Reactivations favoured over newbuilds so far
As the supply/demand balance tightens, the reactivation of rigs has been on the rise with approximately 25 jackups, three semis and nine drillships brought back to life since 2021.
However, the level of newbuilds being delivered from shipyards hasn’t increased to the same level witnessed during the short-lived 2019 recovery period.
During 2019, 25 new jackups, four semis and two drillships were delivered from shipyards in the Far East or Singapore but 2022 brought with it just 10 deliveries in total, which is even less than the number delivered during 2020 (11 rigs).
Most of the remaining stranded newbuild rigs available, of which there are 22 jackups, 15 drillships and eight semis, are owned by the shipyards and drilling contractors continue to be very cautious when it comes to purchasing such a rig. However, 2023 could be the year the tide turns on this, especially if the level of demand continues to improve. In the last quarter of 2022, Transocean announced that it had signed a purchase agreement as part of a joint venture for the 7th generation ex-West Aquila drillship for US$200 million from the Daewoo shipyard.
Meanwhile, Saipem confirmed it had exercised its option to buy the 7th generation Santorini drillship (originally ordered by Ocean Rig), which it had been bare-boat chartering from Samsung Heavy Industries since 2021. Meanwhile, it’s understood that various drilling contractors are eyeing the remaining drillships left in yards.
New rig orders unlikely in near term
The level of new rig construction contracts being awarded has all but stopped, with just two new rigs ordered since 2015. Sentiment from the industry is that there is little appetite for new rigs to be ordered following the harsh lessons learned from previous newbuild cycles as well as a lack of spare capital for such an expensive purchase. Therefore, it is unlikely that we will see a wave of new construction anytime soon and instead drilling contractors will look to their own idle fleets or already under-construction or stranded units to meet their client’s needs if current supply runs out.
Source: Westwood
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