The oil price collapse and deferred drilling campaigns have shrunk the available supply of drilling rigs in the North Sea to the point where operators now face a supply crunch for semisubmersible rigs for next year’s drilling campaigns off the UK, offshore rig brokerage and advisory Bassoe Offshore said in a recent analysis.
The price crash and the capital expenditure (capex) cuts from exploration and production (E&P) companies have impacted the drilling rig market with less work contracted with offshore drilling providers than initially anticipated.
This has caused drilling rig contractors in the North Sea to either remove rigs from their fleets permanently or cold-stack some of them, leading to a looming shortage of offshore rigs available for work in 2021, Bassoe Offshore said.
Drilling rig owners have removed six semisubs from the UK and Norwegian fleet since 2018, according to Bassoe Analytics data. Announcements of further permanent removals of rigs from the fleet could be imminent, according to Bassoe Offshore.
In addition, due to the sparse number of contracts for this year because of the price collapse and operators’ budget cuts, drilling rig owners such as Diamond Offshore and Transocean have opted to cold-stack some of the rigs instead of keeping them hot-stacked, that is, ready to work.
“Due to the high costs associated with reactivating a cold-stacked semisub these drillers would only consider putting their units back to work for a long-term campaign, usually with a minimum of around one year of work,” Bassoe Offshore said.
Currently, the total number of rigs in the UK fleet has diminished to just 11, of which three are cold stacked and not available for near-term work, the brokerage said.
Due to the short supply of semisubs off the UK for 2021, “operators looking for a floating MODU next year may be in for a bit of a surprise,” Bassoe Offshore noted.
Offshore drilling contractors have been some of the worst-hit companies in the oil and gas industry after the oil price crash in March. Several major offshore drilling providers, including Valaris, Noble Corp, and Diamond Offshore Drilling, have filed for bankruptcy protection in recent months.