Stewart Wiseman, ODS-Petrodata

AS EACH YEAR comes and goes, theoffshore industry gets older and one ofthe core pieces of equipment that drivesmuch of the activity, the jackup drillingrig, suffers an additional year of wearand tear.

According to a new report by ODS-Petrodata, The Jackup Market: Sce-narios for Newbuilding and Attritionto 2015, many more jackups will need tobe built to prevent the age profile of theworldwide fleet becoming dominated byold equipment.

Carl Thorne, Chairman and CEO ofENSCO International, agrees.

He says, in connection with his compa-ny's latest newbuild jackup the ENSCO106, that "as drilling requirementsbecome more stringent and fleet renew-

al becomes imperative, we believe thebalance between capability and cost willbe crucial."

Another contractor, Rowan, is currentlybuilding a new jackup at theLeTourneau yard in Vicksburg and hasa further three on order.

In southeast Asia, a subsidiary of Petro-vietnam is expected to place a newbuildorder before the summer and is study-ing the possibility of building three jack-ups. According to ODS-Petrodata, only14 new competitive rigs have been deliv-ered in the last five years, and evenwhen the current rigs that are underconstruction are factored in, rig replen-ishment between 1998 and 2006 willamount to just 6% of the fleet.

1 9 8 2 - A P I V O T A L Y E A R

The vast bulk of the world's drilling jack-

ups are at least 21 years old. Only 4%are less than six years old. The result isa fleet that will need even more moneyfor repair and maintenance.

New rigs are necessary because drillingrequirements are becoming moresophisticated and will include greateruse of automation to prevent accidentsand improve tripping times. Additionalpower will also be required to drilllonger, multilateral and directionalwells.

The fleet has basically stayed the samesize for the last ten years while it hasaged considerably due to the preponder-ance of rigs delivered in the early 1980s.From the earliest days of offshoredrilling until 1982, demand for jackupsfollowed a continual upward trend, cul-minating in a building boom in the early-1980s.

Because the industry was new andgrowing, the supply of rigs was barelykeeping pace with the demand for them,resulting in high levels of utilization.From 1955 to 1982, utilization only oncefell below 90%, and averaged 95%. Theover-building in the early-1980s causedthe end to 90%+ utilization.

W H A T I S A U S E F U L L I F E ?

Conventional thinking suggests thatmost jackups have a useful life of 25years. This thinking grew from the ship-ping industry and is slowly being chal-lenged as rigs reach, and pass, that per-ceived milestone.

Eighty jackups in the current fleet arealready 25 years old or older. Many ofthese are working, including the oldestrig in the fleet, the North Star I, which is37 years old and operating for Petrobrasin Brazil.

While an old car might be able to getfrom A to B, it is not necessarily thesafest nor the most fuel-efficient. Theanalogy could hold true for rigs. Newlybuilt rigs are able to fully benefit fromthe latest advances in technology.

Both ENSCO and Rowan are outfittingtheir newbuilds with substantial mudpumping and engine capacities, largerspud cans to help avoid leg penetration,automated pipe handling systems andother innovations that simply were not

14 D R I L L I N G C O N T R A C T O R May/June 2003

Aging jackup fleet will present serious challenge

The Noble Lewis Dugger is drilling for Mexican state oil company PEMEX in the Bay of Campecheunder a contract that runs through July 2004.

around in the early 1980s. Ultimately,oil companies want rigs that can reachtheir target quickly while being safe,and building new will always offer thelatest bells and whistles over retrofits.

A T T R I T I O N

A total of 582 jackups were deliveredinto the drilling market between 1950and 2002, of which 191 (33%) exited thedrilling fleet, split roughly one-thirdthrough loss, conversion and retire-ment. At 66 units, the number of retire-ments from drilling is fairly small: only11% of the delivered fleet. There havebeen no voluntary retirements since1995.

N E W B U I L D I N G A N D A T T R I T I O N

The study suggests that the industryfaces two milestones. By 2007, nearly90% of all jackups will be 21 years oldand older. In 2012, those rigs will be 26years old and 77% of the then-fleet willbe at least 30 years old. Currently, only4% of the jackup fleet is 30 years old orolder.

By holding the demand for jackups con-stant, the report offers three supply-sidescenarios for newbuilding and attritionto 2015. The assumptions vary in eachscenario and include applying a usefullife that varies from 26 to 35 years old.

When each of the jackups in the currentfleet reaches a certain age they arescrapped or otherwise removed from theactive drilling fleet. While this is a theo-retical approach, the report does admitthat retirement is a management issueand policies will differ between contrac-tors.

In each of the scenarios, the supply ofjackups falls from present day numbersbecause the number of newbuildings is

unlikely to keep pace with increasingrates of attrition.

In one scenario, the jackup industry hasadditional legislation imposed on it thatrestricts the use of rigs beyond the ageof 26, in a similar vein to that seen in theoil tanker industry. Under this scenario,which is dubbed "newbuild boom", ODS-Petrodata predicts that 289 jackups willleave the fleet between 2003 and 2015and that 243 newbuilds will be neededas replacements.

However, the report also says thatdemand for jackups could evenincrease: from Russia, where massivevolumes of offshore oil and gas in waterdepths suited to jackups are estimated,and from deep sub-surface hydrocar-bons in the shallow waters of the USGulf and elsewhere.

If demand does increase, a newbuildspree to replenish an aging fleet willbecome an even more pressing issue. �

May/June 2003 D R I L L I N G C O N T R A C T O R 15

Possible changes in the jackup fleetYear Delivery of

existing orders Attrition Newbuilds

2003 5 7 0

2004 4 16 0

2005 1 21 5

2006 1 41 40

2007 63 68

2008 88 90

2009 24 20

2010 11 10

2011 6 7

2012 5 2

2013 2 1

2014 4 0

2015 1 0

Total 289 243

"Newbuild boom" scenario from ODS-Petrodata's "The Jackup market: Sce-narios for Newbuilding and Attrition to2015"

Net change in worldwide jackup supply 1950 - 2002

-20

0

20

40

60

80

100 1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2002