UK North Sea expects flurry of contracts and tight supply of oil rigs
Britain’s North Sea is likely headed for a tighter supply of oil rigs as a flurry of deferred drilling contracts for next year materializes, new analysis has found.
Last year, Bassoe Offshore (now Esgian) predicted that demand could increase for drilling rigs in 2021 due to the number of projects delayed by Covid.
Teresa Wilkie, Offshore Platforms Market Analyst at Esgian, said: “The predicted struggle to find semi-subs that we had anticipated in the UK market did not materialize this year as expected.
“It turned out that the majority of those longer term campaigns that we mentioned have been postponed until 2022 and so this reduction in the available supply is now more likely next year.”
There are currently five semi-submersibles in operation, with three more hot stacked and three cold stacked in the UK, while around five more dive between the UK and Norwegian markets.
According to Esgian’s Rig Service database, there are tenders or pre-tenders in the next 12 months pending from Hibiscus, CNR International, Dana, Siccar Point, Spirit Energy, TotalEnergies and Serica to name a few.
If all of this happens at the same time, it “could lead to a tight semi-sub market, especially during the summer months.”
UK operators tend to prefer to carry out work during the summer weather window to avoid downtime and additional costs.
The UK sector is expected to reach over 90% competitive use of floating platforms by the summer of 2022 if there is not an increase in platforms imported from other regions like Norway, or if the platforms -Cold stacked shapes are reactivated.
To combat the impacts of Covid-19 on the industry, the Norwegian government last year put in place a system of tax relief on drilling expenses.
This means projects are reaching Final Investment Decision (FID) faster in Norway, which could make platform competition even fiercer for the UK in the coming years.
Ms Wilkie said: “We expect this will lead to an increase in demand for semi-submarines in Norway from late 2022 and early 2023.
“And if a rig owner can keep his rig in Norway earning more than $ 300,000 a day, he’s unlikely to prefer bringing it to the UK to earn much less than that, so if there is enough demand in Norway, the majority of these platforms will stay there. “
The impact of 2020 saw many top-tier drilling contractors go bankrupt in Chapter 11, and several commentators have noted the need to scrap more rigs in order to balance supply and demand.
Although this has happened in some areas, only a few North Sea semi-submersibles in Norway were withdrawn last year, as the majority of the excess and older tonnage had already been scrapped in previous years due to lack of demand in the region.
Ms Wilkie added, “If demand grows as expected and on top of that we can start to see more companies finally wanting to move forward with their plug-in and drop-out campaigns etc. at that point we will see supply issues for these type of platforms become more expensive to hire.
Earlier this year, Bassoe Analytics and Greenpact Data merged into Esgian. Learn more here.