Justin Smith, ODS-Petrodata
With the US Gulf of Mexico rig market experiencing a downward trend in its fleet size as slack demand drives rigs from the area, other regions of the world are not only compensating with strong rig demand, but also benefiting from the US Gulf market’s troubles. For example, while demand for jackups in the US Gulf has declined as operators’ preferences steer toward the region’s deeper waters, the idled jackups are finding work in places like the Middle East and West Africa.
This table shows the Top 10 worldwide drilling contractors ranked by the number of offshore mobile rigs per fleet (excluding inland barges and platform rigs).
Source: ODS-Petrodata.
With other regions picking up the slack from the US Gulf, worldwide offshore rig utilization has remained almost completely flat for all of 2007, even while new rigs enter the global fleet. Fleet utilization around the world started 2007 at 89.1% as 612 of the 687 available rigs were contracted. Currently, 629 of the world’s 703 jackups, semis, drillships, barges, tenders, submersibles, and arctic rigs are contracted, and fleet utilization is at 89.5%.
US Gulf of Mexico
While most markets around the world seem to be improving, or at least staying nearly constant, the US GoM rig fleet continues to dwindle. Currently, the US GoM has fewer rigs under contract than it has in more than a decade. From January 2007 to January 2008, the total fleet size has declined from 137 rigs to 125, with the number of rigs under contract plummeting from 113 to 96. Rig utilization in the region currently stands at 76.8%.
The jackup market in the US Gulf is wildly out of balance at the moment, but the future may not be quite as bleak. Currently, the jackup surplus in the region stands at about 23 rigs, but the figure is expected to be reduced to about 17 over the next six months, primarily through an increase in demand. As for the semisubmersible and drillship markets, small surpluses will lead into a balance by mid-year while the fleet sizes should grow very slightly.
Day rates remain strong in the region, but have changed very little over the last few months. High-end jackups earned day rates of up to $185,000 in August 2007. Now those rigs are earning up to $195,000. The floating rig market is experiencing an increase in day rates, although not a substantial one. Semis capable of operating in over 7,499 ft (2,285 m) of water recorded the largest rate increase, now pulling in day rates up to $500,000 compared to the $466,000 they were earning last August. Day rates for drillships are experiencing a slight increase at the moment, as they are peaking at $525,000/day right now, up from the $520,000/day they were earning in August.
Central/South America
As was the case for almost all of 2007, rig utilization in Central and South America has remained the same, even while the fleet size has grown. The number of rigs available for charter in Latin America rose from 94 at the beginning of 2007 to 101 by January 2008. The contracted rig count rose by eight over the period, from 67 to 75, which is why fleet utilization grew from 72% to 74%.
While the region is nearly balanced in the jackup market, a supply deficit of six to eight rigs is expected to crop up during the first half of next year, primarily in Mexico and Trinidad and Tobago. Semi supply and demand should remain about even in the region. The drillship market in Brazil will remain in balance through the spring, but could see a deficit of one or two rigs in the summer.
Day rates for all rig types in Latin America have stayed about the same over the last several months. The current high for jackups, most of which operate offshore Mexico, is $185,000, down from $217,000 in August 2007. Floating rigs primarily are working off the coast of Brazil in that nation’s deepwater basins. Deepwater-capable semis are pulling in day rates between $245,000 and $520,000. Drillships are sticking to the middle of the day rate range, with the current high still standing at $320,000.
Europe
Being the picture of consistency, the North Sea rig fleet has wavered between 74 and 76 units throughout 2007. Continuing with its consistency, the North Sea region has seen 100% fleet utilization since January 2007. At press time, all 74 rigs in the area were contracted.
Demand will outstrip supply by an increasing margin over the next several months. In the jackup market, the supply deficit could reach a peak of four or five rigs by June 2008. As for the semisubmersible market, the shortfall could reach three or four rigs, also by June. Since drillships are used relatively rarely in the region, that market should remain almost completely in balance.
In the North Sea, the top of the range of harsh standard and high spec jackups are earning up to $300,000/day in January, while semis are earning between $350,000/day and $493,000/day. The one drillship in the region is currently pulling in $230,000 for a drilling program off Norway, but that rig will eventually be earning $550,000/day in 2009, a fairly representative high-specification floater rate these days.
Mediterranean/Black Sea
All 27 rigs in the Mediterranean/Black Sea region are under contract, for a fleet utilization rate of 100%. Of the 27 rigs in the region, 24 are actually working. The rig fleet in the region is made up primarily of jackups, with a few semisubmersibles sprinkled into the mix, almost all of which are working in North African waters, as opposed to those of Southern Europe.
Egypt leads the region with 11 of the 24 active rigs, but several other area countries will see increased activity. Tunisia comes in second with four rigs while Italy and Romania are tied for second with three apiece. Both rig supply and demand are expected to remain flat over the first half of 2008 and nearly in balance, although one more jackup could fill a void in the region’s supply.
West Africa
West African offshore rig fleet utilization has stood at or near 100% for more than the last two and a half years. The utilization rate reached its low of 96% twice over that time, but was at 100% for 10 straight months last year and now stands at 98%.
West African offshore rig demand will continue to grow. The demand for jackups and drillships is expected to rise by a couple of rigs over the next six months. Demand for semisubmersibles, however, is expected to climb by as many as seven rigs.
Unlike West Africa’s fleet utilization rate, the region’s day rates have experienced a fair amount of change over the last few months, with jackups seeing the largest change. The range of jackup day rates in the area has grown from the $130,000/day to $190,000/day reported in August 2007 to $130,000 to $315,000 at present. Semis are earning slightly less now, between $255,000/day and $406,000/day, while drillships are earning anywhere from $405,000/day to an astonishing $600,000/day.
Middle East
With 87 of 93 mobile offshore rigs under contract in the Middle East, the region’s offshore rig fleet utilization rate is 93.6%. Due to the shallow waters found through out the Middle East, all but one of the 93 rigs are jackups, and the one semisubmersible in the region,Aban Pearl, is only visiting a shipyard in the United Arab Emirates before moving on to India in February.
Source: ODS-Petrodata.
Outside of the US GoM, the Middle East has some of the lowest day rates in the world. Day rates in the region range from as low as $90,000/day for the lower specification jackups to nearly $200,000 for the larger jackups.
The most active operators include Saudi Aramco with 24 offshore rigs under contract, followed by Adma-Opco with 10, and RasGas with eight. Jackup demand in the region is expected to climb by about 15 rigs or so. The majority of upcoming offshore rig requirements in the region will be for work offshore Qatar, the United Arab Emirates, Saudi Arabia, and Egypt.
Caspian Sea
Just over half the rigs in the Caspian Sea area are under contract, seven of the 13 to be exact, for a utilization rate of 57.1%. Of the 13 rigs in the Caspian, six are semisubmersibles, six are jackups, and one is a barge rig. Five of the rigs are cold stacked, four in Azerbaijan and one, the barge, in Russia. One more is warm stacked in Azerbaijan. The remaining rigs are working for several operators, including SOCAR, BP, Dragon Oil, Lukoil, and Petronas Carigali.
One rig, North Drilling Co.’s semiIranAlborz, is under construction in Iran, but its completion date has been pushed back multiple times over the years. Its current goal is to begin working for Caspian Oil in March, but there is no guarantee it will make that deadline.
As is generally expected with a landlocked sea, rig supply is expected to remain constant over the next six months, unlessIran Alborz is delivered or another rig is cold stacked. The latter is not expected to occur since demand will also remain constant.
Asia/Pacific
Fleet utilization in the Asia/Pacific region started 2007 at 91.26%, with 94 rigs out of 103 in the area under contract. Over the last year, both the region’s fleet utilization rate and fleet size have grown considerably. Currently, the Asia/Pacific rig fleet is comprised of 117 rigs, 114 of which are under contract, for a fleet utilization rate of 97.44%.
Region jackup demand is expected to continue to climb by up to 14 rigs for the first six months of this year. The delivery of rigs built in the region and the rigs coming into the area from other markets should keep up with the pace of demand, although demand may exceed supply by a rig or two, particularly around mid-year. Demand for semis could climb by about eight rigs by June, but supply is expected to not lag by more than three rigs at any time. Little if any change is anticipated in the drillship market in the Asia/Pacific region.
Day rates for jackups in the region have narrowed somewhat and now range from about $145,000 to $220,000. Conversely, the range of ranges that semis earned has widened considerably to between $143,500/day and $530,000/day. However, over the last several months, drillships continue to earn a maximum day rate of about $285,000.
