Long-term hopes for oil rigs dim, says sector study
WONG JOON SAN
The market for mobile offshore rigs and drilling units for oil and gas will have continued high day rates in the near term despite low oil prices, according to an industry study.
For the longer term, however, prospects are less healthy, says the study by British-based Ocean Shipping Consultants.
In its 210-page Offshore rigs: Market outlook to 2010, it says day rates for deep-water semi-submersibles in the Gulf of Mexico are forecast to remain above US$200,000 in the near term.
It forecasts that after 2000, there will be some weakening for the semi-submersibles due to sustained low oil prices and entrance of new or converted deep-water units.
'It is important to remember that there is likely to be a time-lag between supply and demand conditions changing and movements in rig rates, due to the high degree of term charters for deep-water units,' the study said.
Some marginal weakening in demand and supply conditions was expected for next year, but lower day rates were not expected until 2000-01.
The study said average rate levels for deep-water units were expected to increase for most of this year, and marginally over next year to about $240,000 a day in 1999-2000.
The rates are expected to fall to $200,000 a day by 2003. From then on, rates are expected to fall generally, with only a small scale of sustained demand.
The study said newbuilding prices for jack-ups had risen markedly since the mid-1990s to a level of about $95 million, reflecting increased rig construction interest.
'Since 1994, a marked improvement in the demand-supply ratio for the rig market has seen rates rise dramatically,' it said.
Average North Sea day rates for jack-ups rose from about $25,000 in late 1994 to more than $90,000 by late last year and rates for semi-submersibles had risen from $30,000 to more than $150,000.
In the first few months of this year, there were 390 mobile rigs active worldwide. Since 1990, North America had increased its 30 per cent market of the world's total to 35 per cent.
Rig activity in Asia-Pacific had fallen to 16 per cent from 20.5 per cent, and in Europe to 15 per cent from 21 per cent.