High-Spec Drillships and Harsh Weather Rigs Are Dominating Deepwater Industry

by John Konrad (gCaptain) This afternoon at the Marine Money Week conference in New York, Mike McCormick, principal at Rystad Energy, offered valuable insights on the trends shaping the offshore oil and gas exploration industry. One trend he highlighted was the rising demand for high-spec drillships and floaters.

Noting the increase in the jack-up rig markets, McCormick drew attention to the healthier growth trends in the offshore oil and gas industry. He stated, “There’s a very healthy increase in demand relative to the supply,” highlighting the market’s promising potential. The jack-up rig market saw a strong rise last year, and while the floater market was initially slower, it is currently on an upward trajectory that is expected to continue over the next five years, especially for the more technologically advanced floaters.

McCormick underlined the significance of high-spec, tier-one drillships, which he defined as the “preferred asset class” in challenging exploration conditions. These technologically advanced units are particularly sought after in regions such as Brazil, Guyana, and the US Gulf of Mexico. The other preferred asset class includes ultra-harsh weather capable floaters, typically semi-submersibles used in places like Norway. These units have seen a quick recovery driven by the North Sea.

Despite the growing demand, McCormick pointed out an imbalance effect on less desirable assets, often grouped under “other floaters.” He highlighted the near absence of readily available supply in the high-spec floaters while the “others” have languished.

Addressing this challenge, McCormick noted the industry could resort to reactivating high-spec drillships and floaters, a process that is not only costly but also time-consuming. Alternatively, the industry might need to use lower-spec floaters with potentially lower efficiency levels.

“There’s almost no supply left that is active and ready to go to work in the preferred asset classes,” said McCormick. “So if we want to bring out more high-spec drillships we’re going to do reactivations.”

McCormick shed light on the recovery of the ultra-deepwater market as a whole, following the downturn in the commodity market in 2014-15. “We’re already past $400,000 per day We’re close to touching $500,000 It’s now pretty much a matter of when, not if, that happens,” he said, emphasizing the heated state of these markets at the moment.

In summary, McCormick’s observations provide a clear picture of the current landscape and emerging trends in offshore oil and gas exploration. His commentary underscores the increasing demand for high-spec drillships and harsh weather capable floaters, and the subsequent challenges that the industry needs to tackle, especially in terms of supply and reactivation costs.

Updated: November 23, 2023 (Originally published June 20, 2023)

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