 from the same point in 2002.
James Wicklund, Houston-based analyst for Banc of America Securities, said that day rates for deepwater rigs worldwide remain lackluster.
European benchmarking
Aberdeen-based Rushmore Associates completed a benchmarking assessment of 280 wells drilled off Europe in 2002, as part of the company's drilling and completions performance reviews. The largest participant in this study was Statoil ASA, which drilled 60 of the wells.
The average daily drilling progress was 65 m/day/well, but Statoil's progress was 103.5 m/day. Statoil also drilled the most efficient single well in 2002, at 384.4 m/day. In a November press release, Statoil's Mads Grinrød, vice-president for drilling and well technology, attributed the company's success to well-established planning processes and positive collaboration with drilling contractors and service companies. The benchmarking began in 1988 as a cooperative study among North Sea operators called the "Drilling Performance Review." It was outsourced to Rushmore Associates and Sigma Consultancy in 1993.1
Middle East
According to a report issued by Tehran-based OPEC News Agency (OPECNA) last month, Iranian oil and gas drilling operations in the last 8 months are up by 18% over the same period in 2002. Iran has drilled 77 oil and gas wells since the start of the current Iranian year (Mar. 21, 2003).
The National Iranian Drilling Co. (NIDC), a subsidiary of the National Iranian Oil Co. (NIOC) has 43 onshore and 4 offshore oil derricks. Since its establishment, the NIDC has implemented 1,925 drilling operations in Iran, drilling a total of 4.15 million m.
Hajat Shamsipour, director of the planning department at the NIDC, was quoted by the Persian-language 'Aftab-e Yazd' newspaper as saying that NIDC has drilled 180,000 m total in 2003. Shamsipour said the operations had been carried out while four of the company's rigs were out of service for maintenance.
Arab Maghreb Union
Five countries across North Africa (Mauritania, Morocco, Algeria, Libya, and Tunisia) met in 1988 and drafted a treaty encompassing the "Greater Arab Maghreb." The treaty was signed in February 1989, formalizing the Arab Maghreb Union (AMU) or Union du Maghreb Arabe (UMA). The purpose of the AMU is to safeguard the region's economic interests, and promote cooperation and commercial exchanges in order to create a North Africa Common Market, or Maghreb Economic Space. All five countries have oil and gas operations.
Exploration and development drilling continues on Block 404 in eastern Algeria's Berkine basin.
Algerian state oil firm Sonatrach, Houston-based Anadarko Petroleum Corp., and partners Maersk Olie Algeriet AS (a wholly owned subsidiary of Maersk Olie og Gas AS of Denmark), and Eni Oil Algeria Ltd. (Italy) finished drilling two successful wells in November.
They drilled the BKNE-AAC-A well to a total depth of 11,200 ft in the Berkine North East field, after drilling the SFSW-2 well to a total depth of 10,840 ft in the Sif Fatima South West area. Production from the Berkine basin is expected to peak at 80,000 b/d.
Anadarko operates in two key areas in the Berkine basin Block 404 and the Ourhoud field. The company had planned to invest $98 million in Algeria in 2003, drilling 41 development wells and a number of exploration wells.
In November, Tony Meyer, Anadarko vice-president, international and Alaska operations, said, "We have drilled a total of seven exploratory wells in Algeria since our exploration drilling program resumed in September 2002, and we plan to drill two more by yearend, both in Block 404. In addition, we are planning an aggressive appraisal program next year."
Vanco Morocco Ltd., a subsidiary of Houston-based Vanco Energy Co., holds 8.4 million acres under license off Morooco. Vanco plans to drilll an exploration well in 1930-1960 m water depth in the Ras Tafelney block in early 2004, north of Shell's operations. The drilling platform had not been selected as of late November, but Vanco told OGJ that they expect to have a drilling contract formalized by Jan. 20, 2004.
Vanco (operator) has a 45% interest, ENI Agip British Borneo Ltd has a 30% interest (assuming the interests of London and Scottish Marine Oil Co.; Lasmo PLC), and Morocco's national oil company, Office National de Reserches et d'Explorations Petrolieres (ONAREP) has 25% interest in production.
Morocco is a net importer of oil and coal, but has granted leases for Atlantic blocks in 1998 and 2001 (OGJ Nov. 13, 2000, p.34).
Woodside Mauritania Pty. Ltd. drilled two wells off Mauritania, as operator of the Area B production sharing contract (PSC). The Chinguetti-4-6 (Tiof) well was drilled with the dynamically positioned West Navigator drillship, then plugged and abandoned on Nov. 15. Woodside spud the Chinguetti-5-1 (Pouné) exploration well, in 920 m of water, on Nov. 16, 2003. Planned total depth is 3,520 m. Other participants in the PSC are AGIP Mauritania BV, Hardman Resources Ltd., Fusion Mauritania B Ltd., and Roc Oil (Mauritania) Co. (OGJ Online, Dec. 2, 2003).
British independent Dana Petroleum PLC, Aberdeen, contracted with Global SantaFe to use the ultradeepwater drillship Jack Ryan off Mauritania. Dana spud the Pelican-1 well in Block 7, in about 1,700 m water depth, on Nov. 30, and expects to complete drilling in 30 to 40 days.
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The location is 150 km north of the Chinguetti oil field in Block 4, but the nearest oil shows are in Block 6 (Area C, operated by Woodside).In Tunisia, the Kuwait Foreign Petroleum Exploration Co. (Kufpec) and Tunisia's state-owned national oil company, Enterprise Tunisienne d'Activités Pétrolières (ETAP) are drilling an exploratory well as a joint venture in the prolific Sidi El Kilani field. The Sidi El Kilani field is the third largest in Tunisia, producing 13,260 b/d (January 2002).
The Tunisian oil industry is regulated by the Ministry of Industry, which aims to develop oil exports further. The new Hydrocarbons Code became effective on Feb. 20, 2000, and includes incentives to encourage upstream investment.
Tunisia has proved reserves of 308 mbo, 2.75 tcf natural gas, and 1.32 million cu ft condensate.
India
The drillship Belford Dolphin, capable of drilling in water depths up to 3,000 m, arrived in Mumbai, India, on Nov. 14. It will be one of three drillships used for the deepwater drilling campaign, 'Sagar Samriddhi' ("Prosperity from the Oceans") by India's state-owned Oil & Natural Gas Corp.
ONGC announced the project's goal in August "to discover and produce oil and gas from fields under water depths up to 3 km," off the east and west coasts of India. In a statement to ONGC shareholders in late September, ONGC Chairman and Managing Director Shri Subir Raha said, "The new frontier in E&P business is in Deep Waters."
Earlier in the month, the Washington Times quoted Subir Raha as saying, "This is the biggest deepwater exploration ever attempted by a single operator, anywhere," and he added that ONGC hopes to add 4 billion tons of reserves from the deepsea exploration campaign.
The project plan includes 37 exploratory wells in its blocks spread across the Arabian Sea and the Bay of Bengal. The first well for the Belford Dolphin, in the Gulf of Kutch, was scheduled to spud on Nov. 30, in 1,862 m water depth.
ONGC hired US-based Transocean Deepwater Drilling Inc., a division of Transocean Inc., and UK-based Dolphin Drilling Ltd. to commence drilling for this project, at $336,906/day and $361,763/day, respectively, including management services. According to ONGC, the two companies could eventually take home more than $8 billion from this contract.
Transocean will work with Schlumberger Asia Services Ltd. for integrated campaign management services, and Dolphin will work with New Orleans-based Tidewater Inc.
For the first time, ONGC has adopted an Integrated Well Completion (ICW) approach, involving turnkey contracts, to mitigate the significant operational and financial risks.
Dolphin Drilling Corp., a Fred Olsen Energy ASA company, based in Tananger, Norway, was founded in 1965 under the name of A/S Aker Drilling Co. Ltd. It controls eight semis (all North Sea) and the drillship Belford Dolphin, which has a DP3 class rating and will drill for the project in waters 3,000 m and deeper in the Bay of Bengal and the Arabian Sea.
Transocean's Discoverer Seven Seas will be used for the project to drill in water depths of 1,500 m. It will begin operations in February 2004 (OGJ Online, Aug. 12, 2003).
Transocean also has six jack ups operating offshore India: the C.E. Thornton, F.G. McClintock, Transocean Nordic, Randolph Yost, J.T. Angel, and the Trident 2. Two additional jack ups, the Trident 12 and Ron Tappmeyer, were en route to India in November. All eight are capable of operating in waters 300-400 ft deep.
For water depths up to 900 m, ONGC will use its own Sagar Vijay drillship, currently in dry dock.
Latin America
According to Wicklund's summary of the BAS 2003 Energy Conference, there were bids for five jack ups to work in Mexico and potentially up to seven more in the near-term. Pemex may be interested in turnkey wells. There are no indications of incremental demand for semis off Mexico.
Noble Drilling Corp. has eight jack ups under contract to Pemex. Stifel Nicolaus analysts expect Pemex to tender for up to 15 additional jack ups in fourth quarter 2003 and 2004.
Petroproduccion, the production subsidiary of Ecuador's state oil company, Petroecuador, awarded a $27 million contract for two rigs to Ecuador-based Drillfor in August, then canceled the contract in September after the rigs did not pass technical inspections.
Petroecuador then launched an "emergency" tender for three rigs in September, attracting bids from five companies. A second tender, for six rigs, attracted bids from nine companies. Each contract is worth about $46 million. Petroproduccion spokesman Roberto Freire said in late November that the company expects the new drilling to impact the 2004 production goal of 250,000 bo/d.
A third bid tender for rigs was issued early November, and bids are expected by Jan. 23, 2004.
Adulis Resources expects to hire a rig by Jan. 1, 2004, to drill an exploratory well in the 332,800-acre Salinas block on northern Colombia's Guajira Peninsula.
Gulf of Mexico
Prudential Financial analyst Grant Borbridge expects offshore activity to increase in the Gulf of Mexico, to about 120 rigs by mid-2004, based on the number of offshore drilling permits issued and higher effective utilization rates. The fleet in the gulf has dropped to 118 jack ups from 131 at the beginning of the year, while demand has been stable.
Leading edge rates for Transocean's commodity jack ups in the gulf are increasing from $28,000/day to $30,000/day, the company said last month.
Day rates for premium jack ups are flat, but Wicklund expects these rates to increase and even outpace commodity jack ups in the first quarter of 2004, as rigs continue to leave for Mexico.
Rowan Cos. had 15 rigs drilling on the deep shelf as of mid-November.
Transocean Inc. and ChevronTexaco announced last month that the Enterprise-class Discoverer Deep Seas drillship set a new world water-depth drilling record by spudding a well in 10,011 ft of water. The record was set while constructing ChevronTexaco's Toledo well in Alaminos Canyon Block 951, and it marks the first time that a rig has commenced drilling in more than 10,000 ft of water. The Discoverer Deep Seas (Fig.1) was launched in 2001; it has a triple-redundant dynamic positioning system designed to keep the ship on location in 60-kt winds. The ship is under contract to ChevronTexaco through January 2006.
Reference
1. Rushmore, P., "Global drilling and completions benchmarking comes of age," http://www.dea-europe.com/ meet/dea00/3Q00/140900/rushmore.pdf, third quarter, 2000. See also http://www.rushmorereviews.com/.
