Floating drilling platform market recovery starting in 2018?

2016-11-11 09:00

The offshore market will enter its third year of downturn, with 2017 seeing a decrease in floating drilling platforms ( ship type shipyard transactions The market will still face challenges. However, the market may begin to recover in 2018.

Rystad Energy recently stated that by the end of this year, the global utilization rate of floating drilling platforms (including semi-submersible drilling platforms and drilling ships ( ship type shipyard transactions ) is expected to fall to nearly 50%, down from 73% at the end of last year. The short-term market outlook remains challenging, and will worsen further in 2017, with utilization rates falling to 44% by mid-2017 and averaging around 53% for the full year.

Rystad Energy's data shows that the growth rate of floating drilling platform chartering activities slowed significantly in the third quarter of this year. In the third quarter, only 10 new floating drilling platform chartering contracts were signed, compared to an average of 40 over the past five years. Considering the very limited number of outstanding bidding activities, Rystad Energy believes that the growth rate of chartering activities will not increase significantly before the end of this year.

Meanwhile, the average daily charter rate for floating drilling platforms that secured new charters in the third quarter has fallen to $150,000. In comparison, before the oil price decline in mid-2014, the daily charter rate for floating drilling platforms once reached $550,000 to $600,000.

Rystad Energy says that the average daily charter rate for floating drilling platforms is now close to operating costs, and some floating drilling platform charter contracts are already generating negative cash profits.

To make matters worse, 18 floating drilling platforms have been prematurely terminated so far this year. In addition to these 18, Rystad Energy believes that about 7 to 10 floating drilling platforms are also at risk of premature termination.

Rystad Energy points out that even without considering the cancellation of charter contracts, the floating drilling platform market will still face challenges in 2017, and is unlikely to improve before 2018.

However, Rystad Energy expects that with cost reductions across the supply chain and further improvements in drilling efficiency, the number of projects entering the final investment decision phase will increase; coupled with expectations of commodity price recovery, demand for floating drilling platforms will begin to recover after 2017.

According to Rystad Energy's data, the compound annual growth rate of demand for floating drilling platforms from 2018 to 2020 is approximately 8.75%, mainly from Central Africa, the Mediterranean, and the Gulf of Mexico.

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