Offshore drilling contractors are facing strong headwinds for at least the next two years with oil prices seen staying low and in a range well below US$100 per barrel, according to the head of one of the world's largest drilling companies.
"We don't have any expectation that oil prices would go up. We see oil prices staying in the US$55-US$85 [per barrel] range, but with some volatility," Claus Hemmingsen, chief executive at Maersk Drilling, said on the sidelines of the Sea Asia conference.
He added even if oil prices rebounded to US$70 per barrel, challenges would still prevail for offshore drilling contractors because the industry's costs are too high.
"What needs to happen is costs need to be radically lower," he said.
Maersk Drilling, part of Denmark's AP Moller-Maersk Group, has taken delivery this year of a new jack-up rig built in Singapore, which is now operating in the North Sea. Some of its peers, such as Hercules Offshore, Diamond Offshore and Noble, have chosen to cold-stack some rigs as offshore drilling activities entered a lull.
Hemmingsen said some players may be weeded out from the market as the sector is bracing for the worst oversupply in two decades.