The demand for offshore rigs is expected to grow in the coming years, despite scores of assets currently sitting idle.
Forecasts from Bassoe Offshore show that, by the end of 2022, there will be demand for 518 offshore rigs, rising to more than 550 by the end of 2025.
That could results in global offshore competitive rig utilisation of about 90%, above the level needed to spur significant increases in day rates.
In its recent review of competitive and uncompetitive assets, Bassoe decided to remove 31 rigs – 15 jackups, 10 drillships and 6 semisubmersibles – from the global competitive supply.
That was as a result of them having been stacked for several years and unlikely to return to service in the near term.
The analytics firm currently regards there to be almost 100 uncompetitive rigs scattered about, most of which would cost “tens of millions of dollars” to reactivate.
Due to a lack of cash in the market, as well as an oversupply, it’s also unlikely they will be needed to carry out work in the next few years.
As such, Bassoe doesn’t consider those rigs to be a “threat to near-term competitive utilisation” or to the potential for day rates increases in the near term.
On whether reactivations could threaten long-term recovery, Teresa Wilkie, offshore rig market analyst at Bassoe, said: “Half of the uncompetitive fleet are twenty years old or younger, and 25 are ten years old or younger.
“They are not all past their use-by date by any means, many of these younger assets were ordered on speculation, later cancelled during the downturn and forcedly taken over by shipyards or investment companies.
“There is also a subset within the uncompetitive fleet, generally rigs under 10 years old, which are in a “quasi-competitive” state.
“Some of these units are likely to be scrapped or converted (for work outside of the drilling market) and do not pose a threat.
“There may be some that will eventually be reactivated; however, this would only happen once the market becomes much stronger.”
She added: “However, many uncompetitive units have now been idle for over three years and would already be far too costly to reactivate. Additionally, even though the market recovery appears to have begun it is still in early days, and it may be years before competitive supply tightens enough that reactivations would make any sense, therefore we believe most of these units do not pose a risk to recovery.
“Instead, it is far more likely that most of these uncompetitive assets will eventually hit the scrap heap as owners focus efforts on streamlining their fleets, shedding idle units in hopes of creating more modern, high-specification, low-emission fleets for a more sustainable industry in the long-term.”