Rig contractor Songa Offshore has so far secured long-term charter contracts from Statoil for a total of four Cat-D newbuild rigs ordered at South Korean yard Daewoo Shipbuilding & Marine Engineering for $570 million apiece and due for delivery in 2014 and 2015.
The lucrative eight-year charters, with four options of three years each, carry dayrates ranging between $415,000 and $448,000 and are set to generate total revenue of more than $5 billion for the Norwegian driller.
The custom-built units, designed by Statoil in collaboration with the industry, are intended to meet the Norwegian state oil company’s need for fit-for-purpose workhorse rigs for drilling of production wells and completions in the North Sea.
The move is aimed at combating a rig capacity shortage and high dayrates that have fuelled drilling costs as the company looks to sink more production wells to boost recovery from mature producing fields.
“When we’ve spent time and effort ordering four, it gives us a drive to do more,” Statoil’s head of rig strategy and procurement Torgeir Loland told Bloomberg News.
He said building new rigs according to Norway’s high technical and safety requirements was cheaper than adapting existing units from elsewhere.
There will be only 17 midwater rigs working in Norway by year-end – all of them fixed on longer term contracts – and there is an increasing need for newbuilds as the market is effectively sold out, with only five units likely to become available before 2015, according to research firm Pareto Securities.
While there are a number of deep-water units under construction and due for delivery over the next few years, these are not considered an economic alternative for midwater work as their higher specification makes them more costly to operate.
Aside from the Cat-D rigs, the only additional newbuild to enter the midwater fleet over the next few years will be well intervention semisub Island Innovator, which is due for delivery from China’s Cosco Shipyard in the second quarter of 2013.
The Odfjell Drilling rig has though already been contracted by Sweden’s Lundin Petroleum to drill 12 wells under a two-year charter.
Statoil has already snapped up two recently delivered newbuilds
– China Oilfield Services Ltd’s COSL Innovator and COSL Promoter – on long-term
contracts for work on the Troll field, with the pair undergoing final testing at
Norway’s Westcon yard.
The demand for high-specification rigs to operate in Norway’s harsher environment, as well as tougher regulations, prevent migration of units that do not meet the requirements from other areas such as the UK.
This in turn has contributed to relatively higher dayrates, even for many of the older Norwegian rigs, with Fred Olsen Energy’s 1980-built semisub Bredford Dolphin having this week secured a charter with an oil company consortium with a dayrate of $442,000. Other units are commanding rates as high as $560,000.
This compares with the UK sector where rig rates in the hot midwater segment have soared this year to around $350,000 per day, with Transocean securing a recent fixture at $395,000.
An expert panel appointed by the Oslo government to look at ways of cutting high drilling costs revealed in its recent report that the costs of hiring a mobile rig in Norway are as much as 90% higher than in the UK sector.
Extra upgrades and other work needed to qualify a rig for Norway can cost up to $70 million, the group found.
Loland said the Cat-D rigs would help to rejuvenate the Norwegian fleet, adding: “We’re not reaching our goals with many of the older rigs.”
He said Statoil may decide to adopt an ownership model on any future Cat-D orders whereby the rigs would be owned within the licence partnership, similar to that already adopted for so-called Category J newbuild jack-ups for which construction and management contracts are due to be awarded later this year.