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The past 18 months have seen a surge of cold-stacked units
leaving the drilling fleet. Two downturns in relatively quick
succession, certainly before a truly global recovery took hold
after the first, meant a significant oversupply in the market.
Overall, it has been older semis and jackups hitting the
scrapyards, though some relatively young units, less than 10 years
old, have also been deemed surplus to requirements as well as an
increasing number of drillships. Now, with the market tightening, a
number of units have either been earmarked for reactivation or the
process is already underway. In addition, rig conversions have been
hitting the headlines with steadily increasing regularity in recent
months.
Jackup conversions have dominated, especially in the Far East
market, with multiple rigs now headed for a life in renewables. At
least two CNPC jackups have been converted for use in wind
installation work. Likewise, Sinopec Offshore Oilfield Services is
converting another for similar work. These are all part of a recent
flurry of conversions as coastal areas rush to install turbines
before the eligibility for new wind power subsidies from the
government (secured in 2019 and 2020) expires at the end of the
year. Meanwhile, a number of COSL units are in the process of
conversion and will no longer be marketed as drilling rigs. Going
forward two of the units will be undertaking accommodation work
while a third will function as an early production system (EPS)
MOPU.
Overall, while a select number of units in the Far East are
heading for a new life in renewables, globally the majority
continue to be converted to production or FLNG units. As such,
earlier this year New Fortress Energy announced it was buying two
jackups for FLNG conversion. The company announced that the "Fast
LNG" design pairs the latest advancements in modular, midsize
liquefaction technology with jackup rigs to enable a much lower
cost and faster deployment schedule than floating liquefaction
vessels. Meanwhile, some notable MOPU-conversions include a duo of
former Borr Drilling jackups that were purchased by BW Energy Gabon
for conversion into production facilities. The decision to take on
these older drilling units was made due to their "significantly
reduced" cost compared to an installation of a traditional
platform. BW Energy also made a rare semi purchase for conversion
recently by acquiring Leo from Aquadrill. The rig will be converted
into a floating production unit (FPU) for use in the Kudu gas field
off Namibia.
Operator Perenco, alongside entity Dixstone Holdings, is one of
the most prolific purchasers of former drilling units for
conversion. Most recently, in the UK sector, the former Paragon
HZ1, now Haeva, has been converted to a well-intervention unit for
hydrocarbon free decommissioning work in the UK sector. Also, in
the North Sea, where plugging-and-abandonment scopes are becoming
ever more frequent, Well Safe Solutions purchased two ex-drilling
rigs to convert for its P&A fleet. The units, semi Well-Safe
Guardian and Well-Safe Protector, are in the rare position of
continuing to compete for the same P&A scopes as drilling rigs
in the region.
On the flip side of conversions, the number of rigs being
reactivated from cold stack is picking up pace. With a number of
units quickly cold-stacked following the oil-price crash and
beginning of the pandemic in early 2020, availability has begun to
tighten globally. As such contractors are beginning to take those
more recently cold-stacked units and marketing them for scopes that
are long term enough to be worth pulling them from stack.
Valaris has been leading the charge on such reactivations with
no less than three drillships currently being reactivated in the
Canary Islands. All are destined for long-term work in the
Americas. Meanwhile, there have been at least five semi
reactivations since the 2014 downturn with the majority of these
being due to their respective captive markets, i.e.
harsh-environment, or for temporary non-drilling work where a
high-spec rig is not required. It's a similar story in the jackup
market where at least 20 units have been reactivated in the past
decade, often for work where cheaper, less high-spec jackups are
preferable.
The drilling rig market is inevitably tightening, particularly
in the deepwater drillship segment where demand is picking up in
the 'Golden Triangle' of West Africa, South America and the US
Gulf. But for older units, a life beyond drilling remains
attractive to operators looking for more economic solutions for
MOPUs, well-intervention, P&A work or accommodation.
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Posted 04 November 2021 by Sarah McLean, Senior Rig Analyst, Petrodata, IHS Markit
