Offshore drilling activity weakened for the sixth consecutive week, as fewer than 100 floaters were contracted for deepwater for the first time this year
Brent crude oil, meanwhile, continued to recover from its first quarter woes.
Steadily climbing since mid-April, global oil benchmark Brent crude closed at US$43.44 per barrel on 27 July, up US$0.26 to US$43.18. Still, Brent is well below the levels at the start of the year when it closed at US$68.91 on 6 January.
As countries emerge from Covid-19 lockdowns there has been a rebound in energy demand, sopping up some of the global oil supply glut.
Westwood Global Energy head of offshore Thom Payne estimated that overall oversupply for the first half of the year was 7.6 mmbpd. “However, the subsequent rapid reduction in output, coupled with the US-led demand recovery, has now likely seen the global oil market flip to a net draw position of 1.3 mmbpd in June,” said Mr Payne. “This switch to an undersupplied market will be critical to eroding the estimated 1.2Bn barrels of excess supply accrued in storage between January and May.”
Clouding the outlook for the market is the threat of a second wave of the coronavirus, just as OPEC+ prepares to ease its oil production curbs starting in August from 9.7 mmbpd to 7.7 mmbpd until the end of 2020.
Rig activity falls again
Tracking contracted rigs worldwide, Westwood Global Energy Group reported the total number of active jackups were 319 and floaters 99 during week 31. It is the first time this year that the number of floaters – semi-submersibles, drill ships, etc – has dipped below 100 vessels.
Over the last six weeks, West Africa has remained stable, with five floaters contracted. Two of those drilling rigs belong to Transocean, which said operational and safety challenges resulting from the Covid-19 pandemic required some contract modifications in Total’s drilling activity in Angola.
In its latest fleet status report, Transocean said Total agreed to an additional sequence at a standby rate of US$200,000 per day for the 69-day period ending on 4 July. This sequence did not affect the firm contract for the Marshall Islands-registered ultra-deepwater drillship Deepwater Skyros, which resumed on 5 July, and is now expected to end on 8 December 2021. Additionally, the three options following the firm contract have been modified to be priced at a mutually agreed day rate with an undisclosed cap. This modification represents a modest increase from the previous option day rate of US$200,000 per day.
Meanwhile, Maersk Drilling’s drillship Maersk Voyager is contracted with Total for Ghana and Namibia at a day rate of US$193,000 through August 2020.
The world’s largest offshore drilling contractor, Valaris, reported that the contract for Valaris DS-7 for operations offshore Ghana from April 2020 to mid-May 2020 had been terminated. Valaris has a contract with BP running from September 2020 to August 2021 to drill five wells off Senegal/Mauritania using the ultra-deepwater drillship.
Much like West Africa, jack-up drilling activity in the North Sea has remained stable at 19 mobile offshore drilling units since week 25 2020. Over the same period, floaters have fallen from 23 to 20. There was a silver lining for Transocean. The Swiss-based drilling contractor said the contract for the harsh environment semi-submersible Paul B. Loyd, Jr. had been cancelled in the UK North Sea by Hurricane Energy plc in Q2 2020, but that the company had been compensated for the termination.
Continued Transocean, “The customer, Chrysaor, purchased assets including the drilling contract for the Transocean 712 from our previous customer ConocoPhillips UK. The new customer will replace the Transocean 712 as the contracted rig with the Paul B. Loyd, Jr. with operations commencing in October 2020.”
Paul B. Loyd, Jr. has been contracted from October 2020 to August 2021 by UK oil independent Chrysaor Production to drill in 600 m of water to depths of 7,500 m at an undisclosed day rate. The previous day rate for the semi-submersible was US$160,000.
With multiple short- and long-term contracts in hand from the likes of Shell, Equinor, BHP Billiton, Chevron, Petrobras and others, Transocean reported a backlog of US$8.9Bn as of 15 July.
Riviera is hosting a week of free to attend 45-minute webinars focused on offshore operations commencing 11 August. Register your interest now
© 2023 Riviera Maritime Media Ltd.