Demand surging for ultra-deepwater rigs

Offshore staff

HAMILTON, Bermuda -- Seadrill says tendering and contracting for ultra-deepwater rigs worldwide has improved significantly this year. Available rig capacity has also been absorbed rapidly.

Despite the fall-out from the Macondo incident last year, the company says utilization rate in the ultra-deepwater market (up to 7,500 ft, or 2,286 m water depth) has remained nearly 100%.

In the US Gulf of Mexico, increased clarity concerning for new drilling permit requirements has led to renewed interest in securing rig capacity. Seadrill expects this positive trend to continue.

The company has also noticed a surge in ultra-deepwater rig demand in West Africa, Southeast Asia, and Brazil. As a result, available rig capacity has diminished rapidly. The market appears to be close to a supply/demand balance, and based on known programs, the number of available rig years in 2011 could drop to less than two rig years and to less than 10 rig years in 2012.

Over the longer term, Seadrill adds, the increase in rigs under construction could restrain the upside potential of day rates from late 2013 and into 2014. Since last November, it adds, the number of new ultra-deepwater rigs on order has risen to 31.

Nevertheless, two recent five-year contracts awarded for the Gulf of Mexico with start-up in late 2013 underline the importance of new and modern equipment and on the sound environment for ultra-deepwater field developments.

Consensus is growing, Seadrill concludes, that the number of drilling programs planned to start prior to end-2012 exceeds the number of rigs available and technically capable of such work.

Seadrill also sees steady improvement in demand for premium jackups suited for water depths up to 350 m (1,148 ft). Oil companies are drawn to the safety and efficiency gains offered by the newer, higher-spec units.

Despite the 40 new jackups ordered since last October, utilization worldwide of premium jackups has remained above 90%. The general preference is for new rigs at the expense of older rigs, even when the drilling program does not demand these increased technical capabilities, says Seadrill.

Southeast Asia is the biggest draw for premium jackups, but there has been increased interest from the Middle East, West Africa, and the Americas.

In the North Sea, oil companies have been looking for very large, high-spec harsh environment jackups that can drill and simultaneously host production equipment.

This trend has led to the order of various new rigs, some with long-term contracts but most ordered on speculation.

05/27/2011



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