Gas demand to fuel deep GoM drilling

Dec. 11, 2003
Increased demand and higher prices for natural gas in the US will result in higher utilization rates for heavy-duty jackups in the Gulf of Mexico, according to Tom Kellock, senior consultant, ODS-Petrodata. Day rates can be expected to rise also, he said.

Increased demand and higher prices for natural gas in the US will result in higher utilization rates for heavy-duty jackups in the Gulf of Mexico, according to Tom Kellock, senior consultant, ODS-Petrodata. Day rates can be expected to rise also, he said.

But, Kellock said, the increase in drilling will be short-lived, as rising LNG imports can be expected to fill the supply gap at very competitive prices. Kellock spoke at the IADC Drilling Gulf of Mexico Conference & Exhibition in Houston.

"LNG is becoming a significant force," Kellock said, "and it will become even more so. In addition, CNG and GTL will increase deepwater gas availability, also serving to fill the demand for gas." Kellock said he expects LNG to replace shallow-water gas by 2008.

In the short term, however, he said a number of factors would contribute to increased drilling for deep gas in the shallower waters of the continental shelf, resulting in greater demand for jackups. The driving forces include:
• The US is facing a gas shortage
• Operators think gas is there to be found
• Deep gas on the shelf is "hot" now
• Jackups are the tool of choice.

These factors will increase the demand for heavy-duty jackups capable of drilling below 20,000 ft and to greater depths, where new reserves of gas are anticipated. He added that because of the increased demand for jackups and the number of jackups leaving the Gulf, the industry may be facing a shortage of jackups capable of drilling deeper wells. Kellock said he had heard reports of eight to as many as 18 jackups could be leaving the Gulf for Mexico.

Kellock noted that the tools for forecasting rig demand have changed in recent years. Previously, he said, you could anticipate offshore rig demand based on land rig activity and oil prices. When land drilling picked up, you could expect offshore drilling to follow in a few months.

Likewise, when oil prices increased, offshore drilling would start to increase. That is no longer the case.

"There is no apparent relationship between activity and commodity prices," he said, "nor between land drilling and offshore drilling. In fact, offshore drilling doesn't seem to follow anything."

For example, he said that this year natural gas prices pushed land drilling up, but offshore drilling remained flat.

(12/11/03)