Demand for advanced ultra-deepwater drilling vessels is rising

2013-07-17 08:29

According to projections, demand for newly developed, state-of-the-art ultra-deepwater drilling vessels will increase significantly.

On the 15th, the world-renowned drilling operator Seadrill announced that it had ordered four ultra-deepwater drilling vessels from Daewoo Shipbuilding & Marine Engineering and Samsung Heavy Industries in South Korea. These four drilling vessels will serve deepwater oil fields in the Gulf of Mexico, Brazil, Africa, and other areas. They are 12,000-foot ultra-deepwater drilling vessels, scheduled for delivery in the second half of 2015. Seadrill also signed contracts for two optional vessels with unchanged pricing, scheduled for delivery in the first half of 2016.

Regarding this order, Seadrill stated that it has spent considerable time analyzing the future demand in the ultra-deepwater drilling market. According to their analysis, global average daily ultra-deepwater oil production will increase from approximately 1 million barrels currently to 5 million barrels in six years.

To meet this demand, a considerable number of newly developed drilling vessels will be required.

It was also stated that approximately 49% of the current deepwater drilling fleet consists of vessels over 20 years old. The previous 4th and 5th generation drilling vessels could not meet the new demands of oil companies (in terms of stability and Deck Hook Load), and have been replaced with new vessels.

Since Seadrill's founding in 2005, the global ultra-deepwater drilling fleet utilization rate has remained at 100%. Currently, the global newbuild order backlog for drilling vessels to be delivered in 2014-16 is approximately 39 vessels, and it is possible that the market will fully absorb them. The average daily charter rate for drilling vessels equipped with the latest equipment is expected to remain relatively firm.

Furthermore, the company is undertaking a new construction project valued at approximately $19 billion (comprising 22 vessels/platforms: 9 ultra-deepwater drilling vessels, 2 harsh-environment semi-submersible drilling rigs, and 11 high-tech jack-up drilling rigs). Drilling vessels scheduled for delivery in 2014 are likely to be chartered at attractive rates, therefore, additional drilling vessel construction projects will be undertaken in the coming months.

It was further stated that the number of new deepwater drilling vessels scheduled for delivery in 2015 does not exceed projections. Based on previous orders, only 7 newly built vessels have yet to be chartered.

Furthermore, the likelihood of competitor drilling companies undertaking large-scale new construction projects for deepwater drilling vessels before the second half of 2016 is low. Supply and demand are almost balanced, therefore, high profitability of charter rates can be expected.

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