Drilling contractors and speculators have ordered 140 offshore rigs, to be delivered through 2011. In addition to new rigs, new yards are being built and old yards expanded or reopened. Existing rigs are scheduled for upgrades to accommodate new working environments and new rules, such as the mooring upgrades required in the Gulf of Mexico.
The deepwater rig market appears firm, with rates averaging about $250,000/day and highs reaching above $500,000/day. Newbuild additions are expected to be absorbed into the market without substantially lowering rates.
Although the jack up market is softening, average rates are still well above $100,000/day.
Fleet utilization
According to Rigzone, utilization of offshore drilling units remains high. Of the world’s 35 drillships, 88.6% (31 ships) were working in July. Among 155 semisubs, 143 were working, representing 92.3% of the fleet. Of the 358 jack ups worldwide, 333 were working, or 93% of the fleet.
As of Aug. 24, about 88% (523 rigs) of the world’s offshore fleet of 595 rigs was employed, up 2.5% from a year earlier, when 491 of the 574 rigs were being utilized.
SCORE increase slows
GlobalSantaFe Corp.’s summary of current offshore rig economics (SCORE) reached 136 in June 2007, up 2.4% from the previous month. The SCORE compares the profitability of current mobile offshore drilling rig day rates to the profitability of day rates at the 1980-81 peak of the offshore drilling cycle (when SCORE = 100).
The worldwide SCORE finally exceeded the benchmarks in November 2005 for semisubmersible rigs, and in December 2005 for jack up rigs. Both rig types began to level off in first-quarter 2006, and the increases slowed.
In June, the semisub SCORE reached 152.6, up 20% from a year earlier and up 281% from 5 years ago. The jack up SCORE hit 127, up 6% from a year earlier and up 169% over the past 5 years.
Regionally, the SCORE for West Africa (149, up 18.5% from a year earlier) and North Sea (146.7; up 8.7%) are highest. The SCOREs for Gulf of Mexico and Southeast Asia are nearly equal at about 120, with increases of about 4.5%/month. Southeast Asia, however, has shown a 33.6% improvement in the previous year, while the SCORE for the Gulf of Mexico hasn’t really changed in 12 months, improving only 0.6%.
Worldwide SCORE for all regions and rig types is currently increasing at 2.4%/month and has increased 13.1% in the previous year.
Drilling fleets
With 140 drilling units under construction, the current global rig fleet is set to expand 18% beyond the 782 drilling units now on hand. Many of the new deepwater rigs are already under contract with operators.
There are 72 jack ups, 43 semisubmersibles, 19 drillships, 3 drilling tenders, and 3 inland barges now under construction, according to Rigzone (Table 1).
Jack ups-When Drilling Market Focus last reviewed new jack up construction a year ago, about $7.34 billion was committed to build the 61 jack ups then under construction (OGJ, Oct. 16, 2006, p. 39). Seven jack ups were delivered in 2006, and 21 were scheduled to be delivered in 2007.
As of September 2007, the current fleet contains 411 jack ups; adding 72 newbuilds will increase it 17%, to 482. Two of the jack ups to be built for China Oilfield Services Ltd. are not yet committed to a shipyard, but most (35) are being built in Singapore: Keppel Fels leads with 20 jack up contracts, followed by PPL with 11, and Jurong with 4.
Five jack ups are under construction in Malaysia, at the Labroy and Labuan yards. Ten others are under way in the Persian Gulf, 10 in US shipyards, and 5 in China. Three are under construction in India: two at the ABG Shipyard and one at the Bharati Shipyard.
PPL announced a $198 million contract to build a Baker Pacific Marine Class 375 jack up announced in late August.
Semisubmersibles-The semisubmersible fleet is set to increase by 26%, when all 43 of the new units join the existing fleet of 167 (Table 2). Most of the rigs are being built in Singapore (15), China (11), and South Korea (8). A few are under construction at the IMAC shipyard in Abu Dhabi (3); the Severodvinsk, Sevmash, and Vyborg shipyards in Russia (3); the Aker yard in Verdal, Norway (2); and at Sadra’s Nekkairan shipyard in the Caspian Sea (1). Two yards in the UK Haverton Hill and Teesside, are working with Russian yards on two of the semisubs for SeaDragon Offshore.
Norway’s Seadrill Ltd. has six semisubs under construction; four in South Korea and two in Singapore, including the West Sirius (Fig. 1).
When Drilling Market Focus last tabulated semisub construction in June 2006, there were 26 semisubs under construction in five countries, exceeding $13 billion in orders (OGJ, June 19, 2006, p. 35). This was up from only four units under construction in 2005. Now we see 43 semisubs under construction in eight countries.
Drillships-There are an unprecedented 19 drillships under construction; 18 in South Korea and 1 in Spain (Table 3). Most (13) are contracted to Samsung Heavy Industries’ Geoje yard. Four are being built by Daewoo Shipbuilding & Marine Engineering Co.’s yard in Okpo; one at Hyundai.
The hull for the multipurpose floater (MPF) 1000 drillship is under construction at the COSCO shipyard in China, where steel was cut in January 2007. The topsides are being built Dragados Offshore SA shipyard in Cadiz, Spain, and the ship will be delivered in 2008 (Fig. 2). The ship will have 1-million-bbl onboard storage for extended well tests.
OGJ’s last tabulation of drillship construction showed only five ships under construction in Korea, at a cost of $2.46 billion (OGJ, May 8, 2006, p. 43).
Tender-assist rigs-Three drilling tenders are under construction, to be delivered in 2007-10 (Table 4). Saipem SPA’s TAD-1 (tender-assist drilling) unit is under construction at the company’s Boscongo Pointe Noire yard in the Congo. The tender can work in 450 ft water depth and will begin a 5-year contract with Eni Congo in fourth-quarter 2007. Eni SPA owns 43% of Saipem.
Seadrill has two tenders under construction. The T-11 will be delivered from the Malaysia Marine & Heavy Engineering yard in 2008 (Fig. 3). Seadrill Asia Ltd. has a semi-tender under construction at Keppel FELS in Singapore that will be delivered in 2010.
Inland barges-There are three inland barges under construction in a Gulf of Mexico yard for Inland Bay Energy Services. Rig 701 will be delivered this year; Rig 702 and 704 will be delivered in 2008. The barge derricks have 1.5-million-lb hookloads and triple 1,600-hp mud pumps.
Yards
Well-known shipyards are working at capacity and additional orders from burgeoning speculative building are going to new facilities.
In Singapore, Keppel FELS Ltd., a subsidiary of Keppel Corp. Ltd., is building 20 jack ups and 9 semisubmersibles. SembCorp Marine subsidiary Jurong shipyard is building 4 jack ups and 6 semisubs.
Keppel Offshore & Marine Ltd. opened a new shipyard in China in early August. The Keppel Nantong Shipyard Co. Ltd. yard, in Nantong, Jiangsu province, will build offshore support vessels such as anchor handling tugs and supply vessels and tugboats.
In China, Yantai Raffles is building six semisubs and one jack up. The Dalian yard is building 2 semisubs and 4 jack ups. Semisub construction is now nearly equal in Singapore (15) and China (11). The large demand for new jack ups has spread the contract work to Chinese and Malaysian yards.
The first jack up to be built in Malaysia’s Labuan shipyard will be a Gusto MSC design, cantilever rig capable of working in 350-ft water for $155 million. The rig will be operated by a Malaysian-based joint-venture company formed between Iran’s Tamin Oil & Gas Investment Co. (TOGICO) and SAAG Drilling and Well Services Sdn. Bhd., a subsidiary of Malaysia’s SAAG Consolidated (M) Bhd. Keppel Oil International Ltd. signed a memorandum of understanding with TOGICO Aug. 5, but assigned rights, title interests, and benefits to SAAG in late August.
In South Korea, yards are capitalizing on experience in building drillships and have garnered contracts for 8 semisubs in the last year. Daewoo is building 6 semisubs and 4 drillships. Samsung is building 2 semisubs and 13 drillships.
J. Ray McDermott has a new fabrication yard in Altamira, Tamaulipas state, Mexico, with direct, deepwater access to the Gulf of Mexico.
Merging
Two Houston-based offshore drilling contractors, Transocean Inc. and GlobalSantaFe Corp., announced a merger in August (OGJ, Aug. 27, 2007, p. 30). Transocean’s fleet includes 3 inland barges, 25 jack ups, 41 semisubs, and 16 drillships (including 4 under construction). GlobalSantaFe Corp. runs 60 rigs, including 43 jack ups, 14 semisubs (1 under construction), and 3 drillships (1 under construction). The merged company, to be called Transocean Inc., will control a global fleet of 147 rigs and valued at $53 billion.
Selling
In August, drilling contractor Pride International announced it was selling its fleet of three self-erecting, tender-assist rigs to Norway’s Ferncliff TIH AS for $213 million. The sale is to close in January 2008. Abbot Group’s subsidiary, international drilling contractor KCA Deutag, will manage and market the three tenders. Abbot Group has an option to take a 9.99% interest in the three rigs.
Pride had previously sold its two Latin American business units to GP Investments Ltd., an equity firm, for $1 billion (OGJ Online, Aug. 10, 2007). The sale includes Pride’s Latin American land-based drilling and workover business unit, with 73 land drilling rigs, 135 workover rigs, and two lake drilling barges; and Pride’s E&P Services division.
Pride will probably reinvest in long-term assets. Raymond James Energy analysts J. Marshall Adkins and James M. Rollyson said that Pride is likely to use proceeds from both deals to finance two drillships under construction, acquire newbuild spec rigs, or exercise its option to build another drillship.
