KINGS OF THE
WILD FRONTIER :
OIL RIG MARKET’S
TRENDS AND OUTLOOK
by
NAZERY KHALID
Research Fellow
Jack-Up Asia Conference 2006
Singapore, 7 December 2006
Presentation outline
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Factors influencing rig market
Rigs : types, features, roles
Developments and trends
Statistics
Challenges
Outlook
Factors influencing
rig market
• EIA’s world oil demand estimate : 85
mil. bpd in 2006 (to double by 2030).
• Pressure to find new energy supply
leading to new discoveries.
• Improving E&P technology.
• High oil prices leading to investment
in rigs – old and new.
Common features of rigs
• Huge structures housing equipment
and workers for offshore oil and gas
ventures.
• Mainly located on continental shelf
but more being used in deepwaters.
• May be floated, attached to seabed,
or mounted on artificial islands.
Common features of rigs
• Typical rig has up to 30 wellheads
located on the platform.
• Many have umbilical connections with
remote wellheads.
• Directional drilling may allow access
to reservoirs of various depths and
remote positions up to 8km away.
Common features of rigs
• Self-sufficient in energy and water
needs and O&G processing.
• Designed to have minimal
environmental impact.
• Assisted by platform supply vessels
(PSV), emergency support vessels
(ESV) and anchor handling tug supply
vessels (AHTS).
Types of rigs :
Fixed platforms
Source : www.gomr.mms.gov
Scale of rigs
Source : UK Oil and Gas for Britain (www.ukooa.co.uk)
Types of fixed platforms
• Fixed platforms
• Compliant towers
• Seastar
• Floating production systems
• Tension leg platforms
• Sub-sea systems
• SPAR platform
Fixed platforms
Fixed platforms
• Built on concrete/steel legs anchored
onto seabed.
• Deck with drilling rigs, production
facilities and crew quarters.
• Structures used : steel jacket, floating
concrete & concrete floating steel.
• Economically viable for installation in
water depths up to 520m.
Compliant towers
Compliant towers
• Made of narrow, flexible towers with
piling foundation.
• Support conventional deck for drilling
and production operations.
• Can sustain huge lateral forces and
deflections.
• Commonly used in water depths of
450-900m.
Seastars
Seastars
• ‘Mini tension leg platforms’, cost
lower than TLPs.
• Can be used as utility, satellite or
early production platforms for
deepwater discoveries.
• Employed in waters between 200 to
1,100 meters.
Floating production &
subsea systems
Source : www.gomr.mms.gov
Floating production
systems
ExxonMobil’s Kizomba-A FPSO, the world’s largest, used offshore Angola
Floating production
systems
• Large vessels that can take, process
and / or store O&G.
• Moored to locations over long periods.
• Main types : FPSO (floating
production, storage & offloading
system), FSO (floating storage &
offloading) & FSU (floating storage
unit).
Tension leg platforms
Tension leg platforms
• Made of floating rigs held by vertical,
tensioned tendons.
• Tension legs secured on seabed using
pile-secured templates.
• eliminate vertical movements to the
structure.
• Used in water depths of up to 2,000
meters.
Subsea systems
Subsea systems
• Used in wells located on the seafloor
to transport extracts via riser /
pipelines to existing production
platform.
• Moveable rigs are used to drill wells,
allowing for a platform to serve many
wells over large area.
• Typically used in waters 2,100m deep.
SPAR platforms
Classic SPAR
Truss SPAR
Cell SPAR
SPAR platforms
• Among the largest platforms in use.
• Consist of large cylinders supporting
fixed rig platform.
• Cylinders are tethered by cables and
lines to seafloor.
• Cylinders stabilize platform and allow
movement to absorb hurricane
impacts.
Moveable platforms
• Semi-submersibles
• Submersibles
• Jack-ups
• Drill ships
• Drill barges
Semi-submersibles
Semi-submersibles
• Mobile structures, some with own
locomotion.
• Can be ballasted up or down by
adjusting buoyancy tanks’ flooding.
• Anchored by cables during drilling
operations or dynamic positioning.
• Provide excellent stability in deep,
rough waters between 180-1,800m.
Submersibles
Submersibles
• Rarely used.
• Can be floated to shallow water
locations.
• Ballasted to sit on the seabed at
locations.
Jack-ups
Jack-ups
• Usually towed to locations and
anchored using jack-like legs.
• Legs lowered to seabed and hull
jacked-up clear of the sea surface.
• Used in waters of low depths up to
160m.
Drill ships
Drill ships
• Look like ordinary ships but with
derricks drilling holes through the hull.
• Built on modified tanker hull with
dynamic positioning outfitting.
• Anchored or positioned with
propellers correcting ships’ drift.
• Often used for drilling exploratory
(‘wildcat’) wells and scientific drilling.
Offshore rig market
developments & trends
• As of July 2005, there were 623
module offshore drill rigs worldwide
(424 jack-ups, 100 floaters).
• 14% of the rigs were built after 1994.
• Youngest segment : 63% of
deepwater floaters and 50% harsh
environment jack-ups built after 1994.
Source : US Maritime Administration statistics, July 2005
Offshore rig market
developments & trends
• Half of rigs on order were for deepwater (19 harsh environ jack-ups).
• Rig utilization and day rates have
gone up with oil price rise.
• Largest increase : shallow water jackups and semi-submersibles (140%
and 96% rise in US respectively).
Source : US Maritime Administration statistics, July 2005
Offshore rig market
developments & trends
• In terms of barrels of oil, rigs earn
less now at any point in a decade.
• Rigs can’t be delivered fast enough to
meet huge demand by drillers.
• More refurbishment of old rigs.
• More orders from manufacturers in
the East who can deliver faster and
cheaper.
World’s rig count
(monthly average)
Rig count
International rig count
August
2005
914
August
2006
954
Int’l offshore rig count
268
278
Worldwide rig count
2,894
3,174
US rig count
1,435
1,738
Source : Baker Hughes Inc.
World’s offshore rotary
rig count (July 06)
Region
North America
Europe
Mid-East
Africa
Latin America
Asia Pacific
Total
Land
2,137
22
210
43
261
116
2,789
Source : Baker Hughes Inc.
Offshore
97
49
32
16
62
110
366
World’s offshore rigs
(monthly average)
Total rigs in fleet July 06
Total in July 05
Contracted rigs July 06
Total in July 05
Rig utilization rate July 06
Rate in July 05
Mobile
651
642
598
572
91.8%
89.1%
Platform
288
293
230
228
79.9%
77.8%
Source : ODS – Petrodata Weekly Mobile Offshore Rig Count
Seismic crews
working worldwide
Region
North America
Europe
Mid-East
Africa
Latin America
Far East (incl. China)
CIS
Total
August 2005
77
23
14
36
22
39
44
255
Source : HIS Energy
August 2006
67
17
13
27
23
46
27
220
Average day rates :
Floating rigs
Type of rig
Drillship <4,000’
Drillship 4,000’+
Semi-sub <1,500’
Semi-sub 1,500’+
Semi-sub 4,000’+
Average day rate (US$)
105,000
213,000
129,000
164,000
221,000
Source : RigLogix database (5 October 2006)
Average day rates :
Jack-ups
Type of rig
Jack-up
Jack-up IC 250’
Jack-up IC 300’+
Jack-up IS 250’
Jack-up IS 300’+
Jack-up MC 200’+
Jack-up MS 200’+
Average day rate (US$)
132,000
97,000
125,600
77,000
132,000
89,000
95,000
Source : RigLogix database (5 October 2006)
Average rig day rates
vs. oil prices, 1996-2006
Year
1996
1998
2000
2002
2004
2006
Average
day rate
68,768
83,841
47,014
71,882
67,282
95,633
Average
oil price
20.46
11.91
27.39
22.81
37.66
67.00
Day rate
in bbl.
3,361
7,040
1,716
3,151
1,787
1,427
Source : www.rigzone.com (accessed on 5 October 2006)
Challenges
• Mitigating risk of deadly accidents i.e.
offshore Brazil in 2001; North Sea in
1980 (Alpha platform) & 1988
(Kielland platform).
• Addressing high cost of removing
platform rig structures (UK estimates
£3b for ‘clean sea’ approach).
Challenges
• Addressing environmental concerns
i.e. converting rigs into artificial reefs.
• Risk of leaching of heavy metals in
buoyancy tanks into waters.
• Risk of partially demolished rigs to
shipping.
• Risk of snagged fishing nets.
• Risk of sabotage / terrorist attacks (?)
Outlook
• As energy thirst grows and O&G
prices stay high, outlook for rig
market should remain bullish.
• More deepwater projects coming
onstream = high rig demand in most
fleet categories and regions.
• Pressure on rig owners to mobilize
additional units.
Outlook
• Older units will continue to be
refurbished and reactivated.
• Losses to hurricanes & retirement of
older units will be offset by
reactivation and newbuilds.
• Rig building programs will continue.
• Rig supply will be insufficient to meet
demand, leading to high day rates.
THANK YOU
[email protected]
www.mima.gov.my