The mobile offshore drilling unit building cycle appears to be ending. In the past year, the fleet has experienced very little expansion in terms of newbuilds and upgrade projects, suggesting the four-year-long rush to increase fleet capacity is finally winding down.
One strong indicator is Offshore's annual Worldwide MODU Upgrade/Construction Survey, which appears in July of each year. This year, 67 MODU's are listed as being either recently completed (between July 1999 and July 2000), under construction, or planned for construction. This number of 46 less that appeared in the 1999 Offshore list. Forty-six rigs have either entered fleet service or have been scrapped in one form or another. In addition, rigs listed as recently completed last year (between July 1998 and July 1999) have been removed from the list; last year, 45 units were listed as under construction and a majority of those have been completed.
The big rush for construction began in late 1996 and remained strong through the first half of 1998. The biggest influx of construction projects came through the need for deepwater capabilities. Companies ordered multiple newbuild units based on term contracts agreed to by oil companies.
The cycle did take longer than expected, however, and has kept the shipyards active. Most rigs were delayed on the average of two to three months, while some were delivered on time and others were delayed over a year at an increased cost.
In the past year, 18 newbuild deepwater rigs were delivered (10 semisubmersibles and 8 drillships). Still on the way are the remaining 13 of the 31 newbuild deepwater units. This includes 10 semisubmersibles and 3 drillships. Of all the deepwater units, most are set for delivery this year or the next.
In the past 18 months, due to low oil prices and high construction prices, newbuild orders for deepwater collapsed. Operators began cancelling orders in early 1999. Most looked for opportunities to back out of contracts; many cited schedule and cost overruns. The units were delivered to their designated operators (with a few court battles), under a re-negotiated contract that favored the operators.
While the high cost of the deepwater newbuilding cycle may be over, the new standard for high-capability rigs has followed in shallow water. In the past few months, contracts have been signed for three newbuild jackup units - all high specification units. They were ordered by Chiles, Rowan, and Maersk. The new units will be capable of drilling in the deepest water ever for a fixed bottom unit. In terms of construction, five newbuild jackups have been completed in the past year and another four are on the way.
Beyond newbuilding, a number of units have undergone major upgrades and others have been converted. This was once again in response to the demand for deepwater units, but also as a chance to enhance company fleets while the drilling market recovered and rigs were being stacked.
In the drillship market over the past year, three rigs received upgrades, while two are under conversion. Six upgrade projects were completed on semisubmersibles in the past year, while an additional three are planned. Four conversions were carried out on semisubmersibles in the past year, while one is still ongoing. This compares to 38 total deepwater units (>3,500 ft water depth capability) that experienced upgrades or conversions since 1997.
For the jackup fleet, seven rigs were upgraded or modified, while two are still underway and three are planned. A jackup conversion or upgrade is usually different from that of a semisubmersible. Most work done involves either lengthening and/or strengthening the leg, modifying the spud cans and penetration depth, extending or adding cantilever capability, or adding new equipment such as mud pumps.
The building cycle was good for the industry. Upgrades provided a needed renewal of the fleet, sufficient to last for another 5-10 years.
2000 survey data
A total of 67 mobile offshore drilling units are listed in Offshore's annual survey: 23 jackups, 16 drillships, and 28 semisubmersibles. The vessels in the survey are listed in one of the following stages: recently completed, under construction, or planned within the last year. Thirty-eight of the units are newbuilds (11 jackups, 11 drillships, 15 semisubmersibles. The remaining 29 are being converted or upgraded (12 jackups, 5 drillships, 13 semisubmersibles).
Of the total rigs listed, the vast majority of the rigs have been completed in the last year. Thirty-seven rigs (14 semis, 11 drillships, and 12 jackups) are now, or about to be, in operation. Twenty-three rigs are under construction and due for completion in the next few years (12 semis, 5 drillships, and 6 jackups). Only seven rigs are in the planning stages (5 jackups and 2 semisubmersibles).
Each vessel listing includes the name and type of vessel, whether it is a newbuild, the stage of construction or upgrade (planned, underway, recently completed), new capabilities or upgraded features, the proposed date of completion, and the construction yard. Most information contained within the survey was submitted by the companies, with the remainder gathered from other sources.