The recovery in the offshore drilling industry is just getting started, especially in the drillship and jack-up rig segments, according to market analysts.
Esgian’s current estimate for reactivating a 7th generation drillship is about a year or so, depending on how well the rig was maintained while it was stacked, at a cost range of about US$80 million to US$100 million.
The verdict is that the global fleet of drillships for ultra-deepwater operations is almost fully utilised, driven by activity levels in the “Golden Triangle” of the Gulf of Mexico, South America and West Africa.
Esgian, the international rig market analyst, tells Upstream that drillships are “the most exciting sector right now” and that current utilisation rates “disguise how tight the offshore drilling rig market really is”.
Operators still planning to pick up a drillship this year may need to consider whether they can use a semi-submersible, as only a small handful of seventh-generation drillships have any availability remaining in 2023, and the sixth-generation drillship segment is also nearly sold out for 2023, Esgian adds.
Even looking into 2024, drillship availability is quickly filling up, meaning that only cold-stacked units and stranded newbuilds are possible.
“Esgian’s current estimate for reactivating a seventh-generation drillship is about a year or so, depending on how well the rig was maintained while it was stacked, at a cost range of about US$80million to US$100 million,” Esgian says.
The average ultra-deepwater dayrate has risen 58% since the start of 2022 to $373,000 at the end of January 2023, but still 35% below the November 2013 peak, with drillships in the Golden Triangle increasingly being awarded rates of about $450,000 per day, says market analyst Clarksons Research.
This trend could be seen in Brazil recently when Transocean’s fleet status report showed the drillships Deepwater Corcovado and Deepwater Orion renewing for long-term commitments in Brazil — three and four years respectively — for dayrates of up to $417,000 and a new 910-day term in the same market for the Dhirubhai Deepwater KG2 earning $439,000 per day.
“Our projections suggest that utilisation will improve in the coming years and that the market seems generally well set for further [day]rate progress,” Clarksons Research managing director Stephen Gordon says.
Similar dynamics for jack-ups
The global jack-up fleet is also reaching full capacity, driven by burgeoning demand in the Middle East, with solid requirements in other areas such as India, Southeast Asia and Mexico.
“Due to the increased drilling demand by national oil companies in the Middle East over the past year, 34 jack-ups have migrated from Asia, the Americas and Europe to the Middle East, and 15 more are still scheduled to migrate this year,” says Petrodata Rigs by S&P Global.
“That will be a total of 49 jack-ups being absorbed into the Middle East from the global jack-up market, with demand for more.”
Leading jack-up owner Borr Drilling expects the forecast marketed utilisation rate for the global modern jack-up fleet to exceed 95% in the coming quarters, based on expectations over near-term awards.
The stressed supply chain is also making it unlikely that the small number of jack-ups under construction “will be able to enter the marketed fleet in the near future”, Borr adds.
No new jack-ups have been ordered in the past two years, and Borr quotes Clarksons’ estimates that the newbuild cost for a high specification jack-up is currently $260 million.
Semisub market is slower
The segment for semi-submersible drilling rigs, which operate in mid-water depths and deep water, is currently the weakest of the three main rig types, according to Esgian.
“This is due to softness in the North Sea market, notably off Norway and the UK, where recent charters have been of shorter durations than is typical of these markets.”
“As a result, some rigs from the North Sea market have found work in other regions, such as West Africa, while others continue to be bid outside the North Sea region,” Esgian says.
Analyst Westwood Energy says semisub usage will continue to be prominent in the North Sea, while noting that potential negative effects of the UK windfall tax could make operators of both semisubs and jack-ups decide not to pursue some drilling plans.
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