Monday December 15, 10:37 am Eastern Time
Soaring costs and scarce rigs hit oil exploration
By Sean Maguire
LONDON, Dec 15 (Reuters) - Soaring rates for rig hire and a hectic pace of exploration will push the offshore drilling budgets
of oil companies to a mammoth $16 billion next year, industry analysts say.
While that amount has quadrupled since 1994 the actual increase in rig activity has been just 30 percent, underlining the extent
of the cost explosion in the offshore services industry, they added.
Executives at a leading British exploration company have privately complained their drilling costs have doubled in the last year,
forcing a reappraisal of their portfolio of development projects.
But with oil company profits healthy, availability of rigs, not their rising cost, is still the major limiting factor in exploration, says
Stuart Cochrane of Aberdeen-based consultants Petrodata.
''For the big companies cost hasn't yet hit rig demand as the money is there,'' said Cochrane. ''What has affected work
programmes has been sheer lack of availability.''
In the U.S. Gulf, smaller operators were deferring exploration drilling in shallower waters in favour of maintenance and
production drill work that was a less risky use of their money, he added.
But in the North Sea and global deep-water provinces potentially rich in undersea oil a lack of suitable rigs has begun to crimp
the ambitions of field operators.
Rig demand should have risen by 15 percent this year but available supply could meet only a third of that growth, says
Petrodata. The long term shortfall will be around 65 to 100 rigs at minimum, they add.
''If you have rigs chartered for exploration next year then you are fine, if not then you are totally at the mercy of the sub-let
market,'' said Cochrane. ''If you have long-term development drilling to do then forget it.''
''The shoe may not be pinching in pure exploration, which is still in its infancy in ultra deep-water,'' said Norman Smith, of
Smith Rea upstream consultants. ''But it is influencing the extent of development activity.''
The rig scarcity has been a boon for the seismic industry, added Smith, which has expanded as companies survey more
thoroughly before committing to drilling.
A slump in the drilling market in the late 1980's limited rig fleet expansion. The hunt for oil has since moved to deeper water and
harsher environments which has led to considerable rig upgrading and new building.
Companies have responded to shortages by underwriting the expense of rig construction either with long contracts for their use
or by entering joint ventures, while others have formed partnerships to share rigs.
Norway's state-owned Statoil (STAT.CN) and Saga Petroleum (SAPOa.OL) have combined to share five drilling units in a
move to prevent rig shortages slowing work programmes, and other companies in the North Sea plan cooperative ventures.
New entrants should bring the global deepwater fleet up to 100 from the current 60 drilling units by the year 2000, though
shortages will continue because 20 percent of the fleet is still contracted to mid-water work.
The problem has been worsened by the lack of qualified personnel in all upstream sectors.
A Norwegian company building a deepwater semi-submersible has been unable to contract it out because potential customers
doubt the firm can find experienced staff for the unit, industry sources say.
Skilled geo-scientists, seismic analysts and other technicians are also in short supply, forcing up the cost of retaining staff and
pressuring exploration budgets.
''There is a particular shortage here of skilled chemical and process engineers,'' said a spokesman for Britain's Offshore
Contractors Association. |
