Jackup building price surges on strong demand

Jackup rig construction cost has risen about 30% over the last two years to average $180-$190 million per rig, say Singapore-based rig builders.

Offshore staff

SINGAPORE-- Jackup rig construction cost has risen about 30% over the last two years to average $180-$190 million per rig, say Singapore-based rig builders.

With demand for new units still strong, prices are expected to exceed $200 million per rig in the next year to 18 months, the yards say. Unit cost per jackup for 2005 was $150 million.

A jackup designed for 114 m (375 ft) water depth capable of drilling high-pressure and high-temperature wells could be negotiated for between $180 and $190 million, says T.K. Ong, PPL Shipyard managing director.

A rig with 91-107 m (300-350 ft) water depth capability with a similar design would cost $180 million, according to officials at Keppel FELS.

Most of the cost increases are due to tighter supply of equipment and steel, officials say. There is also an issue of limited yard space.

The yards are moving toward option contracts that give the rig owners a margin to renegotiate a price. The advantage of the option contract is that it provides potential savings to rig owners and gives the yards a firm order, say officials at the Singapore yards.

The yards also are accelerating rig building projects, especially Keppel FELS, which last week delivered its KFELS B Class jack-up,PV Drilling I, to Vietnam Oil and Gas Group two months a head of schedule.

Ong says PPL and parent company SembCorp Marine are negotiating more jackup contracts in addition to 13 rigs, designed to PPL's proprietary design, the Baker Marine Pacific Class 375, which was launched in 2003.

Ong maintains a positive outlook for rig buildings in the coming years, citing the strong energy demand in China and India, which has fueled exploration activities in Asia.

PPL delivered its 13th Class 375 jackup on March 10 to PT Apexindo Pratama Duta Tbk of Indonesia.

PPL is scheduled to deliver four jackups this year, five in 2008 and two in 2009.

3/12/2007

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