Significant disruptions, losses on deepwater rig deliveries

Overruns, income loss, and equipment problems

• Expected construction schedules for 46 newbuilds & conversions [9,105 bytes]
• Expected costs of 68 newbuilds, conversions & upgrades [6,068 bytes]

Business is not going smoothly for rig contractors waiting on deepwater rigs under construction or conversion and the operators to which the rigs are committed, largely because of the size of the rig building program.

Andrew Bakonyi, President of R&B Falcon International, in a panel discussion at the International Association of Drilling Contractors, cited the list of inefficiencies and their impacts for the deepwater mobile rig building cycle.

• The 46 deepwater projects on the average will have a 25-30% overrun in schedule and cost.
• Only 5 of the 12 deepwater units scheduled for delivery in 1998 will be delivered.
• Equipment problems have plagued startups of deepwater rigs.
• The loss of income for contractors now totals $1.2 billion.
• The overruns in costs for contractors now total $2.6 billion.
• Late deliveries are resulting in monetary and license losses for operators.
• There is a significant loss of value to the industry as a result of the delays.

Cost overruns, delays

The majority of the cost overruns and delays exist within the conversion projects, about $50 million and eight months. Newbuilds are experiencing an average increase of about $30 million and a delay of three months.

Many IADC contracting members in the audience felt that the numbers were rather conservative and that the problem is much worse. Bakonyi blames the cost and schedule increases on a number of factors:

• Optimistic bidding and contracting
• Operator's technical solutions often driven by earliest promised delivery
• Insufficient initial design
• Insufficient engineering focus
• Technical complexities
• Inexperience of contractor, shipyard, engineering company, and operator
• Third party quality assessment and schedule problems
• Financing constraints

Bakonyi was participating in a panel discussion entitled "New Paradigms for Deepwater Development" at the conference, which was held in September in New Orleans.

The fleet

According to Bakonyi, commitments have been made to increase the deepwater drilling rig supply to 88 units, from 20, and the ultra-deepwater fleet to 31 units, from two. This increase is taking place over a four-year period and will raise the total mobile offshore drilling unit fleet to over 200 units.

There are 39 vessels currently operating in the deepwater fleet. This number will expand to 88, by the year 2001. Rig construction/conversion for the period 1997-2001 will include the following:

• 20 conversions of existing rigs - 12 semis and 8 DP ships
• 22 rig upgrades - 19 semis and 3 DP ships
• 18 rig conversions - 12 semis and 6 DP ships
• 28 newbuild units - 10 ultra-deepwater semis, 6 deepwater semis, and 12 DP ships.

The majority of these units currently operate or will operate in the US Gulf of Mexico (18 existing units, 21 new units), South America (11 existing units, 11 new units), and West Africa (5 existing units, 5 new units).

This sequence of designated operating areas is followed by four units in Norway (two existing, two new), three for the UK (two existing, one new), three for Southeast Asia (one existing, two new), and five new units for other areas.

The future

In order to achieve success in the future, the industry needs longer term planning by the operators, to continue working with experienced companies (contractors, engineering companies, and shipyards), and an understanding of the full project cycle, Bakonyi explained.

Bakonyi said the following steps need to be taken in order in the project cycle to afford maximum success in rig conversions and newbuilds: design basis, pre-engineering, OFE specification, shipyard selection, basic engineering, detailed engineering, OFE followup, construction, commissioning, sea trials, and delivery.

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