WoodMac: NW Europe operators' drilling plans for 1997

NW Europe's Mobile Drilling Rig Demand [29910 bytes]

Northwest Europe's drilling sector is expected to continue buoyant in 1997, as operators increase exploration/appraisal activity and push major field developments.

This is the view of Wood Mackenzie Consultants Ltd., Edinburgh, which expects rig demand and utilization to stay high and charter rates for drilling rigs to increase further.

The analyst predicts that a total 170 exploration and appraisal (E&A) wells will be drilled off Northwest Europe this year: 105 off the U.K., 35 off Norway, 22 off the Netherlands, and four each off Denmark and Ireland.

This compares with a total 158 E&A well starts drilled off Northwest Europe in 1996: 101 off the U.K., 25 off Norway, 28 off the Netherlands, and two each off Denmark and Ireland.

Rig squeeze

Wood Mackenzie predicts demand for semisubmersible rigs in Northwest Europe will outstrip supply this year, continuing a trend first seen in 1995 (OGJ, Dec. 2, 1996, p. 25).

"Semisubmersible rig utilization in the North Sea area averaged 93.8% during 1996," said Wood Mackenzie, "and is expected to be complete through 1997 unless further rigs move into the area, or drilling programs are rescheduled."

The analyst expects semisubmersible rig demand in Northwest Europe to amount to 47 rig years this year. Supply is expected to fall short by 1 rig year.

The requirement for jack up rigs is expected to ease in 1997, so that demand will be exceeded by supply now that further units have recently mobilized to Northwest Europe.

Jack up rig utilization is forecast to amount to 33 rig years in 1997, with supply of rigs exceeding demand by 4 rig years.

Rising rig rates

Day rates for semisubmersibles increased through 1996, with low specification unit charter rates increasing by 10%: "Under current market conditions, lower specification semisubmersible day rates are likely to plateau at around $100,000/day in 1997."

Charter rates for third and fourth generation semisubmersibles averaged $120,000/day at yearend 1996, said the analyst. Recent contracts for deepwater work have been fixed at about $130,000/day.

"Under current market conditions," said Wood Mackenzie, "higher specification semisubmersible day rates will increase to average more than $140,000/day in 1997, as demand for deepwater work increases and supply tightens."

Short-term contracts for standard jack ups were being fixed at around $48,000/day around yearend 1996. The increased number of rigs operating in the region is expected to keep charter rates below $60,000/day.

By yearend 1996, heavy duty jack ups were being fixed at $98,000/day. Wood Mackenzie predicts these will increase to an average $120,000/day this year, with growing demand for high-pressure/high-temperature work.