Ocean Rig sets new deepwater semi day-rate record

NORWAY’S Ocean Rig has set a record $637,000 per day for premier-division semi-submersible rigs by securing a three-year $723million contract with UK-listed independent Tullow. There are two one-year options on offer that must be exercised before the end of 2008.

“This new contract for Eirik Raude is the best day rate ever received,” said Ocean Rig’s CEO, Trygve Arnesen.

It is to carry out development drilling on Tullow’s huge Jubilee oil discovery offshore Ghana, operating in water depths ranging 800-1,600m. This year, Tullow plans to drill seven wells to confirm the estimated resource potential and to better understand how to develop the 2007 discovery.

Depending on the outcome of the campaign, Jubilee could be onstream before 2012, most likely based on a production ship with an initial nominal capacity of 150,000 barrels of oil per day. The initial capital cost estimate is about $4billion.

A clearly delighted Arnesen said the contract meant “low operational strain” would be imposed on the Eirik Raude.

“We expect to see less maintenance cost, we expect to see less downtime and we expect to see reduced operating expenditure when we compare this with harsh environment or ultra-deepwater drilling.”

Arnesen said the Tullow contract meant that Ocean Rig drilling units would enjoy an average day rate of about $550,000 during Q1 this year.

“This is certainly the highest level in the industry,” he said in a conference call.

“The market for the ultra-deepwater drilling units is very strong. We have seen several fixtures for three-year to five-year contracts with day rates in the range of $480,000 to $525,000.”

Arnesen said he expected that all available deepwater drilling units in the global fleet would secure long-term contracts this year and next.

He said Ocean Rig was involved in several tenders and negotiations regarding the Leiv Eiriksson, which is currently on contract to Shell in north-west Europe and is about to drill west of Shetland at a $475,000 day rate. It was suggested that this was a seller’s market.

“We are not in a rush here to secure just an ‘OK’ contract. We like to secure the best possible contract and hope that we can see long-term and good rates also for that rig (Leiv Eiriksson).”

Looking further ahead, Arnesen said that, in 2010, close to 50% of all the ultra-deepwater drilling units expected to be active at that time would be utilised for development drilling.

“And there are signs that this number will increase. That means that fewer will be used for exploration drilling.”