There is just a small window of opportunity for operators in the North Sea to capitalize on falling drilling rig rates, AGR Petroleum Services, the world's largest independent well management company, has warned.
During the company's annual rig briefing to operators in London on Tuesday, delegates heard that although semisubmersible rig rates are expected to drop below the $250,000 mark, contractors are beginning to choose to stack their rigs rather than accept short term hires at low rates. This could in turn lead to a return to capacity issues and rising rates once the oil price bottoms out.
Comparing the current drilling rig market to the housing sector operators were told that although prices are falling, no-one is buying in a bid to hold out for the best deal but this is creating an artificial market where the true price is not really known.
Ian Burdis, vice president of well management for AGR Petroleum Services, urged operators to progress activity where possible if they are to make the most of the rate reductions and to end the current brinkmanship with drilling rig contractors.
He said, "It's accepted that there are difficult times ahead for operators over the next period. Never before have we seen a drop in oil price coincide with a recession so, over the short-term it's going to be challenging. The dip in North Sea activity offers significant opportunities to capitalize on lower rig rates but this won't be open for long as contractors opt to bottleneck rigs rather than take a rate reduction.
"To take advantage of the current situation operators must be drill ready and have progressed well preparation in advance. By keeping ahead of the game and committing early to site survey work, companies will be able to maximise activity while rates are low and avoid the delays bad weather can cause during the winter."
Although the end of 2008 saw activity significantly slow, AGR Petroleum Services undertook the largest ever well campaign by an independent well management company last year -- seeing an 80% rise in the number of wells drilled compared to 2007.
Burdis believes that while there will be a major reduction in exploration and appraisal activity in the North Sea during 2009 and in to 2010, he not only expects projects to pick up towards the end of 2010 but says activity in other regions remains fairly steady.
He said, "Although we have seen a reduction in activity in the North Sea we still have a full programme of activity planned in Norway, Australia, and southeast Asia and are still pretty busy in the US Gulf of Mexico too. While the current situation means that we're not going out and completing wells in the UKCS, we are busy with our other revenue streams from reservoir management and engineering."
The briefing heard that taking advantage of rig campaigns offered by well management companies are a prudent way of ensuring activity is carried out as efficiently and effectively as possible. AGR Petroleum Services pioneered the campaign model in the North Sea more than four years ago.