Ultra deepwater semisubmersible market stays buoyant

June 1, 2009
The market for ultra deepwater semisubmersible rigs is buoyant with worldwide exploration and field development awaiting the arrival of new units, says Mike Roth, director of Marketing & Contracts - Deepwater at Ensco Offshore Co. in an interview with Offshore magazine.
First of seven Ensco newbuilds to start work in GoM

Gurdip Singh, Contributing Editor

The market for ultra deepwater semisubmersible rigs is buoyant with worldwide exploration and field development awaiting the arrival of new units, says Mike Roth, director of Marketing & Contracts - Deepwater at Ensco Offshore Co. in an interview withOffshore magazine.

Ensco has committed $3.1 billion to build seven 8500 Series semisubmersible rigs to meet customer demand. The first completed rig is ready to start work, and the other three already have long-term contracts ranging from two years to four years with options for renewal, Roth says.

ENSCO 8500 leaving KFELS, Singapore.

Ensco has contracts with Anadarko and Eni for the $312-millionENSCO 8500; Nexen and Noble Energy for the $338-million ENSCO 8501, Nexen for the $385-million ENSCO 8502, and Cobalt for the $427-million ENSCO 8503.

“We are also bidding for contracts for the remaining three ENSCO 8500 Series rigs, which will be delivered in 2011 and 2012,” he adds.

Roth sees a strong demand for deepwater units, and notes the industry concern that some newbuilds may not be completed due to the global credit crunch.

ENSCO 8500 control room.

The deepwater market has held up very well even in the midst of lower oil prices due to the long term nature of deepwater projects, with day rates in the $500,000 to $550,000 range. Ensco expects the seven new 8500 Series semisubmersibles to contribute approximately one-third of its annual revenue from 2012 compared with 4% in 2008.

Some operators have been waiting for several years for the deepwater rigs necessary to develop their deepwater fields, especially in the Gulf of Mexico.

A good example is theENSCO 8501 scheduled for deployment on Knotty Head, which was discovered in 2005 in deepwater GoM and has gone through the peak and troughs of oil prices while awaiting development, Roth says. The rig currently is undergoing acceptance testing in Singapore.

ENSCO 8500 drill floor.

“Markets have changed dramatically since the second half of 2008, and we have seen many changes to oil and gas field development plans, resulting in some delays,” he points out. “These delays could have a significant impact on future oil supply for the world – which up until recently faced a shortage of energy – and could happen again once the global economy recovers.”

In addition to drilling at Knotty Head, Nexen Petroleum USA plans either wells on 119 prospects in the GoM, President Brian C. Reinsborough says.

“We have waited for this to drill deepwater wells and appraise Knotty Head,” he says. Nexen’s three-year charter with Ensco is in partnership with Noble Energy.

Roth highlights Ensco’s rig development program, which is a long-term commitment as a rig owner and operator. This is unlike the speculative investment the industry is seeing in some of the ultra deepwater semisubmersible and drillship units, which, if not completed on time or not built at all due to the global credit crunch, would likely delay some of the field developments.

Though Ensco is in the midst of a multi-billion dollar construction program, it keeps its options open for further expansion and industry consolidation, he says.

First rig ready to work

ENSCO 8500, the first of the seven new semisubmersible rigs, is expected to begin operations in June 2009. This is a two-month delay from the earlier April 2009 start-up schedule due to a recent decision to install different deck cranes on the rig. The company elected to replace the equipment because of mechanical and reliability issues with the original deck cranes.

ENSCO 8500 is contracted to Anadarko and ENI for work in the Gulf of Mexico.

Ensco gotENSCO 8500 this past September and anticipates delivery of ENSCO 8501 in the coming months. It expects delivery of ENSCO 8502 in 1Q 2010; ENSCO 8503 in 4Q 2010; ENSCO 8504 in the second half of 2011; ENSCO 8505 in the first half of 2012; and ENSCO 8506 in the second half of 2012.

The rigs are capable of drilling in 8,500 ft (2,591 m) of water and can be upgraded to operate in 10,000 ft (3,048 m). The ENSCO 8500 Series proprietary design is an upgrade from Ensco’s 7500 rig design and has a 2 million pound quad derrick, offline pipe handling capability, increased drilling capacity, greater variable deck load, and improved automatic station keeping ability.