Weekly Offshore Rig Review: Shuffling Rigs

Worldwide offshore rig utilization dipped slightly this week, as a net total of two rigs came of contract pushing utilization down to 84.3%.

Rig utilization impacts the distribution of the rig fleet around the globe. As demand grows in one area, it may decline in another and rigs move to new markets. This week, we'll examine where rigs have been moving over the course of the last 6 years.

Moving On Up
All around the world, rigs are moving into developing regions, pushing the offshore rig counts higher than they have ever been in these areas.

Mexico has seen the largest increase in the number of rigs working its waters. In July 2000, there were only 5 rigs offshore Mexico, 4 of which were under contract. That number fluctuated somewhat through 2001 and into 2002, when the rig count began to take off. At the start of 2002, there were 10 rigs in Mexico and by the end of 2002 there were 26 rigs, a 160% increase in 1 year. The growth continued as Pemex increased its exploration budget on into 2004, when the Mexican rig count peaked at 45 rigs and held at that level for 10 months. From the initial level of just 5 rigs to 45 rigs is an increase of 40 rigs, an 800% increase. Since the start of 2005, the rig count has fallen back to a current count of 37 rigs.

The Persian Gulf has been another area that has benefited from a growing rig fleet over the last 6 years. In July 2000, there were 44 rigs in the region, working at just 66% utilization. That number started to grow in early 2001, and since that time, a total of 28 rigs have moved into the region pushing the overall rig count up to a current total of 72 rigs. That's an increase of 28 rigs, which equals 64% growth over 6 years. That growth was fairly steady over that time frame, although there was a large growth spurt of about 10 rigs in 2001 and another spurt of 8 new rigs over the last year.

In the Far East and Australia, there has been a slow and steady growth in the rig count, with an average of 4 to 5 new rigs entering the region each year. In July 2000, there were 59 rigs in the area, of which 47 were contracted. By July 2005, 18 new rigs had entered the market. But within the last 12 months alone, a total of 10 more new rigs have come into the area, pushing the total rig count up to 87 rigs. That marks a 47% increase over the last six years.

Southern Asia, for which India accounts for almost all offshore activity, has seen significant growth in its rig count since July of 2000. At that time, there were only 12 offshore rigs working in the region. That number grew steadily over the next 5 years to a peak of 38 rigs working at 100% utilization in early 2005. Since that time, the number has come down slightly and held near the mid-30s, with a current rig count of 36 rigs. That is a 200% increase caused by 24 new rigs entering the region over 6 years.

The Mediterranean, Black Sea, and Red Sea taken as a group have also seen their overall rig count increase over the last six years. In July of 2000, there were 21 rigs working in these waters, which declined to just 20 rigs in 2001. From 2001, the number of rigs in the region has grew steadily until the end of 2005, when the rig count peaked at 36 rigs with 90% utilization. In the last 7 months, the number of rigs has fallen to 31 rigs. But, for the last 6 years, the region shows a net gain of 10 rigs, a 48% increase.

Steady as They Go
A few regions of the world have had fairly consitent rig counts over the course of the last six years. Of course, none of these regions was perfectly static, but overall, the rig counts did not vary more than about 10 percent from the 6 year average number of rigs.

South America has remained steady for most of the last 6 years. During late 2000 and early 2001, the rig count varied from 40 rigs up to 57 rigs. The rig count slowly declined over the course of 2002 and 2003, steadying at about 50 rigs, which the rig count has remained near until the last 18 months, when it declined by a few more rigs to its current count of 47 rigs. With the decline in overall rig count, South American rig utilization has pushed upwards above 90% for the first time in the last 6 years, holding about 90% for the last 10 months.

West Africa has also held a consitent rig fleet over most of the last 6 years. The rig count stood at 40 rigs, of which 32 were contracted, in July 2000. By early 2001 that number had grown 12% to 45 rigs. Since that time, the number of rigs in the region has remained between 42 and 52 rigs, varying only about 5% from the average of 45 rigs. There are currently 48 rigs in the region, and 47 of those are contracted, for a very high utilization rate of 97%.

Emptying Out
With quite a few regions experiencing significant growth in the size of their offshore rig fleets, most of those rigs had to come from some other region. At the same time, not all of the rigs moving into these growing areas were rigs moving from other patrs of the world; a portion of the additions in these regions were newbuilds, which accounted for 24 new jackups, 18 new semisubs, and 5 new drillships that joined the fleet from July 2000 to today.

The North Sea rig fleet has seen a small decline in its overall size over the last 6 years. In July 2000, there were 80 rigs in the North Sea. By late 2001, that number had grown to 87 rigs. After the start of 2002, the fleet size dropped by 18 rigs to just 69 rigs in September 2004. It has since begun to recover, and the North Sea fleet now stands at 77 rigs. Overall, that is just 4% (3 rigs) below its level of 6 years ago and 12% (10 rigs) below its 2001 peak.

The Gulf of Mexico experienced by far the biggest loss in total fleet size over the last 6 years. Like the North Sea, the region experienced some growth and peaked in 2001, rising from 193 rigs July 2000 to a maximum of 206 rigs in September 2001. In the nearly 5 years since that time, the Gulf of Mexico has lost an average of more than 1 rig per month every month. The only exception to this trend was the 9 month period from January to September 2005, when the decline stopped near 150 rigs and pulled back up to 158 rigs before continuing its decline to just 140 rigs today. Over the last 5 years, the GOM has lost 64 rigs, more than 30% of its overall fleet of jackups, semis and drillships.

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