Upturn reported in call for semis to work in N. Sea

North Sea demand for semisubmersible drilling rigs has rebounded since the end of 1994.

Day rates are on the rise, and a move is under way toward longer contracts.

Ian Mitchell, rigs markets manager for Petrodata Ltd., Aberdeen, told Oil & Gas Journal contractors are upgrading older and stacked semisubmersibles to cash in on doubled day rates.

A typical third generation semisubmersible would have been taken under contract for $30,000-35,000/day in late 1994, and then most likely only on a short contract. Now the same type of rig commands more than $70,000/day, and contracts are typically for multiwell programs.

Operators have found difficulty in hiring rigs for single well operations. A unit of Chevron Corp., for example, is likely to postpone drilling off Ireland this year because of high rig costs (OGJ, June 19, Newsletter).

Thirty-five North Sea semisubmersibles were operational at the end of 1994, but 42 are expected to be in use by the end of 1995. Mitchell said some rigs are en route to the North Sea, having left less than a year ago.

Supply, demand

Drilling contractors are mainly meeting North Sea demand for modern, deepwater semis by upgrading rigs. Mitchell said some contractors are even dusting off rig construction plans. "The issue of building new rigs is nearer the surface than it has been for the past 10 years," said Mitchell, "but a newbuild contract is still likely to be some way away."

Mitchell reckons it would require more than $200 million to build a fourth generation semisubmersible. Making such an outlay possible would require a 5 year contract at a day rate of more than $150,000.

"It is unlikely that any rig operator will build on spec," said Mitchell. "After the newbuilding spree of the early 1980s, many rig operators got their fingers burned. And a steep change in demand is still required before an oil company would award a 5 year contract at the required rate."

Supply and demand for North Sea jack ups is in balance. The current fleet stands at 34, of which 31 are operational and three are inshore but committed to drilling programs.