With little signs of a pick-up in newbuild rig orders, shipyards in Asia are turning to other offshore projects to ride out the market doldrums.
Years of optimism in the Asian newbuild rig market has been shaken, with major petroleum companies reducing capital spending in line with the decline in oil prices, which have shown little signs of recovering from its descent below $100 a barrel since the second half of 2014.
Asian shipyards, whose revenues have shrunk due to the weakness in global oil prices which in turn has led to a slowdown in newbuild rig orders, are looking elsewhere for fresh business opportunities covering floating production and offshore vessels.
Vanishing Rig Orders
The adverse impact of lower oil prices, with U.S. West Texas Intermediate and Brent crude oil futures falling by around 40 percent since September 2014, was felt almost immediately by Asian rig builders – newbuild rig orders simply dried up.
According to Rigzone’s RigLogix database, there were no significant newbuild rig contracts placed this year – apart from an order made by Abu Dhabi’s National Drilling Company (NDC) for Lamprell plc to build a Super 116E (Enhanced) Class mobile offshore drilling unit (NDC Jackup TBN 9).
Instead, the rig market is facing a supply glut this year, a situation exacerbated by weak demand as companies reduced capital expenditure, including spending on exploration. Around 64 drilling units are scheduled to be delivered in 2015, including eight drillships, 47 jackups, seven semisubmersibles and two tender assist rigs, RigLogix data indicated.
“The oversupply of drilling assets is putting a strain on the industry,” Jason Waldie, associate director (Singapore) at Douglas-Westwood told attendees at the Sea Asia 2015 conference in April.
Newbuild Rigs for Delivery in 2015, Source: RigLogix
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