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The global offshore rig market is set to continue its tentative
recovery for the foreseeable future. Overall, demand continues to
rise, albeit in a more muted sense than was first anticipated for
the period between late 2019 and 2021, and there is cause to remain
cautiously optimistic. Rig demand is expected to increase by
approximately 16.3% between 2019 and 2021 with an average demand of
473 units in 2019 climbing to 550 units in 2021. Jackup demand is
expected to make up a large majority of the increase, growing by
12.5% from 345 units on average in 2019 to 388 units in 2021. On
the floater side, semi demand could increase from 69 units to 84
(21.7%), while drillship demand is forecasted to increase from 59
units to 78 (32.2%). There remains potential for demand to rise yet
further as the market gains increased visibility when upcoming
programmes get firmed up over the next 18 months.
While these increases in demand are front loaded with more
programmes visible in the short term, it is probable that many
drilling campaigns will continue to be delayed, which would lower
demand in 2020 and push things into 2021 and beyond. This is
particularly true the longer the price of oil remains low and
relatively unstable, especially in the face of cheap onshore
alternatives and general disruptions in the form of trade and
geopolitical disputes.
Jackups Yet more growth to come in the Middle
East
The Middle East continues to drive the vast majority of jackup
demand with the region recently surpassing its previous high of 130
contracted units in 2015 to 136. Over the next two years, demand is
expected to continue to rise with the 2021 forecast averaging 152.5
units. Demand in the Middle East will be mostly driven by the
region's NOCs increasing their production goals, predominantly in
Qatar, Saudi Arabia, and the United Arab Emirates, with an expected
increase in jackup demand if there are no global events or
geopolitical factors to hamper the current plans. For example, in
aiming to increase domestic oil production, Abu Dhabi's
ADNOC intends to increase its rig fleet from 27 units to
potentially 35 to 40 units over the next several years. In Qatar,
the rig fleet is expected to increase from an average of 14.7 units
now to 22.7 through 2021. Meanwhile, Saudi Aramco plans to
maintain its position as the world's leading oil producer by volume
by further developing its lighter crude oil potential and its
offshore fields. Shallow-water developments in both Saudi Arabia
and the Partitioned Neutral Zone are projected to account for over
60% of Saudi Aramco's new source volumes in the near
term.
Strong growth is expected in the Indian Ocean with demand
expected to rise from the 2019 average of 28.4 units to 37.6 in
2021. West Africa is also expected to see a higher level of
activity thanks to the return of longer-term developments to the
agenda. Demand in that region is expected to rise to an average of
20.3 units through 2021, compared to the 2019 average of 14.0
units. Mexico also continues to show a steady increase in activity.
This trend is not expected to abate in the near future, although it
may flatten out in 2021 with current projections showing a 2021
average of 32.2 units.
Jackup recovery remains slow in certain
markets
That said, a number of markets around the globe are not
currently showing signs of dramatic growth. In the North Sea, the
demand forecast for 2021 of 30.7 units is only slightly higher than
the 2019 average demand of 29.8 units. There is scope, however, for
demand to rise as operators finalise their requirements for 2021.
In the Far East, demand is expected to end 2019 at 46.0 units with
just a slight decrease to 43.0 units in 2021 due to units
mobilising to other regions.
Demand for jackups in North America is similarly not forecast to
change much over the next two years. The Canadian market currently
has one rig working, but after mid-2020. Opportunities for this
unit are expected to dry up, and it will leave for another region.
In the US Gulf, marketed utilisation is expected to be relatively
flat, with dips during hurricane season each year. Overall, jackup
demand in the region should stay between 10.0 and 11.0 units over
the period. Finally, in South America, demand for jackups in the
region is expected to stay relatively flat and low with demand
having a floor of two units, but could reach as high as four over
the next couple of years.
Figure 2: Global Forecast jackup demand 2020 - 2021
Floaters Activity increasing in the Golden
Triangle
Generally, the rise in floater demand will be driven by a slight
resurgence in the Golden Triangle, which has been relatively quiet
of late. Floater activity continues to drive the entire South
American region with Guyana alone potentially having up to five
units working for ExxonMobil in 2021. In Brazil, Petrobras is
finally in a mode of replacing a handful of the rigs it has been
releasing recently, which will stem the bleeding there, while
foreign operators will slowly play a larger role in the country,
primarily in the pre-salt areas. Demand for semis in the region is
forecast to climb from an average of 4.8 units in 2019 to 10.3 in
2021, while drillship demand could climb from an average of 14.4
rigs in 2019 to 23.4 in 2021, although that could be a somewhat
optimistic pace.
Longer-term deepwater development programmes across West Africa
will push an incremental rise in the drillship market between the
2019 average of 11.4 units and the 2021 average of 16.0 units. The
semi market has remained basically flat across West Africa with
very little work to be found, but there is potential for some
harsh-environment work in South Africa following Total's
recent discovery at Brulpadda. At present, the highest level of
demand is concentrated in late 2020 to early 2021 when a number of
long-term developments are expected to kick off in Angola and
Nigeria, but that could increase as operators potentially pencil in
developments for Ghana, Senegal, and Mauritania.
While North America and Central America are separate regions,
the Gulf of Mexico binds them. A new trend we expect to see more of
going forward are floaters moving between the US and Mexican
sectors of the Gulf, particularly during the early stages of
exploratory drilling by foreign operators in Mexico's deep waters.
However, the bulk of the programmes in Mexico are generally short
and difficult to project. As such, with work in Trinidad and Tobago
providing a boost to the numbers, floater demand will average 2.2
semis and 2.2 drillships this year, but those figures could go
either way over the next two years depending on how successful
ongoing exploration campaigns are in Mexico.
Demand in North America is forecast to grow slowly over the next
two years. The small semi market will experience more growth off
Canada, as multiple pending exploration programmes commence, than
in the US Gulf, which primarily uses semis for the narrow mid-water
sector. As such, the demand for semis in the region is expected to
climb steadily climb from an average of 5.3 units in 2019 to 7.4 in
2021. Looking at the drillship category, only one unit is expected
to work off Canada over the next two years on a short-term program
in 2020. The remainder of the drillship demand comes from the US
Gulf. Similar to the demand for semis in the region, the demand for
drillships is expected to slowly tick slowly upwards over the next
two years, from an average of 18.2 this year to 20.1 in 2021.
Further areas of growth include East Africa, which will play a
major role in growing floater demand as discoveries made over the
last few years get developed. Mozambique, in particular, has a
number of long-term development programmes coming up with
Anadarko, Eni, and ExxonMobil. Myanmar
will also remain active, but at not much more than current
levels.
Norway remains strong in Northwest Europe floater
market
In Europe, the Norwegian floater segment continues to dominate
the Northwest, which has an expected modest rise in demand from the
2019 average of 25.6 units to 27.9 units in 2021. The familiar
pattern of demand peaking over the second and third quarters and
reducing over the winter is expected to continue in 2021. In the
Mediterranean, the 2019 drillship average of 2.7 units is expected
to rise to a 2021 average of 5.2. Most of this demand will be
focused on the eastern Mediterranean and the Levant Basin of Egypt,
Cyprus, and Israel. Semis should see a steady increase from an
average of 2.7 rigs in 2019 to 4.2 in 2021.
On the fringes of the deepwater market there will be little to
no demand increase. In Australia and New Zealand, the growth rate
in the rig count is not likely not to continue as demand will only
increase marginally, from an average of 5.0 semis this year to 5.3
in 2021, while drillship demand is expected to stay at or near zero
for the duration. In the Far East, semi demand will hover right at
11.5 units between now and the end of 2021 and drillship demand
will stay at 1.0 unit for the duration. While nearly all of the
work in the region is situated off the coast of China, there will
be a small amount of floater demand in Japan, plus a few semis can
find work off Russia in the summer months. Meanwhile, Southeast
Asia will see drillships stabilise at around 1.8 units through 2021
and the semi market is set to say between 2.1 and 2.3 units over
the next two years.
Figure 3: Global forecast floater demand 2020 - 2021
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Sarah McLean is a Senior Rig Analyst for IHS
Markit. Justin Smith is an Offshore Rig Analyst for IHS
Markit.