• DCube(Demand Database): Field-by-field coverage for the global oilfield service companies and their spending
In the latest version of DCube we have launched a new set of templates including Contract Analysis, Supplier Analysis and Segment Analysis.
• SCube(Supplier Database): Detailed insights into revenues and contracts of the largest oilfield service companies
SCube now covers oilfield service contracts in detail. Use it to identify relationships between service companies and E&P Operators. It is also possible now to produce Fact Sheets on desired service companies from the Tools menu.
• RigCube (Rig Supply & Demand Database): Insights into historical and forecasted global rig supply and demand
Latest version of RigCube is also enriched by Operator Fact Sheets. Activate "Rig Demand Years", choose Operator and select "Operator Fact Sheet" in the Tools menu.
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Rystad Energy noted at the beginning of 2016 that approximately 100 rig years of demand were at risk, as previously announced projects continued to slide to the right and failed to reach FID. The record books will likely show 2016 as one of the most challenging years, if not the most challenging, for the offshore drilling sector. Global market rig demand in 2016 for the mobile offshore drilling fleet declined 22% from the previous year, which had already seen an 11% decline from 2014. Rig retirements during 2016 were nowhere near sufficient to bring supply into balance.
While dismal, 2016 did see approximately 71 rig years of demandenter the market as both shallow and deepwater projects made it through the approval process. As a comparison, projects receiving FID approval in 2015 and 2014 accounted 131 and 366 rigs years of demand, respectively. For 2017, Rystad Energy estimates projects with the potential to reach FID could revive just under 130 years of rig demand as operators adjust to the lower price environment and find ways to make their projects economical.
In contrast to projects receiving approval in 2016, Rystad Energy noted 44 offshore projects being postponed, thereby delaying 82 rig years of demand for the combined floater and jackup markets. Projects expected to reach FID last year and did not, such as Trestakk, Dvalin (Zidane) and Johan Castberg, only serve to highlight the horrible market environment that was 2016.
The left chart shows rig demand split by region and based upon the underlying projects. Western Europe, South America and West Africa are three regions where project deferrals are prolonged, as operators explore ways to achieve economic viability. Libra and Sepia in South America, Cameia in West Africa and Snorre 2040 in Western Europe are examples of delays having an impact on rig demand.
The right chart illustrates the water depth breakdown of the projects incurring delays. Over 60% of the projects where rig demand was deferred during 2016 are located in water depths between 3,000 and 7,500 feet.
At the time of the writing of this article, approximately 25 years of rig demand entered the market through projects securing FID approval. Those projects reaching FID now share several factors in common including improved supply chain cost efficiencies, drilling efficiencies, and, in some cases, near-field development opportunity. In Western Europe breakeven prices for some of the now-delayed projects averaged $75 per boe in January 2015. Two years later the breakeven prices are down 40% to $45 per boe. In some regions, breakeven prices are reported at or below $30 per boe. Shell recently approved Phase 1 of its Kaikias deepwater project, in the Gulf of Mexico, with a breakeven price below $40 per boe. Separately, BP and Premier Oil each approved offshore projects in Indonesia earlier this year. BP approved the third train for its Tangguh LNG project while Premier Oil approved its BIGP cluster of fields. Other satellite projects that are likely to receive approval in 2017 are Total’s Zinia 2 offshore Angola and Ikike offshore Nigeria. We are also monitoring projects such as Fortuna in West Africa and South Pars 11 in the Middle East.
Just as 2016 was challenging for the offshore drilling market, there is no denying 2017 will be similar. Rystad Energy does not expect to see the rig market come into balance this year and global offshore rig utilization will continue to be depressed, especially if approvals do not materialize until the second half of 2017. However, as operators restructure project costs we expect to see traction on previously deferred projects translating into future rig demand.