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Contractors in the North Sea semisubmersible drilling rig market
will consider 2021 a bit of a damp squib. In late 2020, there was
optimism that following the coronavirus disease 2019 (COVID-19)
dominated annus horribilis of 2020, the sector was
starting to recover. In December 2020, Petrodata by IHS Markit's
forecast for 2021 from North Sea Rig Report expected a
noticeable rise in demand compared to the previous year. The chart
below shows the December edition forecast represented by lines
compared to the columns which show how the market actually
behaved.
But both the Norwegian and United Kingdom sectors failed to live up
to expectations. Semi demand in the UK sector peaked at five units
as opposed to the expected seven. (This is in contrast to the 14
units under contract even only two years ago).
The UK semi sector is now so small that even the deferral of a
handful of programmes can have a significant impact on its
tightness. In 2021, the deferral of programmes such as CNOOC
International's Ettrick plug-and-abandonment (P&A)
programme, Hibiscus's Marigold field development
programme, TotalEnergies' Benriach exploration well,
Serica Energy's North Eigg high pressure, high temperature
(HPHT) exploration well, and short-term programmes from smaller
operators all contributed to the expected peak not materialising.
Most of these programmes have been delayed to 2022 or 2023 but even
then there is no guarantee of them all becoming firm.
The most well-known casualty this year has been Siccar Point
Energy's nine-well Cambo programme. This deepwater requirement
had already been deferred from a 2021 start to 2023, but following
Shell's withdrawal now looks unlikely to happen at all. The
project's high profile as a target for environmental pressure
groups ensures it is a development that companies with the
necessary experience and expertise are avoiding. This does not set
a good precedent for the other remaining long-term West of Shetland
field development, Rosebank, for which drilling had been expected
to commence around 2024.
The UK semi market's structural challenges remain: predominantly
short-term work focused over the summer means contractors can face
up to six months of the year with no work for their available
capacity. Added to this is a downturn in exploration in recent
years meaning few prospects to appraise, and despite an oil price
in the USD 70s and 80s for most of 2021, little sign of operators
rushing to add requirements to the semi market backlog. From 2023
onwards it is telling that most of the large requirements are for
plug-and-abandonment (P&A) work.
Norway's market also failed to reach the peak predicted at the
end of last year, with activity dropping off in mid-2021 as a
succession of units completed contracts. The most notable of these
was West Mira, whose contract with Wintershall
Dea was terminated after an incident that saw production
equipment dropped to the seabed. The sixth-generation unit has not
worked since May 2021. However, as 2021 progressed, the number of
working rigs increased and the year has finished with 15 units
under contract, the same number as predicted in the forecast.
The year 2022 is shaping up to be tricky for Norwegian contractors.
There are only a handful of outstanding requirements, all of which
are short term, and four units with no commitments at all in 2022.
Island Innovator will leave the country in April
2022 to undertake work in the UK sector, with units such as
COSLInnovator, Bideford Dolphin
and Borgland Dolphin also being bid across the
North Sea. Contractors are hoping that the expected increase in
development drilling driven by the temporary tax incentives offered
by the Norwegian government is the cavalry coming over the hill for
2023.
Jackup market
The chart below shows the relationship between the forecast from
December 2020 and what actually happened to the jackup sector in
2021. The biggest concern for contractors this year has been the
decline in strength of the Norwegian sector. As illustrated, even
the modest gain in demand that was expected in 2021 did not
materialise with the number of rigs under contract not varying much
between 10 and 11 over the year.
In addition to this, Norway-capable rigs such as Maersk
Interceptor, Maersk Innovator and
Maersk Reacher remained idle for most of the year,
with only the last of these resuming work in Norway in 2021. The
lack of requirements coming through has also seen fixture rates
plummet, from peaks in the USD 270,000-300,000 range to closer to
USD 170,000-200,000. Underlining the weakness was the departure of
Valaris 292 (Norway) to the UK sector in November
2021 as the prospects for work in Norway in 2022 diminished. The
arrival of Noble Lloyd Noble added another
contractor into the mix, as Equinor tried to increase
competition for CJ70 design units, but this will be cancelled out
by the proposed merger between Noble and Maersk, which is due to
take effect from mid-2022. But next year looks extremely quiet in
Norway, with the market from 2023 onwards dependant to a large
extent on which developments progress from Aker BP and
Equinor.
The most successful year in terms of increasing rig demand was
seen in the UK, Dutch, and Danish jackup markets. Although activity
levels did not follow the pattern of the forecast exactly there was
a clear increase in demand as 2021 wore on. A number of programmes
that had been delayed from 2020 due to the pandemic actually
materialised, especially from the likes of INEOS and
Harbour Energy. Although requirements are outstanding from
the likes of TotalEnergies (in the United Kingdom,
Netherlands, and Denmark), BP and Spirit Energy,
most demand in 2022 remains short term in duration, and as in the
semi market competition is available from under-employed Norwegian
rigs.
For more data and insight on the global offshore drilling
market use RigPoint by IHS Markit. The platform
provides data and reports on the industry dating back to 1984 and
offers unparalleled information on rig supply, demand and
specifications. It is maintained by a team of analysts with a
combined 90+ years of experience on reporting the offshore rig
market, with access to IHS Markit's deep knowledge and
understanding of upcoming exploration plans, field developments and
the upstream sector, provided by around 900 analysts and
experts.
Posted 20 December 2021 by Rod Hutton, Associate Director, Petrodata,S&P Global Commodity Insights
Since 2021 it has been observed a strong reduction of stacked OSVs. The increasing demand has encouraged companies… https://t.co/TcqJsN4JMp
Jul 05
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