Rig building writ large

December 1, 2011

Despite a brief interruption post-Macondo, the rig newbuilding boom that started in 2005 is gathering momentum. Jennifer Pallanich talks to IHS about the latest trends in the drilling contractor market.

One of the trends that Tom Kellock, Houston's head of consulting for IHS Petrodata, has noticed in the latter part of this newbuild order cycle is how many are being built on a speculative basis. While ‘that's normal for jackups', he says, it's not typical for the majority of floaters to be built on-spec.

There have been some new entrants into the deepwater drilling arena, starting with Seadrill in 2005, the year the current newbuilding cycle began. Other new companies entering this market include Vantage Drilling, Pacific Drilling, Sevan Drilling and Sete Brasil, while a host of other existing contractors, such as Songa, Maersk, Rowan and a number of Brazilian contractors have added their first deepwater rigs. The jackup market is also ‘seeing a bunch of new entrants,' Kellock says, and ‘they are able to get money to build these rigs. That is interesting in this market environment.'

The newbuilds are pricey. The two high-spec jackups that Noble ordered from Sembcorp will cost $245 million each, while the one AOD has on order with Keppel Fels is running $184 million. Transocean's jackup order with Keppel Fels is valued at $195 million. The two jackups NDC ordered from Lamprell carry a $167 million price tag each.

Rowan estimates its drillship will run $600 million at Hyundai Heavy Industries while Maersk estimates the pair of drillships it ordered from Samsung Heavy Industries will run about $1.3 billion.

‘What surprised us and I think many other people is that from June 2010 to date, over 100 new rigs were ordered,' Kellock says. ‘I have to say that in the aftermath of Macondo and in an environment of global economic uncertainty this was more than we expected.' In addition, he says ODS-Petrodata tracks options for newbuilds and options exist for an additional 30 rigs. The majority of the newbuilds ordered are jackups, and a number of them have been harsh-environment or heavyduty designs.

He notes the jackup market in Norway ‘has been hot. We are seeing rigs being snapped up there.'

Drillships have been the second-most ordered drilling design, with semis making up the smallest number of rigs on order; that category includes the monocolumn units being built by Sevan Drilling, which has spun off from Sevan Marine.

Contractor confidence

Kellock notes some reasons drilling contractors may choose to order drillships rather than semis, such as the larger variable deckload on a drillship and the drillship's maneuverability, especially if it's to be used in hurricane prone areas. Because a drillship can evacuate an area faster, it can stay on location drilling longer in the face of a looming storm.

With the number of orders already placed, he says, contractors appear confident that demand will increase steadily in the deepwater market.

Click for larger image.

As Kellock notes, the current building boom started in 2005 and moved along strongly for years. The industry is still seeing rigs being delivered from before the April 2010 Macondo explosion that claimed 11 lives, spewed nearly 5 million barrels of oil into the deepwater Gulf of Mexico from a BP-operated block and destroyed Transocean'sDeepwater Horizon.

‘We had a hiccup after Macondo,' he says. ‘The resurgence really came post- Macondo.'

The orders are going to the usual locations: jackup orders are frequently going to Singaporean yards with a few going to Chinese yards and some to Lamprell in the Middle East. There's even been one jackup built on spec in Mexico. Most of the drillship orders have gone to South Korean yards, Kellock notes.

And while there have been numerous rigs ordered, not many of the aging assets are being replaced.

‘People are just not retiring rigs. We've seen a very, very few being retired,' Kellock says. ‘There is a tendency among contractors to hold onto them.' OE



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