Rig activity in the Gulf region is expected to contract by as much as 15% in Q2 2009 according to a leading market observer.
Rina Samsudin, senior Middle East analyst at ODS-Petrodata, told ArabianOilandGas.com recent reports that Saudi Aramco would cut its total drilling fleet by 20% didn’t seem wide of the mark.
“Saudi Aramco has said it will cut back on its offshore fleet, and this is primarily do with the decision to cut back on offshore drilling, but it could be linked to OPEC mandated cuts too.”
The offshore drilling market in the Middle East is dominated by the jack-up type rig, and despite an abundance of resources to tap, rig owners are expected to suffer a tough 2009.
“It’s not a good market for jack-up owners because Saudi Aramco is not the only oil company cutting back on offshore drilling activity. Offshore companies in the United Arab Emirates and Qatar are doing the same,” says Samsudin.
More jack-ups are expected to become available without jobs over the next few months, and competition will intensify as a result. “Day-rates will be coming down, in fact, they have already started to drop,” she adds.
Today’s marketed jack-up utilisation in the Middle East is 88%, but just one year ago this figure was around 93% for the Middle East. In the second quarter of this year, ODS Petrodata says this figure could drop to between 75% and 85%.
Whilst the regional market is not as far along the curve as the US Gulf of Mexico, the trends are consistent and the drop in rates is significant. “One example is a rig with Maersk Oil Qatar which just secured a one year extension on its contract, and the day-rate was almost half the previous rate.”
In the current climate many drilling contractors will be more willing to take lower day rates just to keep their fleet working.
“Just eight months ago the Middle East was considered a good environment for owners to park their rigs in long-term contracts. There are a lot of new jack-ups coming out of yards and over the past couple of years the Middle East has become a focus for long-term contracts. It’s the other way around now. Even the rigs that are on long-term contracts are getting 30-day cancellation notices,” adds Samsudin.
Unfortunately for rig owners the Middle East is not isolated, and demand for rigs in other parts of the world is decreasing in tandem with the local scene. Contractors with rigs in the Middle East are now marketing worldwide and chasing work wherever they can find it.
Jack-up rigs have already started to be cold-stacked in the US GoM market, and the Far East. “I think that will spread,” warns Samsudin. “It hasn’t come to the Middle East yet, but the number of idle rigs without work is certainly on the rise.”
Market crunch – Key Facts:
– At the moment there are around 105 marketed jack-up rigs in the Middle East (includes those in the Persian Gulf and Gulf of Suez).
– Around 10 jack-ups are currently idle or in yard without near-term future contracts.
– Another 15 or so jack-ups are completing their respectively contracts from now until end Q2 09 without any follow-on contracts in place.
Statistics provided exclusively to ArabianOilandGas.com by ODS Petrodata.
