Rig Scarcity Looms in UK: Report
Operators may have to alter their drilling plans off the UK next year due to a lack of availability of semi-submersibles, a report published by rig brokerage Bassoe Offshore on August 27 states.
"Too many rigs and not enough work has been the norm in the British semisub segment since the 2014 oil price crash, which has meant utilisation and dayrates have been lagging for several years now," Bassoe said. This has led to the market becoming highly seasonal, as operators seek to drill in summer when conditions are most favourable.
The typical dayrate benchmark for semi-submersibles is currently around $140,000-160,000, which only just covers operating costs and is unsustainable for their owners. But "the tide is beginning to turn," Bassoe said.
"The global coronavirus pandemic and oil price shock have added additional problems to the already distraught market and therefore drillers with rigs in the region – some of which are going through Chapter 11 proceedings – have been making drastic decisions, which will have a lasting effect on the availability of such units in the future," the brokerage said.
Some owners have opted to recycle or convert their vessels, while others are cold-stacking their units. The size of the UK semi-submersible fleet has shrunk to 11, of which three are idle but cold-stacked, meaning they cannot quickly be redeployed and are only likely to be for long-term campaigns.
Only five units will be available for the UK market in 2021, and one with only limited availability. Meanwhile there are 10-12 drilling campaigns scheduled off the UK and Norway next year, but few are lengthy enough to justify rig reactivations. Options for the transfer of rigs from Norway are also limited.
"Depending if all planned 2021 rig requirements come to fruition, it could mean operators will have to rethink timing of their planned campaigns," Bassoe said. "It may mean considering drilling during the harsher months of the year to secure a slot. Rig-share campaigns could be a potential solution by tying together a few of the short-term campaigns and utilising one rig, however these sorts of programmes have been relatively uncommon in the past due to the complexity in organising such a deal."
These changes in the market cannot be counteracted easily, Bassoe said.
"There is not a stack of North Sea-capable newbuilds sitting dormant in shipyards awaiting delivery," it said. "This will be permanent or at least a long-term shift in the segment which could be further exacerbated, with more units cold stacked or scrapped, if operators do not find a way to proceed with plans in the coming year.