Drilling advances

	Vol. 225 No. 1
ROBERT E. SNYDER, EXECUTIVE ENGINEERING EDITOR

Record water-depth drilling. In Mid-November, Transocean and ChevronTexaco announced that the Transocean drillship Discoverer Deep Seas had set a new world water-depth drilling record by spudding a well in 10,011 ft of water in the US Gulf of Mexico. The record – set while constructing ChevronTexaco's Toledo well in Alaminos Canyon Block 951 – marks the first time in the offshore drilling industry's history that a drilling rig has explored for oil and gas in more than 10,000 ft of water. The previous world water-depth record was 9,727 ft in the US Gulf by another Transocean drillship, Discoverer Spirit, in October 2001, working for Unocal.

Deep Seas and it sister drillships, Spirit and Discoverer Enterprise, incorporate and use Transocean's patented dual-activity technology, which saves time by allowing drilling tasks to be performed in parallel, rather than sequentially, as with conventional offshore rigs. For the record-breaking operation, Deep Seas used a subsea BOP operating on a 2% concentration of Houghton Offshore's Stack Magic 200 BOP fluid, which provided lubrication and corrosion protection. Transocean's mobile offshore drilling fleet includes 13 fifth-generation semis and drillships, plus 15 other deepwater semis/ drillships.

Since November 2000, according to the Offshore International Newsletter, operators have filed plans for 12 Gulf of Mexico drilling programs in 9,000-ft waters or greater, including BHP Billiton's Walker Ridge program, and Anadarko's Lloyd Ridge program, which came up with a dry hole on LR Block 360 earlier in 2003. Most deepwater plans filed recently cover work in the Alaminos Canyon area by Unocal and ChevronTexaco. Unocal, in 2002, filed plans for two programs in the area, while Chevron Texaco filed plans in June 2003 for three Alaminos Canyon programs.

Oceaneering expands ROV activity. In two separate transactions, Oceaneering plans to acquire 116 ROVs for a total cost of $158 million – 82 ROVs from the Subsea 7 company, and 34 ROVs from Stolt Offshore. This acquisition will increase Oceaneering's ROV work class fleet by 70%, to 213 vehicles, and the observation class fleet to 38 from 10. Reportedly, the company's strategy is to be well positioned for an expected recovery in floating drilling rig demand.

With the newly acquired ROVs, if the proposed deals go through, Oceaneering's market share would increase to an estimated 51% from 30%, according to Lehman Brothers. Major competitors include: Sonsub, a subsidiary of Saipem (with a 14% share); Thales (9%); the remaining Stolt Offshore fleet (8%); and the remaining Subsea 7 fleet (6%).

Rig count inching up. The first nine months of 2003 was a period of slow steady upward growth. The active US rig count started the year at 854, and was on a steady upward trend for each month. By May it had increased to 1,035, the first monthly active rig count over 1,000 since November 2001. By September, it was 1,093, and still moving upward. The overall active rig count for November broke the 1,100 mark, and could possibly be over 1,200 by the end of the year (we hope). 

Overall, active rig counts increased by about 28% since January, while the overall rig and equipment price index indicated an increase of 6.4%. Idle rigs had moved back to the field and the supply was tighter than it had been since mid-summer 2001, with demand still increasing. With the US rig count moving up, there could be a shortage of rigs with crews – similar to 2001, when the active rig count peaked in August.

This rig activity summary was basically what appeared in the third-quarter Oilfield Appraiser (OA) by Hadco International. In describing the rig market, OA notes, buyers shopping the market for small fleets of active rigs do not have a lot to choose from. Smaller contractors are enjoying the improved demand and, as long as cash flow continues to justify operations, they have little incentive to sell.

Day rates and turnkey rates are increasing, but not as fast as the increased active rig count. Like rig and equipment prices, work rates do not track to increased rig utilization until demand outpaces the availability of rigs with crews. We were approaching that point last October, and operators were offering longer term contracts to lock in rigs for up to two years, with renewal options.

OA advises rig owners to not be mistaken about rig/ equipment prices. “That old junk rig you have out back is still junk. But the value of that rig you have working every day has increased considerably.” In the third quarter, rigs rated at 12,500 to 15,000 ft, in good condition, gained almost 13%. This depth grouping represents about 18% of the active rig fleet.

Big, deep-rated electric rigs are still considered the most desirable by most drilling contractors. There is no doubt they command higher day rates, and deep gas drilling is increasing. However, rigs rated at over 20,000 ft make up only 6% of the total active US fleet.

The most active grouping of drilling rigs is those rated at 10,000 to 12,500 ft, making up about 23% of the active rig fleet – prices for good rigs in this grouping increased by over 8% in the third quarter. Most active rigs in the US are still drilling for gas – over 90% of the active rigs are working on gas wells. One year ago (2002), 83% were working on gas jobs, but there were fewer active rigs at that time. It is unlikely there will be a swing to more oil drilling in the next year or so. Additional oil drilling will not be taking rigs from active gas jobs.

Yes, the oilfield has been steadily gaining momentum in 2003, the OA says. Will it carry over into 2004? That seems to be the number one question for both contractors and operators. Contractors are still cautious and conservative, limiting spending to items that show a short-term benefit. A long, cold winter is just what we need to get the gas drilling and production in gear. Current supplies are about 7% lower than normal, according to recent reports. It's far too late to drill for additional gas for this winter, and current gas production indicates there may be spot gas shortages this winter.

By all reasonable indicators, OA concluded, it is most probable that the oilfield will see steady upward growth for the balance of 2003 and into 2004. Some slowdown in drilling and service rig activity was expected late in the year, as weather and moving rigs became a factor.

Come February, World Oil will bepublishing its forecast for 2004. We hope we can be optimistic, since we haven't fully understood why operators didn't drill more in 2003, with $30 oil and $4-$5 gas.