NEWBUILD REPORT

Rig building continues in onshore and offshore markets

Marine rigs begin long-term contracts, while land rigs shift to shorter contracts as utilization softens.

Victor Schmidt, Drilling Engineering Editor

The newbuild cycle continues to bring new rigs into both the marine and land markets, but lately the land market has felt the first brush of overbuilding. The ReedHycalog Rig Census (see World Oil, October 2007) tabulated the expansion across the offshore mobile rig market and the international land market, including the US and Canada where resource plays in shale gas and coalbed methane have led to very active drilling over the past few years. Rig use is softening, but the number of rigs on order remains strong. The census shows that the US rig fleet expanded to 2,817 rigs, the highest it has been since the late 1980s.

Baker Hughes, Inc. released its most recent count, showing 3,124 rigs operating across the globe. This is down six rigs from October 2006-essentially flat. In their international market tally, BHI counted 1,024 rigs, a 59-rig increase from last year. For the North American market, the tallies have softened to 2,100 rigs, down 65 from last year.

New high-technology rigs are replacing older, less-efficient land equipment, according to Richard Mason, publisher of The Land Rig Newsletter. The North American market is now a 60-90 day market, a contraction from longer-term contracts that brought many new rigs into the market.

The present land-rig newbuild cycle started after the shale gas resource plays kicked-off in 2004. The strong cash flows generated by increasing oil and gas prices fueled the cycle, which has now mostly run its course. Mason sees the present flat to slightly down utilization pattern as a shift from the equipment constraints of 2005 to personnel constraints in 2007. The new rigs have a longer learning curve due to their complexity, and require personnel with different skills from earlier rigs. In effect, the land rig fleet is operating at its maximum effective output.

The marine market continues to add new hulls with the number of newbuilds under construction or on order expanding to 157 rigs, as seen in ODS-Petrodata’s Offshore Rig Locator, Table 1. The November compilation has 85 jackups, 43 semisubmersibles, 25 drillships and 4 tenders under construction or scheduled in the shipyards.

Table 1. Mobile offshore drilling units under construction or on order1 Click table to enlarge image.

Mobile Offshore Drilling Unit (MODU) deliveries are expected to peak in 2008 at 56 vessels. According to Tom Marsh, vice president and publisher USA for ODS-Petrodata, most MODUs have work scheduled in firm, multi-year contracts, but 65 jackups, 9 semis and 11 drillships are being built without firm work contracts.

One of the most active companies building new MODUs is Seadrill Ltd., who is reported to be spending $4.5 billion on a major fleet construction program. The investment will produce four jackups, six semisubmersibles, two drillships and two tender barges, some of which are already delivered and working. These new vessels, in addition to the company’s purchase of Smedvig in 2006, will create an offshore competitor with 34 rigs, once all the new rigs enter the market.

MODU NEWBUILDS

Rig construction is taking place across the globe with much of the work focused in Southeast Asia and Far East shipyards. Below are some activity highlights.

Jackups. KSAM2 Petrodrill Offshore Inc. cut steel on its third newbuild jackup. The rig is a Freide & Goldman Super M2 design to be delivered in the first quarter of 2010. Maritime Industrial Services is building the vessel at its Sharjah yard on a $152 million contract.

Scorpion Drilling began construction of a LeTourneau Super 116E jackup design at Lamprell, a Middle East-based oilfield services contractor. The new rig will be delivered in early 2009.

Rowan Co. is presently building two 240-C rigs in its Vicksburg, Mississippi shipyard with delivery scheduled for the third quarters of 2008 and 2009. The company will also build two other 240-C class jackups designed to drill to 35,000 ft and use the latest technology for drilling HPHT and extended-reach wells. These rigs will be built in its Vicksburg yard for delivery in 2010 and 2011, at about $400 million total cost. This rig class is an upgrade of the 116-C, the industry’s most commonly-built design since the late 1970s.

Rowan Co. has contracted Keppel AmFELS, Inc. to build four Super 116E jackups. The rigs will be built at the constructor’s Brownsville, Texas shipyard. Delivery will begin in the second quarter of 2010 with each rig averaging some $175 million each, including drilling equipment.

Seadrill Ltd. is building one jackup at the Keppel FELS yards in Singapore. The West Ariel, a MOD-V design will have a 400-ft water depth capacity.

Semisubmersibles. China National Offshore Oil Corp.(CNOOC) is building its first deepwater rig with a 9,842-ft (3,000 m) rated water depth. The rig will be completed by 2011. The semisubmersible will have a 40,000 ft maximum rated drilling depth. The vessel will cost $599 million and be built by Shanghai Waigaoqiao Shipbuilding Co. under China State Shipbuilding Corp’s supervision. CNOOC is prepared to invest $2 billion to develop deepwater equipment for drilling and production.

ENSCO is building four ultra-deepwater semisubmersible rigs in the ENSCO 8500 series. The vessels are enhanced versions of the ENSCO 7500 and are capable of drilling in 8,500 ft (2,591 m) of water. The rigs have a 2,000,000-lb (907,200-kg) quad derricks, greater drilling capacity, offline pipe handling capability, more variable deck load, automatic station keeping and can be upgraded to 10,000-ft water depth capability. Construction is on schedule and within budget. The ENSCO 8500 will be delivered in the second quarter of 2008 with the ENSCO 8501 and ENSCO 8502 entering the market in 2009. The fourth rig, ENSCO 8503, is scheduled to be completed in the third quarter of 2010. The first three rigs have firm, long-term contracts.

Odfjell Invest recently took delivery of the Deepsea Atlantic, a sixth-generation semisubmersible, which was constructed at Daewoo Shipbuilding & Marine Engineering Co., Ltd. in South Korea. The semi was delivered last month and will begin a 4-yr or 5-yr contract with Statoil in the North Sea in early 2009. Statoil will decide the fixed term length by next July. The contract can be extended with two 2-yr options. Odfjell Drilling is the manager and drilling contractor for the vessel.

Seadrill Ltd. is building two semisubmersibles. The West Aquarius is a GVA 7500-N design with a 7,500-ft (2,286 m) water depth rating. It is being assembled in the Daewoo yard at Pusan, South Korea and will begin a 3-yr contract with ExxonMobil in November 2008. The West Orion is a Friede & Goldman ExD four-column design with a 10,000-ft rating. The semi is being built at the Jurong Shipyard, Singapore for delivery in early 2010.

Drillships. MPF Corp. Ltd. will construct what the company claims is the world’s largest drillship. The hull for the MPF-01 drilling and production vessel will be built with $215 million of construction financing and be assembled at COSCO Shipyard Group’s Dalian Shipyard in China. After hull construction, Dragados Offshore SA in Spain will conduct topsides integration and commissioning. The completed drillship will have production equipment and be able to store up to 1-million bbl of produced fluids.

Shell EP Offshore Ventures Ltd. and Frontier Drillships Ltd. are joint venturing to build a deepwater/arctic drillship. The GustoMSC PRD12000 design will be customized with a Huisman Multi-Purpose Tower drilling system and have an ice-class hull. The new drillship will use less fuel because of its high-efficiency engines and will require a smaller crew to operate it. Delivery is scheduled for early 2010.

Transocean and Pacific Drilling Ltd. have joint ventured for two ultra-deepwater drillships being built in South Korea at Samsung Heavy Industries’ shipyard, where Transocean is overseeing construction. Deepwater Pacific 1 will be equipped to work in 12,000-ft (3,658-m) water depths and be capable of drilling and constructing wells to 35,000 ft (10,668 m) in depth. Estimated cost is some $685 million. Deepwater Pacific 2 will be equipped to work in 10,000-ft water depths and also drill 35,000-ft wells. It can be upgraded to 12,000-ft capability in the future. Its estimated cost is about $665 million.

The drillships will have a 22,050-ton (20,000-mt) variable deckload and use NOV drilling packages. They will be equipped with off-line tubular-handling and stand-building capabilities, systems for efficiently handling BOPs and risers, as well as systems for building, storing and running subsea trees. The vessels will be completed by the end of 2009. Once they begin operations, a Transocean subsidiary will provide operating support.

Seadrill Ltd. is building two drillships at Samsung Heavy Industries at Okpo, South Korea. The West Capella is a Saipem 10000 design rated to 10,000 ft (3,048 m). The vessel will be delivered a year from now and begin drilling for Total off West Africa on a 5-yr contract. The second vessel, West Polaris, is to be delivered next summer. It is of the same design with similar capabilities as its sister ship. The company has a third drillship on order with a delivery date of June 2010.

Tenders. Seadrill Ltd. continues its construction program with two tenders. The first is a Smedvig Super class vessel, dubbed T-11, with 400-ft (122 m) water-depth range for jackup-assist. It is being built at the Malaysia Marine and Heavy Engineering yard in the Pasir Gudang, Malaysia and has a 5-yr contract with Chevron. The second vessel, West Berami II, is on order at Keppel FELS in Singapore. It is a Keppel FELS SSDT 3600E design with a 5,000-ft (1,524-m) rating for semisubmersible support and is scheduled for delivery in late 2009.

Other utility vessels. Gulfmark Offshore Inc. is in the middle of an eight-vessel newbuild program at Keppel Singmarine. The shipyard recently delivered Sea Cheyenne, a 154-ton (140-mt) bollard pull anchor handling tug/supply vessel. This vessel will operate offshore Vietnam. One more vessel is schedule for delivery this year with the four remaining vessels scheduled for delivery by the end of next year.

Oceanteam has signed for two options with MetalShips & Docks, SUA in Vigo, Spain to build construction support vessels. Delivery is expected in the third quarters of 2011 and 2012. The vessels will serve the subsea, power and umbilical installation markets. The company is also building five large construction support/power-cable lay vessels in a 50/50 venture with Bourbon Offshore Norway AS at the same shipyard. The recently delivered Bourbon Oceanteam 101 vessel began operating last month.

Lewek Shipping awarded a contract to Karmsund Maritime Service for the design and construction of a 27,000-hp Multi-Functional Support Vessel (MFSV) to cost NOK $620 million. This vessel is designed and equipped for offshore construction, subsea installation, ROV interventions, installation-maintenance-repair, anchor handling in up to 16,400-ft (5,000-m) water depth, towing, supply, standby and rescue, and tanker assistance. It includes an ROV hangar and foundations for a heave-compensated offshore crane and an A-Frame. The MFSV is built to meet strict North Sea environmental requirements and is scheduled for delivery in late 2010.

LAND RIG NEWBUILDS

Trinidad Energy Services Income Trust plans to build five new rigs with depth capacities ranging from 16,400 to 18,000 ft (5,000-5,500 m). The rigs will operate in the US on take-or-pay contracts, expanding the company’s US drilling fleet to 42 rigs.

Winstar Resources will build a new rig for drilling and service work in its southern Tunisia exploration and development program. The rig is compact, fully automated for quick set-up and is designed to drill to 9,800 ft (3,000 m).

Grey Wolf is constructing two 1,500-hp rigs built to drill multiple wells from the same location. These new units have been contracted for 3-yr terms with two oil companies. They will be used in the US Rocky Mountain market with deliveries expected in the second and third quarters of 2008. The company has upgraded or refurbished 17 rigs and has deployed eight new rigs.

Pioneer Drilling has completed 11 rigs in its 15-rig newbuild program. Since April 2006, the company has added six 1,000-hp electric rigs: one in Utah; two in South Texas and three in North Texas, plus one 1,000-hp mechanical rig in Oklahoma, according to William Stacy Locke, Pioneer’s president and CEO. Starting in January 2007, the company began adding iron roughnecks to all of its rigs, a process it will complete by mid-2008.