WATCHING THE WORLD NORTH SEA DRILLING ON THE RISE

March 12, 1990
with Roger Vielvoye from London Britain's offshore drilling business appears to have completely recovered from the bout of "falling crude price sickness" contracted in 1986. After a couple of years of convalescence, when North Sea drilling activity started to recover, two independent examinations have pronounced the patient fully restored to the vibrant health it enjoyed in the mid-1980's.

Britain's offshore drilling business appears to have completely recovered from the bout of "falling crude price sickness" contracted in 1986.

After a couple of years of convalescence, when North Sea drilling activity started to recover, two independent examinations have pronounced the patient fully restored to the vibrant health it enjoyed in the mid-1980's.

A survey of offshore operators' drilling intentions by Britain's Department of Energy suggested that 230-240 exploration and appraisal wells could be drilled this year, a 10% increase from the peak drilling year of 1984.

WOODMAC'S SURVEY

A second survey by Edinburgh, Scotland, analyst County Natwest Woodmac has now confirmed the government's optimistic prognosis for 1990. And looking ahead to 1993, it expects high levels of activity to be maintained.

The Woodmac survey also underlines continuing improvements that are being made in drilling efficiency off the U.K. Because the average time for drilling each well is down, rig utilization rates probably will not exceed the 1985 record when a high drilling commitment coincided with a sudden upturn in the average time spent on each well.

Excellent prospects for drilling off the U.K. should ensure that total demand for rigs in Northwest Europe is likely to exceed the 1985 level by about 7%.

However, the Woodmac survey points out that the number of rigs available in the North Spa is likely to be more than 20% greater than in 1985. As a result, day rates will certainly be. healthy but may not exceed 1985 levels.

Day rates for jack ups and semisubmersibles reflect this year's higher demand. Rates for heavy duty jack ups with top drive and 15,000 psi blowout preventers recovered to $60,000/day, while the average jack up rate rose to about $30,000-35,000, making up the ground lost in fourth quarter 1989. Both rates are slightly above levels at the start of last year.

The biggest increase is in the semisubmersible market. High specification semis are commanding about $40,000/day, compared with $25,000 a year ago. The average rate for semis also increased to more than $20,000/day from $15,000-18,000.

The higher rates are still drawing equipment from other parts of the world to Northwest Europe. A heavy duty jack up from the Soviet Union has moved into the Norwegian North Sea, while the Maersk Giant jack up has made the long trip to the North Sea from Australia.

Woodmac reports that the total number of rigs in the region has risen from a low of 122 last August to 128.

WHAT'S AHEAD

Based on those figures, rig utilization rate could be about 85% this year. And the analyst says jack up utilization may increase to nearly 100% during the summer months, sparking a sharp increase in day rates.

But as Woodmac points out, any increase in day rates will be short lived. If rig utilization, particularly for jack ups, remains about 100%, the North Spa will continue to suck in equipment from other parts of the world.

A spate of newbuildings would be likely, and the boom would last for only the 2-3 years it would take to get new rigs to Northwest Europe.

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