A 10-day labour strike by the Norwegian trade association Lederne ended on 9 October following a wage agreement, according to the Norwegian Oil and Gas Association (NOGA)
The strike had resulted in the closure of six offshore oilfields totalling 330,000 barrels of oil equivalents per day (boed) or about 8% of the 4M boed of oil and gas on the Norwegian continental shelf (NCS).
If prolonged to 14 October, the strike would have forced the closure of seven additional fields – pushing the loss of daily production to 966,000 boed or about 25% of the country’s oil production, according to NOGA.
Brent crude oil had rallied partly on the news of the strike from US$40.72 on 1 October to US$43.44 per barrel on 8 October. Once the labour agreement was reached, oil moderated and has since returned to close at US$41.76 on 12 October.
Beyond the labour strike, Covid-19 has also roiled projects under development on the NCS. Equinor reported that as a result of the weak Norwegian krone and Covid-related measures, it has been forced to delay several projects under development. Those projects facing the greatest delays and cost overruns from the weak krone and Covid-19 mitigation measures are the Martin Linge, Johan Castberg and Njord.
Deepwater drilling rises
Overall, deepwater drilling activity increased during week 42 2020, with global floater activity rising in the North Sea, South America and West Africa, according to the latest data from Westwood Global Energy.
As of 12 October, the number of floaters operating globally climbed to 107, a rise of one unit week-on-week. Regional markets highlighted by Westwood Global Energy’s RigLogix showed deepwater drilling in the North Sea rose from 19 to 21 units, while West Africa and South America made gains of one unit each.
In South America, drilling contractor Noble reported it had secured a 6.5-year extension for the ultra-deepwater drillship Noble Tom Madden under its commercial enabling agreement with ExxonMobil to work offshore Guyana. Previously contracted until mid-February 2024, Noble Tom Madden has now been contracted until mid-August 2030.
In the US Gulf of Mexico, which was hit by Hurricane Delta, Baker Hughes reported 14 offshore drill rigs were active, unchanged from the week prior and 10 down from the same period in 2019.
RigLogix indicated that the number of contracted offshore jack-up rigs fell from 326 to 324 week-on-week, with only the North Sea showing an improvement.
In the Dutch North Sea, Danish drilling contract Maersk Drilling secured a two-well contract from Dana Petroleum Netherlands BV as part of the Project Unity. With emissions taking centrestage in offshore oil and gas operations, prior to commencing the work, Maersk Drilling will refit one of its harsh-environment jack-up rigs with a high-efficiency selective catalytic reduction (SCR) system to reduce NOx emissions by up to 98%. The design will include an advanced control interface between the engines and SCR units.
“Operations in the Dutch North Sea come with a strict focus on protecting the environment, and we fully support this as part of our ambition of providing responsible drilling,” said Maersk Drilling chief operating officer Morten Kelstrup. “We already have experience with providing NOx emission reductions by using SCR systems on Maersk Innovator in the North Sea.”
A harsh-environment jack-up has not yet been selected for the two-well contract, which will last about four months, starting in Q2 2021.
Covid takes a toll
Covid-related energy demand destruction, the low-oil price environment and crushing debt have taken a heavy toll on drilling contractors, forcing some of the biggest names into bankruptcy. One of those filing for Chapter 11 was Valaris plc. With 15 ultra-deepwater drill ships, seven semi-submersibles and 49 shallow-water jack-ups, Valaris has one of the largest rig fleets in the world, with experience operating in nearly every major offshore basin.
International law firm Watson Farley & Williams LLP advised the debtor-in-possession (DIP) lenders in connection with their US$500M term loan credit agreement with Valaris.
The agreement was executed after receiving final approval to access the DIP term loan facility from the US Bankruptcy Court for the Southern District of Texas.
Including some US$180M of cash on hand, Valaris has US$680M of total liquidity available. “With access to this additional liquidity, I am even more encouraged that we will be able to support our continued operations uninterrupted throughout the Chapter 11 process and take advantage of a market recovery over the long term,” said Valaris president and chief executive Tom Burke.
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