Offshore staff
LONDON/HOUSTON/SINGAPORE – Rig utilization has returned to pre-COVID levels and rig day rates are up 40% over the past year, according to a recent report from Wood Mackenzie.
According to the report “Are we at the tipping point of the deepwater rig market?,” demand is forecast to increase another 20% over the 2024-2025 time period.
The report also noted that active floater utilization has rebounded from a low of 65% in 2018 to over 85% in 2023. Wood Mackenzie also said that the number of contracted ultra-deepwater (UDW) benign rigs has returned to pre-COVID levels, and day rates for best-in-class floaters have doubled over the past two years.
“Higher oil prices, the focus on energy security and deepwater’s emissions advantages have supported deepwater development and, to some extent, boosted exploration,” said Leslie Cook, principal analyst for Wood Mackenzie. “Active supply is now more in line with demand and rig cash flows are positive. We expect demand to continue to rise.”
Much of this expected growth will come from the “Golden Triangle” of Latin America, North America and Africa, as well as parts of the Mediterranean. Wood Mackenzie projects that these areas will account for 75% of global floating rig demand through 2027.
While recent activity has pushed day rates up 40% over the past year, Wood Mackenzie says that it anticipates a further 18% escalation for floater day rates. Before the end of the year, rates of $500,000/day or above may return for highly-prized, advantaged ultra-deepwater rigs, the firm said. Benign ultra-deepwater rigs have averaged $420,000/day in the first half of 2023, with utilization at 90%.
“With increasing demand and rates, we are approaching the tipping point for newbuilds and reactivations,” said Cook. “We haven’t reached it yet, but for new builds, it’s not a question of if, but when. The need for decarbonization, technological advancement, more efficiency and, ultimately, fleet replacement will drive a new cycle. If rig economics remain robust and rig companies see contractual risks abate, this could be sooner rather than later.”
06.12.2023
