Weekly Offshore Rig Review: Persian Gulf Growth
This week, worldwide offshore rig utilization remained unchanged at 82.7%, with 539 of 652 rigs under contract.
Last week, we took a look at the Gulf of Mexico rig market, looking particularly at the significant drawdown of rigs in the high-end jackup segment. We noted that the GSF High Island III and GSF Adriatic VII had been marked by the USCG as underwater obstructions after being damaged during Hurricane Rita. However, the hulls of both rigs are currently at the shipyard in Port Arthur, Texas being inspected to determine whether they will be repaired or declared a total loss.
This week brings more news of rigs leaving the US GOM, as the Noble Eddie Paul will be moving to the waters offshore Mexico to drill for PEMEX in March. That is a further reduction to the US GOM's high-end jackup fleet, which will drop to 27 rigs, a more than 20% decrease. This further reduction will give the Persian Gulf the largest high-end jackup fleet of any world region. And with four of the six rigs leaving the Gulf of Mexico heading for the Persian Gulf, we wanted to take a look at that market.
With waters that average about 80' (25m) in depth and run no deeper than about 300' (90m), the Persian Gulf is the territory of jackup rigs. As such, it has a large fleet of 69 jackup rigs, the second-largest behind the Gulf of Mexico, composed primarily of ILC jackups.
For the last five years, the Persian Gulf has seen very steady rig utilization rates. Five years ago, at the start of 2001, utilization was at its lowest point around 70%. By mid-2001, utilization had climbed into the low-80% area, where it has remained for the majority of the time since then.
The size of the Persian Gulf rig fleet remained fairly constant from 2001 through early 2004, as well. But, in mid-2004 new rigs began to move into the area and augment the size of the fleet. In the last 2 years, the number of jackups has increased from 58 to 68 rigs, a 17% increase. Of those new rigs moving into the area, only one new-build jackup, National Drilling's 150' ILC the Al Hail, joined the fleet. The other rigs moving into the area came mainly from the US Gulf of Mexico and West Africa.
Not surprisingly, Saudi Aramco is the leading operator in the Persian Gulf with a total of 15 rigs currently under contract at an average day rate of about $85,000. This makes Saudi Aramco not only the leading, but also the best-paying operator in the area, paying out an average day rate that is 30% higher than the regional average. The UAE's Abu Dhabi Marine Operating Company (ADMA-OPCO) is the second leading operator in the region with 11 rigs under contract. Rounding out the top three is Qatar's RasGas, which currently operates 8 jackups. The other 29 rigs that are under contract in the region are working for 18 different operators, each of which only has a few rigs.
As is true throughout almost every offshore rig market, strong demand in the Persian Gulf is driving longer contracts and higher day rates. After 4 years of virtually no change, day rates have climbed significantly in the last year. The highest day rate being earned by a jackup in the region has nearly doubled from about $60k to $115k. And the average day rate has increased almost 30% from $48k in January 2005 to about $60k today. Much of that increase has been driven by Saudi Aramco, which is paying the 7 highest day rates in the region.
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Operates 44 Offshore Rigs
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