While Covid-19 has injected a great deal of uncertainty in the energy markets, Middle East offshore drilling in shallow water rose, leading to positive gains in overall global jack-up drilling activity during week 39 2020
Overall, 325 jack-up drilling rigs were contracted globally for the week, up five units week-on-week, in one of the biggest moves of the year.
Fewer floaters, semi-submersibles and drill ships were contracted for deep-water for the week, dropping by two units to 108 week-on-week, according to Westwood Global Energy’s Riglogix.
“The impact of the pandemic on energy markets has been unprecedented and for the offshore oil and gas sector, which produces 17% of global energy, markets have inevitably become stressed as offshore rates and utilisation unwind towards 2016 levels,” said Clarksons Research managing director Steve Gordon.
In releasing the company’s latest Offshore Review and Outlook, Mr Gordon said the drilling rig market has been rapidly affected by the downturn, with at least 98 contract cancellations or revisions recorded so far.
He said by the beginning of August, 468 rigs were active, down 10% on start-March. “Floater utilisation has fallen 10 points to 63% since March, while jack-up utilisation is 6 points down to 73%. This reversal has severely affected rig companies’ finances.”
That financial pressure has pushed multiple offshore drilling contractors into bankruptcy or restructuring, and increasingly sent rigs to the scrapyard.
Mr Gordon said that sales for demolition are increasing notably with 25 rigs removed by the beginning of August – up by 30% on an annualised basis.
Financial pressures are also pushing down on offshore support vessel owners. “The downturn has affected the OSV market a little more slowly so far, except in the more liquid North Sea market,” he said. “Large (platform supply vessel) term rates are down 43% in the year-to-date, while spot rates in the North Sea have trended towards opex. Other regional OSV markets have begun to soften more slowly, not least because of the difficulties in laying-up vessels during the pandemic-related travel disruption.”
Clarksons reports OSV utilisation has slipped to 59% and its OSV Rate Index is down 14%.
A trio of platform supply vessels that supported oil and gas operations in the North Sea are heading to the scrapyard. Vroon Offshore Services (VOS) reported in September it would dispose of VOS Power, VOS Producer and VOS Prominence, all built between 2006 and 2007, to ‘right-size’ its fleet. The three PSVs had been laid up for some time and will be demolished at a ship recycling facility in the Netherlands.
Ban on offshore drilling extended to North Carolina
While the prospects for offshore wind development on the US Atlantic Coast continue to brighten, the same cannot be said for offshore oil and gas development. At the request of US Senator Thom Tillis (R-NC), President Trump is withdrawing new leasing of federal lands for offshore oil and gas developments off the North Carolina coast for the next 12 years. Under the order, leases for the purposes of offshore development are prohibited between 1 July 2022 and 30 June 2032.
By adding North Carolina, the President would extend his previously announced moratorium on offshore drilling off the coasts from Florida, Georgia and South Carolina.
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