Weekly Offshore Rig Review: Northern Exposure

Worldwide offshore rig utilization has held above the 83% mark for the second week running, with several rigs starting and ending new contracts, but no major changes.

This week, we'll complete our look at some of the largest offshore rig markets by examining the North Sea jackup and semisub fleet, its recent history and future trends.

With 32 jackups and 42 semisubs working in the region, the North Sea is the second largest rig market in the world, behind the GOM (153 MODUs) and ahead of the Persian Gulf (71 jackups). Specifically in terms of jackups, the North Sea employees the world's third largest fleet, after the GOM and Persian Gulf. And with regard to semisubmersibles, the North Sea is the world's leading market for semisubs, currently having 9 more than the GOM with its 33 rigs and more than twice as many as third-ranking Brazil with 20 rigs.

The North Sea jackup fleet is one of the most consistently busy subsegments of the worldwide rig fleet. Jackups in the North Sea have maintained utilization rates above 80% for more than 65 consecutive months. As a matter of fact, since the start of 2001, North Sea jackup utilization has averaged about 92%. And during the past 12 months, utilization has been at 100% for half the year.

Looking back further, we find that North Sea jackup utilization has averaged just below 90% for the last 15 years. In fact, the only time since 1990 that the North Sea jackup fleet has seen utilization less than 80% was during 1999 and early 2000.

However, over that 15 year time frame, the jackup fleet has shrunk in size significantly. From 51 rigs in 1990 to 32 rigs today, the region's jackup fleet has slowly retired and been dispersed to other regions at an average rate of 1.2 rigs per year. But most of the exodus occurred during the 1992-3 time frame, with the number of jackups dropping from 50 in December 1991 to 40 in December 1993. The North Sea jackup fleet experienced another significant drop more recently, when the number of rigs fell from 40 jackups in September 1999 to only 35 in September 2000.

Looking forward, the North Sea jackup fleet will remain about 30 rigs for the rest of 2006. At this point, 27 jackups already have contracts that will have them working in the North Sea until December of this year. That's almost 85% of the currently available rigs in the region.

Similarly, semisubs in the North Sea are also experiencing high utilization rates at this time, with that trend continuing through the rest of 2006. For the month of January 2006, 37 of 42 semisubs in the North Sea are contracted, an 88% utilization rate. And looking forward to later this year, utilization is set to increase as 38 rigs are already contracted out for the month of April. Already, 2006 is shaping up to be the best year in at least 5 years for the North Sea semisub fleet, with utilization likely to climb above 90% for the first time since 2001.

Unlike the North Sea jackup fleet, which has maintained very high utilization over the last 15 years, the North Sea semisub fleet has struggled. Most notably, from mid-2002 to late-2004, utilization was barely able to crack 70% at any point, reaching a low of just 52% utilization at the start of 2003. Looking back over the last 15 years, North Sea semisub utilization has averaged about 78%, but that fairly high level of utilization has been punctuated by extremes. For instance, in early 1994, utilization bottomed out just below 50% before climbing to a 15-year high of 97% in early 1997.

In one respect, at least, the North Sea semisub fleet is like the North Sea jackup fleet. It too has decreased in size over the last 15 years. From a high of 67 rigs as late as 1992 to 42 rigs today, the semisub fleet has shrunk nearly 40% over those 14 years, a regional attrition rate of 1.8 rigs per year.

But the North Sea market has stabilised for now, and it is experiencing strong growth in rig demand and day rates across both jackups and semis. 2006 looks to be a banner year for the entire North Sea fleet, even if it is a much smaller fleet than it was 15 years ago.

For More Information on the Offshore Rig Fleet:
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