This week, worldwide offshore rig utilization inched down slightly to 84.2% as a net total of one rig came off contract this week.
Two weeks ago, we looked at the strong growth in the Chinese economy, and its ever-growing appetite for oil. This week, we will look at India, the other Asian giant that will likely be the world's third-largest economic power during much of this century.
Currently, India is the world's fourth-largest economy, generating about US$3.7 billion in GDP for 2005. This places it only about US$300 million behind the Japanese economy, which it is likely to surpass within the next 5 to 10 years.
Looking forward, the Indian economy is expected to continue its strong growth, with predicted average GDP growth of 5.5% to 6.5% over the next 20 years. As such, by 2025, India will likely have a GDP of US$12-14 trillion, placing it at about 60% of the projected size of the US and Chinese economies at that time.
India's Oil and Gas Consumption
India's energy needs are rising sharply, however. During 2004, India's crude oil consumption increased by 10 percent. And its oil consumption is expected to continue growing at a rate between 5 and 7% over the next 20 years. That is about 3 to 4 times the 1.8% projected growth rate for the world as a whole, and even further above the 1% growth rate for developed economies in the US and Europe.
By 2025, India will be consuming over 5 million barrels of oil per day, more than double its current consumption.
Moreover, India is highly dependent on oil imports. Close to 70% of India's oil is imported (1.5 million bopd) and oil imports account for one-third of the total value of all India's imports. By 2025 India is expected to have to import 80% of its energy needs, or about 4 million bpd of oil.
At the same time, India also is a growing consumer, and importer, of natural gas. Between 2002 and 2005, Indian natural gas consumption rose from 2.46 billion cfd to 3.32 billion cfd, a 35% increase in just 3 years. And that amount is expected to more than double within 10 years to 6.8 billion cfd. At present, the country has to import more than 50% of its natural gas needs.
India's Oil and Gas Production
Last year, India's oil production fell 5.3%, or about 40,000 bpd, from about 682,000 bpd to 642,000 bpd, although this was due primarily to the explosion at the Mumbai High field last summer. Conversely, Indian natural gas production rose slightly, about 1.4%, to 32.2 billion cubic meters for 2005.
India's Offshore Rig Fleet
ONGC, India's Oil and Natural Gas Corporation, is the leading offshore rig owner and operator in Indian waters, with 10 of its own rigs working and another 21 rigs contracted from major drilling contractors. Thus, the future for ONGC is very much the future for activity offshore India, and the company is looking to invest significantly in offshore exploration, with expanded exploration in both shallow and deep waters.
Thus, for India we forecast that the demand for jackup rigs will grow from 27 rigs today to 35 rigs by May of 2008, then decline. The behavior demonstrated in this market also indicates that this scenario is most likely to unfold if the day rate is around $55,000 per day. Should average jackup day rates in India remain around the current level of mid-$40,000 per day, the fleet size will remain under 30 rigs. If day rates were to increase to $60,000 per day and above, the fleet size might temporarily exceed 35, but a fleet of this size is likely not sustainable for long.
In conclusion, India's rapidly growing economy and high oil prices, in conjunction with other factors, are likely to push Indian offshore rig demand to new highs in the next two to three years.
What About the Rest of the World?
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