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General: North Sea Revival As Rigs Back In Action

Posted on 11.10.2004 - 02:00 EDT in GENERAL NEWS by ginamc

Record oil prices could help bring back the boom times for the North Sea drilling industry after two lean years.

Experts believe the sector will experience an upturn in activity next year, with more drilling rigs moving out of the Cromarty Firth, where they have been stacked up, and back into action.

The region manager with drilling giant Transocean in Aberdeen, Doug Halkett, said the UK drilling market was definitely picking up with a number of rigs being reactivated and others coming back into the North Sea.

This week, Transocean won a year-long contract from Canadian oil and gas minnow Oilexco for the semi- submersible Sedco 712, which has been stacked at Invergordon for months.

The rig is to start work in March on Oilexco's development and appraisal programme on its Brenda oil discovery in the outer Moray Firth.

The deal also reflects the growing lack of available rigs in the North Sea, with Oilexco agreeing to pay almost £58,000 a day for the Sedco 712 - £6,750 more than Transocean's last similar contract.

Just a year ago, the going rate for semi-submersibles was as little as £22,500 a day.

Mr Halkett said: "This reflects market rates which will be seen by the middle of next year. It's not just the independents who are drilling. The majors will be busier next year, which is good news for the drilling industry.

"We are also reactivating the Sedco 706, which will start work on an eight-month contract for Total on the Dunbar field in January after being stacked since last October."

Graham Tran, regional officer for the trade union Amicus, believed as many as 1,500 jobs in the UK drilling industry had been lost or moved overseas during the downturn.

Amicus is, however, preparing a paper calling on the Government to force oil majors to release potential oil and gas fields they were just sitting on or face financial penalties.

Mr Tran said: "We always knew 2005 would be better than 2003, which was an absolute disaster, and 2004, which has not been much better."

"The oil and gas industry estimates there is up to 31billion barrels of oil equivalent still to come out of the North Sea, but there does not seem any great urgency to tap into that.

"We still need to see long-term stability. People will not come back into the industry on contracts of six months or even a year."

The number of rigs in use has risen by 20% compared with last year, with September showing the fifth consecutive month-on-month increase.

It is now at nearly 85% capacity, according to Platts North Sea Letter.

It said five semi-submersibles had come out of long-term lay-up already this year, while Diamond Offshore's Ocean Nomad is scheduled to return to the North Sea from west Africa next month.

The Ocean Nomad has been signed up by Talisman Energy for its 2005 exploration and development drilling programme, and there are options which could extend the contract by a further 12 months.

Another long-term drilling contract just agreed is for Dolphin Drilling's semi-submersible Byford Dolphin to begin a programme for Canadian Natural Resources (CNR) in January after being in lay-up at Invergordon for all of this year.

The 14-month contract has been agreed at rates of about £40,000 per day, rising to almost £48,000.

Meanwhile, BP has booked the Global Santa Fe semi- submersible Arctic IV, which has been working for Petro-Canada, to start drilling on its Farragon discovery in January for a six-month period.

Platts said drilling contractors are predicting standard semi-submersible day rates in the UK in excess of £56,000 for 2005.

It added that utilisation for jack-up rigs has improved, moving close to 100% in September, with forward rates rising strongly.

In December last year it was reported that around 16 rigs were stacked in the Cromarty Firth, and 20 of 38 rigs in UK waters were not working, with only 16 exploration wells drilling in 2003 compared with a peak of 159 wells in 1990.

But by early next year there may be as few as four rigs stacked at Invergordon, and some of those may win work before then.

A report on North Sea activity by energy bank Simmons & Co International said rigs have been migrating from the region - which had 47 rigs available or working a year ago but now has just 38.

This better balance between supply and demand would mean better rates, said report author Rory Stewart.

He added that exploration and appraisal drilling was 20% ahead of last year, although UK development drilling continues to decline.

The recent successful UK licensing round, in which a number of smaller, more aggressive companies won licences, should help to boost drilling activity over the next few years, he added.

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Source: The Press & Journal
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