Your web browser is out of date. Update your browser for more security,
speed and the best experience on this site.
You have successfully subscribed to the newsletter!
09 20, 2012 by AOL Energy
The global fleet of ultra-deepwater oil rigs was increasing steadily until April 2010, when regulatory aftershocks from BP's Macondo disaster slowed its overall growth rate. But now, two years after the Gulf spill, there are indications that drilling in the ultra-deep could be poised for a long-term surge.
One of the key indicators is rig demand. And a Barclays equity research report says oil companies are clamoring for rigs designed to operate in water depths of 7,500 feet or more – the generally accepted threshold for the ultra-deep space.
"Channel checks indicate several majors and national oil companies are in the market with multi-unit, ultra-deepwater tender packages," says the Aug. 31 report. "Demand for ultra-deepwater rigs is at unprecedented levels as sustained high oil prices, coupled with operators' desire to achieve production targets, is driving demand higher in essentially every region compared to just a few months ago."
Just days after Barclays issued its report, Transocean, one of the companies involved in the Macondo development, announced that it was negotiating a partnership that would lead to a contract for four, ultra-deepwater drillships. The company also announced that it was selling 38 of its jack-up (meaning shallow-water) rigs for $1.05 billion.
Leslie Cook, senior research consultant at Quest Offshore, told AOL Energy that the oil industry's focus on ultra-deepwater rigs was intensifying before the Macondo blowout. "The only thing Macondo did was delay the entry or delivery of some ultra-deepwater rigs, but we were noticing greater demand for higher-spec deepwater rigs before the spill," said Cook.
Currently, she observed, the most active ultra-deepwater players are BP, Chevron, Petrobras, Shell, and Total S.A.. She added that there will be 136 ultra-deepwater rigs in operation by the end of 2012, pointing out that "there were 121 in 2011; 84 in 2010; and 65 in 2009. So, the fleet has doubled in just the last three years."
But Cook advises caution when using this growth to forecast ultra-deepwater drilling, itself. "Bear in mind that what's interesting about the ultra-deep market is that, while we see a large number of ultra-deep rigs being built in comparison to any other water-depth-rated rigs, [the trend] doesn't necessarily mean that that's the water depth they'll be working in. Just because almost 60% of the fleet is now ultra-deep doesn't mean 60% of the drilling is, or will be, ultra-deep."
Searching for Supergiants
Quest's manager of consulting services, Sean Shafer, agreed, telling AOL Energy that "there are rigs being built right now that are rated to drill in 12,000 feet of water, even though no one is currently drilling in that depth."
Nevertheless, Shafer added, "the majors are much more interested in ultra-deepwater drilling because it's seen as the last frontier for the big, big oil finds that the majors have access to. Here, in the Gulf of Mexico, and places like west Africa, are the places where you can have billion-barrel discoveries."
James West, Barclay's lead analyst for U.S. oil services and drilling, told AOL Energy that another key driver supporting demand for ultra-deepwater rigs is offshore oil pricing, whose Brent (meaning North Sea) spot price is currently $114 per barrel – or well above the level believed necessary for profitable, ultra- deepwater drilling.
Shafer said oil companies are "coy" about the actual number, but added, "The highest number I've ever seen quoted or heard from legitimate sources to sustain ultra-deepwater drilling is $75 per barrel."
Another driver, said West, is coming from the construction side. "Companies that wanted to build offshore oil rigs," he pointed out, "were competing against companies that wanted to build tankers, but now that we're not building tankers [because of the global recession], shipyard slots are opening up and the shipbuilders are incentivizing rig construction with lower pricing and attractive financing terms."
Yet another driver, West added, "is the exploration success that oil companies have experienced in recent years. The tremendous success in the Gulf of Mexico and Brazil and many areas off west Africa and even French Guyana is not going unnoticed in other areas of the world with outer continental shelves. There are 25 or 30 countries around the world exploring their deepwater potential."
BP's Macondo well was drilled in 5,000 feet of water, which falls short of the ultra-deep threshold. But the difficulty of containing the blowout at that depth serves to illustrate the perils of deepwater drilling, whether or not it qualifies as "ultra." Does that mean there are more Macondo's on the deepwater horizon?
"What Macondo did is really change the nature of the rigs that are being built to where they're going to be safer," said West. "The newbuilds will be designed to accommodate dual blowout preventers and, in addition to that, the BOP's on the four rigs announced by Transocean will be configured to handle 25,000 psi, whereas the industry standard has been 15,000 psi."
The majors and national oil companies are "scrambling" for such assets, said West, pointing out that "every new deepwater rig under construction for delivery in 2013 or '14 is either spoken for, under contract, or will be under contract soon."
No one knows how much oil lies below the ultra-deep waters where those assets may be deployed, and West said it would be premature to speculate about market impacts from the oil extracted by the newbuilds. "The timeline from an exploration well being drilled and discovering oil to the first development well can be anywhere from 5 to 7 years," he noted, "and then you have a development program that could run as many as 15 years, so it takes a lot of time to bring that oil to market."
Sep 30, 2021 | LMOGA
Aug 25, 2021 | LMOGA
Aug 11, 2021 | LMOGA
Jun 18, 2021 | LMOGA