Jack-up rigs demand drive

More demanding criteria from operators is prompting new designs and enhancements so as to comply with increased regulatory oversight.

Whilst Saudi Arabia is recognised as leading the region for offshore drilling, with projects such as the $10 billion Karan offshore non-associated gas development.

Abu Dhabi has numerous plans for oil drilling. Away from the onshore and island-orientated Upper Zakum project, it is working on the $10 billion Integrated Gas Development (IGD) project, which will see gas from the Umm Shaif field and processed at Ruwais and Habshan.

Half of the OPEC members are from this region and there is a big contract backlog. This and associated projects in the region, will naturally place demand on the jack-up rig sector. There are currently 337 active jack up drilling rids, according to Clarksons.

Of this, 250 rigs are above 30 years of age. According to RS Platou’s June report 107 are active in the Middle East, with eight passive, equating to an effective utilisation rate of 93 per cent.

Popular for use in exploratory drilling, a jack-up rig or self-elevating unit is a type of mobile platform that consists of a buoyant hull-fitted with a number of moveable legs, capable of raising its hull over the surface of the sea using jacking system.

Once on location, the hull is raised to the required elevation above the sea surface on its legs supported by spudcans on the sea bed.

In general, jack-up rigs can only be placed in relatively shallow waters, generally less than 400 ft of water. However, a specialised class of jack-up rigs known as premium or ultra-premium jack-ups can have an operational capability in water depths ranging from 500 to 625 ft.

There are three main types of jack-up rigs; the mobile offshore drilling units (MODU), a type of rig most commonly used in conjunction with oil and/or natural gas drilling. There are more jack-up rigs in the worldwide offshore rig fleet than any other type of mobile offshore drilling rig.

A Turbine Installation Vessel (TIV) is a rig commonly used for offshore wind turbine installation. Finally, jack-up rigs are also referred to as specialised barges that are similar to an oil and gas platform, but used as a base for servicing other structures such as offshore wind turbines, long bridges, and drilling or production platforms.

According to IHS, there is an increasing demand for offshore heavy list services and average of 33 platforms to be installed between 2013 and 2017 to meet the demand. Moreover, 788 fixed platforms are more than 25 years old and there is a need for jack up units with crane and accommodation for repair work of these platforms in offshore.

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The preference displayed by oil majors for new jack-ups is entirely obvious. As Bijali. M.P., regional offshore manager, DNV Maritime Middle East and India explains: ‘For new developments the day rate between new drilling rigs and oil rigs are substantial.

Due to high operational costs for maintenance on old jack-ups, the oil majors prefer new jack ups, which are readily available for long term drilling contract. This will reduce substantial down time and increase safety during operations.

“Many international owners are moving their base to the Middle East and local owners are increasing the fleet. In future, local owners will play a significant role in this part of the world,” he added.

This was evidenced by a number of recent deliveries into the region. In June, Singapore’s Keppel FELS shipyard has delivered the 45th KFELS B Class jack-up rig. The design was launched in 2000 and KFELS B Class rigs now account for more than 30 per cent of the total jack-ups completed globally since then.

The latest rig was delivered June 8 to Arabian Drilling Company (ADC). Called ArabDrill 50, the rig will be chartered to Saudi Aramco for operations in offshore Saudi Arabia.

In February meanwhile, Maersk Oil Qatar signed a $211.5 million, four-year agreement with Gulf Drilling International (GDI), under which Maersk will contract the Al Jassra, GDI’s new build jack-up drilling rig. The contract covers drilling and well work-over activity in the Al-Shaheen field – Qatar’s largest offshore oil field.

Such activity in the sector confirms Bijali’s opinion on the emerging trend. “Now the new trend is that many yards are coming up in the Middle East for construction of the rigs as well as for maintenance.

Local rig owners have big expansion plans and they are in the process of increasing the fleet. So yards are thinking of developing their own generic design instead of going for licenses of western designers. Thus local yards will be able to cater the needs of the local market instead of going for conventional design.”

“Now there are yards in the UAE, Qatar, Oman, Bahrain and Saudi Arabia. Local rig owners like National Drilling Company (NDC) or GDI have continuous long term business and there is no need for them to look for jobs outside their territory.

NDC, Abu Dhabi has expansion plans of more than $1.91 billion between 2013 and 2017 and will be the biggest local rig owner in the region. Yet, it isn’t as simple as this. Recent failures of jack-up units in new building yards has resulted in holding of ongoing new-build projects in Singapore and China.

“These accidents opened up the eyes of all the stakeholders to go back and do their homework in design, manufacturing and installation of jacking systems,” said Bijali.

“DNV is actively involved in the investigations of these failures. Also DNV has initiated a joint industry projects on maintenance of jacking systems. Seadrill, Rowan Drilling, Willteco, NDC, Noble, Prospector and Cameron are participating in the project.”

In May, Gulf Marine Service (GMS)’s AHTS vessel, Atlas was awarded a 21-month charter with UAE-based OPCP. It will use the vessel in rig support operations. Moreover, one of its K-class barges has secured a term contract with an international oil company operating in the Middle East valued at $11 million.

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Commencement is expected towards the end of the year and a multi-phase workover and reinjection operation is planned to be completed from the unit. Kudeta has commenced a large scale accommodation role with China’s COOEC having expanded her living quarters to accommodate 236 people.

The unit is mobilising for Saudi Arabian waters in support of the client’s ongoing offshore construction and refurbishment campaign. GMS has a fleet of nine jack- bup barges with current commitments worth $460 million.

The firm also signed a three-year contract with the Abu Dhabi Marin Operating Company (ADMA-OPCO) whereby the jack-up barge Keloa will join ADMA-OPCO’s technical support fleet in the Umm Shaif and Zakum fields, offshore Abu Dhabi.

GMS, an Abu Dhabi-based oil equipment operator – and the region’s biggest owner of jack-up barges – is targeting a foreign listing in 2014 that could value the company at up to $500 million. The company is meeting with investment banks and aims to make a final decision imminently.

GMS is 79 per cent owned by Gulf Capital, the local private equity firm. It is evaluating three oil and gas listing hubs: London, Singapore and New York. Founded in 1977, Gulf Marine was for several years a small, local provider of offshore barges oil companies before being bought out by a consortium in 2007 led by Gulf Capital, which installed new management and looked to expand in West Africa and S.E. Asia. The company’s profits have increased by 750 per cent as a result.

Yet, there is a definite trend for utilising existing rigs. An example of this was seen mid-2012, when Drydocks announced the completion of maintenance work on Abu Dhabi-UAE based National Drilling Company’s Jack-Up Cantilever type self-elevating drilling platform, Delma, which was build in 1983.

Drydocks World has repaired over 100 rigs, since operations began and has implemented more projects for the offshore drilling sector in recent years as part of a deliberate strategy to serve this rapidly growing sector. In 2012 the shipyard has worked on six rigs simultaneously that year.

As Khamis Juma Buamim, chairman of Drydocks World and Maritime World said, Drydocks has developed its strategy around the oil and gas industry as it sees definite long-term growth prospects in the field due to continued offshore exploration and development. “Drilling rigs with enhanced capabilities are a pre-requisite as the search for new hydrocarbon reserves reach deeper and harsher waters,” he said.

The scope of the work consisted of the complete overhaul of Starboard crane and overhaul of Port Side crane, steel renewal in tanks, improving high pressure mud limes and stand pip manifold and various pipes.

What else can the sector predict for jack-up rig companies going forward? According to Bijali, Abu Dhabi is already starting to think differently and looking for developing island rigs.

“It has already completed two islands and planning to have onshore drilling rigs that walk in the island. According to oil majors, this will have positive effect in processing facilities, longterm reservoir performance, issues with well integrity and expensive maintenance of ageing structures and subsea pipelines.”