Increased offshore drilling activity in key oil and gas basins is set to spark a surge in rig demand next year, according to a report from Norwegian brokerage and investment management outfit Fearnley Securities.
The rig market has suffered in recent years due to overcapacity, a situation compounded by the Covid-19 pandemic from the start of 2020 that saw energy companies rein in spending and activity amid weak global oil demand.
The continued rollout of vaccines against Covid-19 and a generally easing situation around the pandemic, combined with strong oil demand, may lead to more drilling requirements moving to tender and later converted to awards, the report said.
“The rig demand is consistently returning back to the market,” said the report.
Demand for semi-submersible rigs and drillships is expected to rise to 140 units by the end of 2022 — a 22% increase from the 115 units that expected to be working at the end of this year, the report said.
Floater demand will be driven by drilling activity in the likes of Brazil, Guyana, Suriname, Norway, West Africa and US Gulf of Mexico.
Norway’s state-controlled Equinor has recently taken the Seadrill-owned drillship West Saturn for a four-year development drilling campaign at its operated Bacalhau project offshore Brazil.
Brazilian state giant Petrobras is also in the market to seek as many as two rigs to drill in Block BM-S-11, which hosts the Tupi, Berbigao and Sururu pre-salt fields.
ExxonMobil is speeding up exploration and appraisal drilling offshore Guyana, where the US supermajor now has six rigs at its disposal as it expands operations in the prolific play.
The company plans to drill as many as 15 wells this year in the Stabroek block alone.
The lacklustre floater market is yet to pick up, according to the report, which said 110 floaters are under contract, down from 125 units before Covid-19.
“The lower activity levels are in general derived from termination, suspensions and fewer contract awards,” the report said.
However, the market has already bottomed out, given that the number of floaters under contract has increased by 13 since the nadir of 97 in November last year.
Demolition continues to reduce supply, as 34 floaters were either scrapped or announced to be scrapped since the start of 2020.
The active supply is also losing momentum, as drilling contractors are more disciplined in cold stacking idle rigs.
As such, the marketable supply has fallen by 35 rigs to 153 floaters as against 110 units under contract.
In the ultra-deepwater market, only 52 such drillships are contracted as against supply of 75 rigs, reflecting total utilisation levels of 69%.
Before the Covid-19 pandemic, ultra-deepwater floater demand was 57 units with marketable utilisation of 81%.
There are 15 drillships on order with only two having firm contracts. They are expected to be delivered this year, but could be delayed into the first half next year, according to the report.