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In July 2008, the deepwater rig market was looking rosy. The rapid run-up in oil and gas prices resulted in a rush of Final Investment Decisions (FIDs) as previously marginal deepwater projects suddenly became economically viable. Although initially tentative, the growth in the rig sector gradually gained momentum as upstream operators jockeyed to contract new-build capacity for their ambitious deepwater drilling campaigns. By September 2008, around 100 new deepwater rigs (semis and drillships) were under construction or planned, a historically unprecedented level of construction.
However, just when $200/bbl looked in sight, the unstoppable finally stopped. Since July, the oil price has fallen over $100/bbl, from its high of $147/bbl, to $40/bbl (December 15, 2008), significantly lower than the current marginal development cost for deepwater and close to the cash cost. Although in the short term this will not unduly concern deepwater operators - primarily because of the long investment horizons required -
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