February 2000 Vol. 221 No. 2  Offshore

Robert E. Snyder,  Editor

Rig outlook, new fields

An analytical report appearing in Offshore Data Services’ December 13 Offshore International Newsletter says the outlook is "mixed" for the world offshore rig market. The worldwide rig count bottomed out at 406 contracted units in August, but the activity increase by year-end was almost exclusively the result of improved jackup demand in the U.S. Gulf. Other markets, at best, held their own or saw only minor up-ticks in demand.

The second-largest market, Northwest Europe, was in a "tailspin" that eased in December, but may continue as winter progresses. Various signs do point to the potential for increased rig demand this year in some markets, ODS noted, but it is not an absolute certainty the market will live up to that potential. The report says volatile oil prices will force caution on many operators not to overcommit themselves to projects that may or may not be economical over the long haul, and the recent slide in U.S. natural gas prices, unless reversed, could have a negative impact on U.S. Gulf rig demand. As of late January, this comment on gas prices still appeared valid, though gas demand will likely maintain an overall upward trend.

Gulf of Mexico rig demand increased dramatically, to 150 rigs, after bottoming out at 108 rigs in April. The increase is accounted for primarily by increases in jackup demand. This was driven by independents "ramping up" their drilling programs on the back of strong natural gas prices, which doubled in mid-1999, before another "unseasonably" warm winter caused them to fall.

ODS says more than one industry observer expects U.S. Gulf demand to slip a little in the first quarter. However, operators have work intentions. In recent months, they filed 52 drilling plans for programs that had estimated start dates in December and January. Of these, 32 involve water depths less than 350 ft, boding well for potential jackup demand.

For other world areas, the ODS report said no dramatic change in Latin American rig demand is likely over the near term. Only eight of the presently contracted 51 rigs in the region reach the end of their contracts by March. Over the longer term, Brazil’s initiative to bring in other operators for E&P will translate into attractive work opportunities for drilling contractors – mostly in deep water.

"Dismal" was noted as the word most often heard in connection with the North Sea rig market. Most recent rig moves have been to take rigs to lay-up. In December, 59 jackups and semis were active, with about 68% utilization. One indicator of near-term prospects is that owners continue to market their rigs for work in other areas. A "handful" of new rig requirements for work in late ‘99 are "probably not enough to keep the European offshore rig count from slipping more during first-half 2000."

If any area holds promise for rig owners, it is West Africa. Operator interest in deepwater prospects is high, and quality discoveries are likely to boost the level of interest from 24 active jackups and floaters, at about 59% utilization. Eight of the 11 floating units in the region are committed, but with only 11 of 26 jackups under contract, "the market has a long way to go before any semblance of balance is achieved."

Rig demand in Asia and Australia changed little since bottoming out at 43 rigs in April 1999. Since then, demand has moved in a narrow range between 47 and 49 rigs, at about 65 to 70% utilization. Most recent contracts have been of relatively short duration – only 12 rigs have firm commitments beyond first-quarter 2000. The Australian offshore rig market is improving. Three rigs will move into the area this year. Four of the six rigs there were under contract at year-end.

Field developments. Recent announcements gleaned from operator releases and Offshore Data Services newsletters indicate activity on several new offshore fields.

In the U.S. Gulf of Mexico, Total Offshore Production Systems (TOPS) completed installation of the world’s first 15,000-psi subsea production system on December 10. The high-pressure Gyrfalcon well for Reading & Bates Development Co. had initial production of 13 MMcfgd and 500 bcpd. The well is located in Green Canyon Block 20 in 880 ft of water and is tied back to Shell’s Boxer platform three miles away in GC Block 19. TOPS says a key to project success was the unique adaptation of Cameron’s existing 10,000-psi SpoolTree technology for a 15,000-psi application, saving several months and "millions" of dollars.

Chevron’s A-22, a new fault discovery in Main Pass Block 77, is producing 19.3 MMcfgd and 1,500 bopd. Partners in the well include Apache, Contour Energy, Sabco Oil & Gas and Key Production Co. Chevron has also filed plans with the MMS to install two platforms, one pipeline bundle and one export line in Viosca Knoll Blocks 251 and 252. A multi-well, four-pile structure will be installed in each block. The pipeline bundle will connnect the two platforms. One 8-in. pipeline will run from Block 251 platform to the Destin 36-in. pipeline. Construction could start in April.

Anadarko Petroleum will bring its subsalt Garnet prospect onstream with a single subsea completion. The jackup Charles Rowan is completing the well, which will be tied back to Anadarko’s existing A platform in East Cameron Block 359 – first production is expected by March. Vastar Resources proposes to install a central manifold platform and two 6-in. pipelines in a bundle from a platform in West Cameron Block 28 to the B platform in WC 66. Up to four development wells may be drilled in Block 28 and tied back to the central manifold platform.

In the North Sea, BP Amoco and its co-venturers are proceeding with an in-field development program encompassing Lomond field in Block 23/21, 233 km east of Aberdeen and South Everest field, principally in Blocks 22/9 and 22/10a, 233 km ENE of Aberdeen. Lomond’s second-phase development will be carried out by drilling two wells, starting last December, from the platform. Production is expected early this year.

South Everest will be developed with two wells and a 7.1-km tieback to North Everest platform. Drilling is to start in April, production is expected in third quarter. Drilling will be carried out by the new Santa Fe Galaxy III jackup on a long-term contract. Gas from the fields will be exported via the CATS pipeline to Teeside, liquids via the Forties Pipeline system to Grangemouth.

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