Winter Downturn to Result in North Sea Rig Lay-offs

Rig utilization in the North Sea remained steady in July at 77.6% as a marginal rise in jack-up usage compensated for a slight decrease in the number of semi-submersibles employed. However, forward indicators have worsened, suggesting little chance of an upturn until second quarter 2004 at the earliest, according to Platts North Sea Letter.

"The magnitude of the coming winter downturn is likely to force contractors into cold-stacking more units," said Meg Leitch, editor of Platts North Sea Letter. "Internationally there is little demand to compensate for the North Sea's regional slack."

While utilization for jack-ups rose from 91% in June to 94% at end-July, the six-month forward rate dropped six points to 63%. The weakness appears to be predominantly in the standard unit market segment, while the outlook for heavy-duty rigs has remained healthy by comparison. In the semi-submersible market, over 20 rigs are likely to be idle by end-December, a situation which will result in lay-offs and slack demand for ancillary services.