Northwest Europe's offshore drilling contractors face a bleak year in 1994.
Demand for semisubmersible rigs in particular is expected to fall, and utilization and day rates will remain flat, Wood Mackenzie Consultants Ltd. predicts.
The Edinburgh, Scotland, firm said that despite a reduction in the North Sea rig fleet from an average 104 rigs in 1992 to only 89 in 1993, the market was oversupplied. Day rates remained low.
Wood Mackenzie expects North Sea demand for semisubmersibles to fall from 36.7 rig-years in 1993. U.K. demand is expected to be hardest hit, although a recovery is predicted for 1995-96.
Jack up rig demand will decline to 31.5 rig-years in 1994 from 32.9 rig-years in 1993. Reduced development off the U.K., Netherlands, and Denmark will more than offset increased U.K. exploration demand for jack ups.
U.K. DEMAND
Loss of petroleum revenue tax (PRT) relief for U.K. exploration and appraisal drilling, coupled with low oil prices, is depressing the U.K. drilling outlook (OGJ, Mar. 29, 1993, p. 33). However, Wood Mackenzie believes outstanding commitments to drill on existing licenses will help cushion the fall.
"About 150 wells may be outstanding on 11th round acreage," the analyst said. "With only 18 months left for commitments to be met, it appears that about 100 wells should be drilled on 11th round acreage alone in 1994."
Many operators were said to hope they can waive their drilling commitment to the Department of Trade & Industry, using loss of PRT relief and low oil prices as their main arguments.
Wood Mackenzie concluded that about 95 exploration/appraisal wells are likely to be spudded during 1994 a similar number to 1993 when 96 such wells were spudded.
A record 14 U.K. offshore oil or gas fields went on stream last year, twice the previous record number set in 1990. This has buoyed development drilling in the past 2 years, but the peak is over.
Five oil fields are expected to go on stream this year: Alba, which started production Jan. 14 (OGJ, Jan. 31, p. 46); Nelson, which went on stream Feb. 18; and Medwin, Stirling, and Dunbar.
Also due on stream are four southern North Sea gas fields: Alison, Galleon, Excalibur, and Johnston.
The analyst said more than 50 projects are candidates for development in the next few years. Projects such as Britannia and Captain are likely to require about 50 and 30 development wells, respectively, and win help bolster rig demand in the mid 1990s.
NORWEGIAN ACTIVITY
Static activity off Norway in 1993 was marked by demand for development drilling rigs surpassing exploration/appraisal requirements for the first time. Last year, 27 exploration/appraisal wells were spudded off Norway, compared with 24 development wells.
About 25 exploration/appraisal wells are expected to be spudded in 1994, the analyst said. That would amount to a demand of 5.7 rig-years, down 5% from 1993.
Wood Mackenzie said, "The 14th round awards should bolster drilling levels, and intense gathering of 3D seismic data over the last few years will lead to identification of a substantial number of new exploration targets."
Development drilling by mobile rigs is expected to amount to 25 well spuddings this year, equal to demand of almost 7 rig-years.
This high level of demand is a result of a number of major developments that are coming forward during the mid to late 1990s, such as West Troll, Snorre Phase II, Vigdis, Statfjord satellites, Froy, Njord, and Norne."
NETHERLANDS, DENMARK
Wood Mackenzie said 1993 saw no significant discoveries off Netherlands. Perception of the sector as mature, along with low oil prices, caused a sharp reduction in Dutch exploration/appraisal drilling during the last 2 years.
The analyst said 13 exploration/appraisal wells were spudded last year off Netherlands, while 12 such wells are predicted for 1994.
One exploration/appraisal well is expected to be drilled off Denmark this year, the same as in 1993. Development drilling is expected to fail from 28 wells last year to 20 this year.
"Development activity on the Danish shelf peaked in 1993 and is expected to decline steadily into the late 1990s," Wood Mackenzie said.
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