The world is awash with idle jack-up rigs, with more than 100 units stacked, plus a further 60 new ones under construction/on order.
Tom Kellock, head of consulting and research at ODS-Petrodata, told the International Association of Drilling Contractors’ annual meeting last month that the industry faced a huge surplus with little near-term prospect of returning to balance.
In the traditional jack-up heartland, the US Gulf of Mexico, Kellock told the IADC session that there was no longer a close correlation between gas prices and jack-up activity.
“And the only obvious explanation, and the one I would support, is that this is such a mature market, the prospects are just not there any more,” he said, signalling that the days of the shallow-water shelf were numbered.
Kellock suggested that Iran and Mexico might be the best prospects, but that both presented challenges, especially currently frosty relations between the US and the Iranian government. As for Mexico, he noted that mat-supported jack-ups were no longer wanted and that, in any case, state operator Pemex was headed deepwater.
Looking ahead to the final quarter of 2015, the ODS forecast is for a gross jack-up supply of 506. Compare this with the mid-case forecast for 334 units at that time, but about 280 worst-case scenario and 372 at best. Whichever outlook is selected, Kellock has predicted a massive oversupply that can only be solved by mass scrappings and long-term lay-up.
For mid-water semi-submersibles, Kellock noted a surplus, too. He warned that there has been very little re-chartering of rigs coming off of contracts and that rig rates have been dropping back from the pre-credit crunch records set.
In Scotland, this is made very clear by the number of semi-submersibles stacking in the Cromarty Firth, with 10 locally predicted for parking or undergoing maintenance by the end of 2009.
Kellock told the meeting that Europe and the Mediterranean theatres offered the best contract prospects for the mid-water contingent, with further opportunities to be found in south-east Asia, the Indian Ocean and Latin America.
In line with other rig-market pundits, Kellock said deepwater offered the best business prospects for the drilling community, especially for ultra-deepwater capability units.
That said, charter rates were reported to have flattened out, and that as many as 10 deepwater rigs could have spare drilling slots to sub-charter during the coming year.
“If you’re looking for a rig, you could get it, but probably only by sub-letting it from an operator who already has a rig. And he’s very unlikely to let you have that rig for anything less than the rate he is paying.”
Kellock added that, near-term, the Gulf of Mexico, West Africa and Brazil would remain the hotspots of activity, though Asia-Pacific was also a market to watch. Even northern waters were offering a few openings.
“We’re also seeing a little bit now in NW Europe, where deepwater rigs have been used, but not normally at their deepwater capabilities.”
One way and another, however, Kellock made it clear that Petrobras of Brazil was the linchpin player at the deepwater table, basically controlling the game for years ahead.