Analysis: Inside the Persian Gulf Jackup Market
Each day, the RigLogix team converses with insiders in the offshore drilling industry. Of late, we have heard more chatter about the Persian Gulf market and the future expectations for this continually growing area. Rig counts and dayrates have been steadily increasing but will it continue? Below you will find an analysis of this market that sheds some light on the answer.
Rig Count Rises
With waters averaging 160 feet deep and not exceeding 300 feet deep, jackups have always dominated the Persian Gulf. Currently, there are 73 jackups under contract that are located in the Persian Gulf. Sixty-eight of the rigs are presently performing drilling or workover operations. Two jackups are waiting on location, two are undergoing modifications, and one is serving as an accommodation unit.
The number of jackups working in the Persian Gulf has been growing consistently over the last decade. Since June of 2000, the number of jackups working in the Persian Gulf has more than doubled. While the Gulf of Mexico and North Sea previously dominated the jackup market, the Middle East is now the largest employer of jackup rigs in the world.
Newbuilds Entering the Persian Gulf
Of the jackups working in the Persian Gulf, there are a number of newly built jackups that have been delivered in the last two years. Those include:
| Noble Roger Lewis
Source: Noble Drilling
|Noble Drilling's Noble Roger Lewis was constructed and delivered in September 2007. In an agreement that was signed in August 2005, Shell holds a two-year fixed contract on the jackup, starting in February 2008.|
| Al Zubarah
Source: Keppel Corp.
|Gulf Drilling's newly built Al Zubarah jackup, delivered in January 2008, is contracted for work with Qatar Petroleum through the start of 2010.|
Maersk Resilient Jackup
|Maersk Drilling's Maersk Resilient jackup, delivered in March 2008, is contracted to Dubai Petroleum through mid-2011.|
| Perro Negro 7
|Also delivered in March 2008, Saipem's Perro Negro 7 is working a firm contract for Saudi Aramco through mid-2011, with a one-year option.|
| Aban VIII
Source: Aban Offshore
|The Aban VIII jackup, managed by Aban Offshore, was delivered in June 2008 and is currently working on South Pars in Iran for Petropars. The 18-well firm contract on the Aban newbuild continues through 2012, and there is an option for four additional wells, which would extend the contract through 2013.|
| Offshore Intrepid
Source: Scorpion Offshore
|Delivered in January 2009, the Scorpion Offshore jackup Offshore Intrepid was contracted by Al Khafji Joint Operations (KJO) from the start of May 2009 through October 2012 with a year-long option that would extend the contract through 2013.|
| Offshore Freedom
Source: Scorpion Offshore
|Most recently, the Offshore Freedom jackup, managed by Scorpion Offshore, was delivered in April 2009 and contracted for four years by KJO from June 2009 through June 2013, with a one-year option that would extend through 2014.|
Rig Managers Active in the Persian Gulf
With 73 jackups presently working the waters of the Persian Gulf, there is an even diversification of rig contractors, with 22 contractors represented. National Drilling Company has 10 jackups under contract, and Noble Driling has 8. Other companies with a number of rigs drilling in the region include Rowan, ENSCO, Nabors and Transocean.
Of the managers that have reported dayrates for the jackups working in the Persian Gulf, Maersk holds the highest average dayrate of $185,000. This is primarily because the contractor only has one rig working in the Persian Gulf, and that rig has a very high dayrate. Next, Scorpion Offshore has an average dayrate for its two rigs contracted in the Persian Gulf of $182,500. For its six jackups contracted to the region, Transocean has an average dayrate of approximately $163,000; and for its seven jackups in the Persian Gulf, Rowan has an average dayrate of almost $152,000. (Note: This article previously reported incorrectly the average dayrate for ENSCO jackups working in the Persian Gulf. In fact, the company has an average dayrate of more than $114,000, with five rigs rated for 250 feet of water and two jackups rated for waters measuring up to 300 feet.)
Of those that have disclosed dayrates, the jackup working in the Persian Gulf that is currently commanding the highest dayrate is the Aban VIII managed by Aban Offshore. Working for Petropars, the rig is garnering a dayrate of $199,500. Coming in not far below that, Rowan has two jackups working in the Persian Gulf that are contracted at a dayrate of $191,000: the Hank Boswell and the Scooter Yeargain.
The dayrates for jackups working in the Persian Gulf have shown a steady rise over the last several years. While the average dayrate for jackups working in the Persian Gulf was $31,000 in 2000, the average dayrate has grown to $126,000 for the first five months of 2009, representing a quadrupling of rates.
Looking at dayrates according to contract fixture dates (the date of the contract signing), a pattern of growth is evident. Including jackup contracts currently working in the Persian Gulf, the average dayrate for contracts signed before 2005 is $85,000. In contrast, the average jackup dayrate in the region for contracts signed between 2005 and 2006 is approximately $134,000. Portraying another increase, the average dayrate for contracts signed since 2007 is nearly $140,000.
Additionally, there have been six new contracts signed in 2009. Those include contracts on the ENSCO 96, Noble David Tinsley, Noble Gene House, Noble Harvey Duhaney, Arch Rowan and Gilbert Rowe jackups. All of these rigs have commenced operations, and the Noble David Tinsley has recently come off contract due to a "punch-through" that damaged the rig.
Furthermore, there are 14 jackups whose contracts have commenced in 2009. Another two are scheduled to begin operations at the start of 2010, which include the NIDC jackups that have not yet been named. Recently, the Nabors 867 and the Noble Caes van Diemen jackups completed their contracts; the rigs have not been signed to new agreements as of yet.
When comparing jackup dayrates in the Persian Gulf to those of the US Gulf of Mexico, it is apparent that the regions were neck-and-neck in the early 2000s. Dayrates in the US GOM peaked in 2006 and then leveled off. Dayrates in the Persian Gulf have seen a somewhat steady rise during the same time period. Yet, since 2007 dayrates in the Persian Gulf has surpassed those of the US GOM.
On the other hand, dayrates for jackups in the North Sea are higher than those in the Persian Gulf. This is primarily due to the environmental variations required on rigs working in the waters of the North Sea, and thus the limited number of jackups working there, which increases demand and, in turn, dayrates. Nonetheless, both regions have seen an increase in dayrates, even in 2008 and early 2009, when commodity prices for oil and natural gas dropped.
Looking at Persian Gulf rig activity and dayrates in the future, the region holds its own over the remainder of 2009 through the next two years based on existing contracts in place.
Jackup drilling in the Persian Gulf remains strong, with an average of 64 rigs contracted through the rest of 2009. Despite a lull in recent contract fixtures, activity in the Persian Gulf is expected to pick up in late 2009 and into early 2010, according to RigLogix sources. Average dayrates, mainly from existing contracts, in the Persian Gulf will take a slight upturn in 2009 to about $126,000. While in 2010, the average dayrate for jackups working in the region increases to approximately $134,000. So far, there are 29 jackups contracted for work in the Persian Gulf in 2011, and the average dayrate holds firm at approximately $129,000.
According to the most recent report from RigOutlook, the Arabian Sea, which includes the Persian Gulf, has a forecasted demand for 80 to 82 jackups over the next three years. Average dayrates for the region are also forecasted to decline at the close of 2011.
|For daily updates on the worldwide offshore rig market please visit www.riglogix.com|
|If you would like more information on the future of this market, please see RigOutlook for 3- to 10-year forecasts.|
|Learn more about two of the larger projects in the Persian Gulf, Oman's Block 8 and Iran's South Pars on SubseaIQ.com|
Manages 64 Offshore Rigs
- Ensco Acquires Atwood Oceanics, Lays Off Staff (Oct 10)
- Lamprell to Compensate Ensco for Delay in Delivery of ENSCO 140 (Aug 29)
- Lamprell Delays Delivery of Jackup to Mid-August Due to Technical Issue (Jul 27)
Company: Maersk Drilling more info
Operates 5 Offshore Rigs
Manages 23 Offshore Rigs
- Maersk to Limit Investment in Energy Businesses until Separation (Dec 13)
- Maersk Oil Begins Culzean Drilling Campaign (Sep 29)
- Maersk Highlander Ready for Action (Aug 19)
Company: Transocean Ltd. more info
Manages 46 Offshore Rigs
- Oil's Biggest Rigs Headed to Junkyard as Daily Losses Mount (Oct 18)
- Transocean To Buy Norwegian Rig Firm Songa Offshore For $1.1B (Aug 15)
- Borr Drilling Signs Deal With Transocean to Buy 15 Rigs (Mar 20)
Company: Rowan Companies more info
Manages 22 Offshore Rigs
- Rowan Lays Off Another 50 Offshore Workers (Jun 26)
- Rowan to Lay Off 150 Offshore Workers (May 31)
- Rowan Idles Rig, Will Lay Off Up To 110 Workers (Nov 28)
Company: Noble Corporation more info
Manages 28 Offshore Rigs
- Sembcorp Marine Delivers World's Largest Jackup Noble Lloyd Noble (Jul 18)
- Oil Industry Maintains Country Club Culture During Downturn (May 23)
- Freeport to Pay Noble $540 Million to Not Use 2 Oil Rigs (May 10)
Company: Saipem more info
Manages 12 Offshore Rigs
- Sanction-Proof Oil Rig Beats US Policy From Cuba to Russia (Dec 19)
- Ifax: Saipem To Conduct Feasibility Study On Rosneft Chemical Plant (Sep 15)
- Saipem to Build Pipelines for Kuwait Refinery Project (Aug 16)
Company: Aban Offshore more info
Manages 17 Offshore Rigs
- Aban Offshore Bags $87M Contract to Provide Aban Abraham Drillship to ONGC (Jun 28)
- Aban Offshore Inks Deal to Provide Aban II to ONGC for $50M (Oct 27)
- Aban Offshore Clinches $182.7M Deals to Supply 2 Jackups to ONGC (Oct 13)
Company: Scorpion Offshore more info
- Seadrill's Mandatory Offer to Purchase All Scorpion Shares (Jul 15)
- Seadrill Increases Ownership in Scorpion Offshore (May 31)
- UPDATE: Ensco Ends Partial Offer for Scorpion Offshore (May 28)
Company: Nabors Drilling more info
- Robotics and Automation: The Oil, Gas Skillsets of the Future (Nov 15)
- Nabors Rig Headed for EL1070 in Western Newfoundland (Dec 16)
- Analysis: Saudi Aramco's Rig Appetite (Jun 23)
Company: Keppel Offshore & Marine Limited more info
- FPSO Armada Kraken on Track for North Sea Deployment (Aug 29)
- Bumi Armada's LNG FSU Leaving Singapore Soon to Work for EletroGas Malta (Aug 11)
- McDermott, N-KOM Signs MOU to Jointly Pursue EPCI Projects Offshore Qatar (Jul 27)