IHS Markit: Offshore drilling rigs to rise through 2020

Sept. 10, 2018
Consistently higher oil prices and greater cost–efficiency in offshore projects are driving increased demand for offshore drilling rigs through 2020, particularly for deepwater projects, according to recent analysis from IHS Markit.

Consistently higher oil prices and greater cost–efficiency in offshore projects are driving increased demand for offshore drilling rigs through 2020, particularly for deepwater projects, according to recent analysis from IHS Markit.

In its first worldwide mobile rig forecast for 2020, IHS Markit, which relies on data from its Petrodata RigPoint database, estimates the average global demand for mobile offshore drilling units, comprising jack ups and floating rigs, is expected to increase by 13% between 2018 and 2020 as the offshore market slowly emerges from its prolonged downturn.

IHS Markit expects global offshore rig demand will average 521 units in 2020, which exceeds the average of 453 units expected through 2018. These demand figures account for the entirety of 2018 through 2020, including seasonal fluctuations and regional trends.

“Broadly speaking, much of this increase in global demand can be attributed to the price of oil being sustained at a higher level than when the downturn was in full swing,” said Justin Smith, offshore rig analyst at IHS Markit and an author of the rig forecast. “In addition, costs associated with the offshore industry have been slashed in recent years. This has led operators to reconsider exploration, appraisal, and development programs that were not economically viable while the market was bottoming-out.”

While the demand for jack ups, which work in shallow water, will improve during this period, the increase will primarily be driven by floating rigs, specifically semisubmersibles and drillships, as operators step up activity in deepwater areas around the globe, IHS Markit said.

“The vast majority of this offshore rig demand increase will come from the Middle East, led by Saudi Arabia, and other notable additions in Qatar and the United Arab Emirates,” Smith said. “Saudi Aramco alone will account for roughly a third of this increase as the operator continues its push for more offshore production, a sentiment echoed by Qatargas, which is aiming to increase its LNG exports.”

For jack ups, demand is expected to climb from an average of 321 rigs this year to an average of 352 in 2020, which would be an improvement of 9.7% during the period. Meanwhile, smaller upticks in the jack up rig segment are expected for several regions, including Northwest Europe, Central America, West Africa, and the Indian Ocean. Interestingly, the US Gulf of Mexico has made a considerable rebound from its lowest point of the downturn of four contracted units in October 2016. This year, the US Gulf jack up sector is expected to average about 9 units, increasing to 11 by 2020, with potentially more on top of that, should local operators decide to undertake additional drilling programs, Smith said.