Drillers See Robust Demand for Ultra-Deepwater Rigs

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Offshore drilling contractors report seeing robust demand for ultra-deepwater rigs worldwide as oil prices and exploration success in basins outside the deepwater ‘Golden Triangle’ spur operator interest in ultra-deepwater drilling.

Operators are seeking longer contracts and looking to pick up groups of rigs for ultra-deepwater drilling contracts, such as BP’s recent three-unit contract award to Seadrill and Noble Corp., Chairman, President and CEO David Williams told attendees Thursday at the Barclays CEO Energy Power Conference in New York.

Operators are now willing to consider 10-year contracts for ultra-deepwater rigs; the increase in contract terms does not include the rigs that Brazilian state energy company Petrobras has under contract for 15 years, Williams noted. In August, Sembcorp Marine said it secured contracts for five drillships with Petrobras for 15 years of drilling activities in the pre-salt areas offshore Brazil.

Elevated crude oil prices are supporting ultra-deepwater drilling efforts, with Brent averaging $110 in 2012, and the increasing number of offshore licensing rounds being held worldwide each year giving operators access to increasingly attractive plays, Williams said.

From 2013 to 2015, Petrobras is expected to deploy 40 ultra-deepwater rigs to explore Brazil’s offshore pre-salt potential. That number will increase to 75 between 2015 and 2020. Expanding opportunities in Africa’s pre-salt region, which now stretch as far north as Gabon and as far south as Namibia, are also supporting the increase in deepwater exploration, Williams said.

Demand for newbuild floater rigs will continue, said Williams. He expects more attrition of the global rig fleet to continue in the next decade than the previous one, even with rig construction occurring at a decent clip, shipyard prices flat to down and oil prices up. These factors will serve to elongate the current rig construction cycle.

Transocean sees a ‘very robust’ demand in the global ultra-deepwater market, with little remaining drilling capacity available this year and capacity availability in 2013 and 2014 a topic of conversation among operators.

Ultra-deepwater rig demand is growing not only due to increased exploration in the ‘Golden Triangle’ of the Gulf of Mexico, Brazil and West Africa, but emerging ultra-deepwater areas in East Africa, the Black Sea, the Far East and Mexico, Transocean President and CEO Steven Newman told attendees Wednesday at the Barclays conference.

Customers appear to be more willing to enter a contract to support construction of a newbuild rig versus six months ago, Newman said. At worst, the decision to place a contract-backed order for a newbuild rig would be credit neutral.

Read the full article at Rigzone.

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