North Sea rig utilisation still climbing and newbuild construction falls

North Sea rig utilisation has been on an upward climb since early-spring, with improvement in both the jack-up and semi-submersible sectors. At the beginning of July, jack-up utilisation had reached 81%, a four-year high, while a figure of 66% was recorded for the semi-submersible sector, a similar level as in July 2018. The question for the offshore rig sector is whether the utilisation improvement can be sustained through the autumn and winter months. If it is, this will be a firm indicator that recovery in rig demand is becoming more established.

Another good sign for the rig market is that the number of newbuild construction projects has fallen to a total of around 75, comprising 53 Jack-ups, 15 drillships and seven semi-submersibles. At one stage, when construction reached record highs, over 200 jack-ups alone were on order and at a time which coincided with the sharp fall in oil prices. The industry still has some way to go before rig supply and demand becomes balanced, but the problem of excessive newbuild construction is coming to an end. All existing projects are expected to have been completed by 2022.

Four newbuilds are due to enter the North Sea within the next eight months. The jack-up Ensco 123 is about to start a contract with Premier in the UK sector and the semi-submersible Transocean Norge is also expected to start a fixture in July with Equinor in Norway. The Odfjell-managed Deepsea Yantai has a contract start with Neptune in October, while the West Bollsta is due to start work with Lundin in April 2020; both contracts cover operations in Norway.

There appears to have been a fall in contract awards in the North Sea, with just five allocated to semi-submersibles and four to jack-ups since April. However, it is quite possible more awards will be revealed when drillers release their respective second-quarter results later this month or in early-August, along with updated fleet reports.


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