Demand strengthening for ultra deepwater rigs

Offshore staff

HAMILTON, Bermuda – The supply of ultra deepwater rigs (up to 7,500 ft, or 2,286 m, water depth) continues to grow, according to Seadrill, with the number of newbuild orders placed since last October increasing to 37.

However, due to high demand, uncontracted ultra deepwater newbuilds are being absorbed by oil companies prior to delivery from the yards. This, Seadrill says, has cut the number of ultra deepwater rigs available over the next 12 months from 18 rigs in 4Q 2010 to eight rigs currently available.

Seadrill expects that newbuilds ordered on speculation will continue to be absorbed into the market with no significant impact on utilization rates or day rates over the next couple of years.

Demand for ultra deepwater rigs is particularly strong offshore Brazil, with opportunities also emerging of Nigeria, Angola, Ghana, and Egypt.

But drilling in the US Gulf of Mexico remains hampered by the fall-out from the Macondo incident, Seadrill says, and continued regulatory uncertainty and the slow pace of permit approvals are discouraging oil companies from making long-term commitments in the area.

As a result, the number of floaters in the US Gulf of Mexico - 31 rigs prior to Macondo - is currently at only 25 rigs. However, Seadrill sees this as a short-term phenomenon and believes that rigs in operation will pick up as more drilling permits are issued.

The company has also seen a strong pick-up in demand for premium jackup rigs (up to 350 ft, or 106 m, water depth), with increased tendering activity and climbing day rates in most regions. As a result, eight new jackups have been ordered bringing the total number of newbuilds ordered since last October to 48.

Attractions for operators are the safety and efficiency gains offered by the newer and higher specification jackups, according to Seadrill. Demand remains strongest in the Asia/Pacific market, but has also increased in the Arabian Gulf, with Seadrill winning recent long-term contracts for two rigs in this region.

Elsewhere, opportunities for high-spec rigs are emerging off West Africa, and Central and South America. The present utilization in the premium jackup market has been constant above 98%, Seadrill claims, as opposed to a 76% average for the global jackup fleet.

08/26/2011



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