In mid-March, AGR Petroleum Services, the world’s largest independent well management company, took advantage of its annual rig briefing to operators in London to warn operating companies that there is a small window of opportunity for operators in the North Sea to capitalize on falling rig rates.
AGR claims that although semisubmersible rig rates are expected to drop below $250,000, drilling contractors are beginning to stack their rigs in lieu of accepting short-term contracts at low rates. “This could in turn lead to a return to capacity issues and rising rates once the oil price bottoms out,” said Ian Burdis, vice president of well management for AGR Petroleum Services.
Burdis compared the rig business today to the UK housing market. Although prices are falling, he said, no one is buying because they are holding out for the best deal. The result is that this is creating an artificial market where the true price is not known.
Burdis urged operators to end the current brinkmanship with drilling rig contractors and to progress activity where possible if they expect to make the most of the rate reductions.
“It’s accepted that there are difficult times ahead for operators over the next period,” Burdis said. “Never before have we seen a drop in oil price coincide with a recession, so over the short term it’s going to be challenging. The dip in North Sea activity offers significant opportunities to capitalize on lower rig rates, but this won’t be open for long as contractors opt to bottleneck rigs rather than take a rate reduction.
“To take advantage of the current situation operators must be drill ready and have progressed well preparation in advance. By keeping ahead of the game and committing early to site survey work, companies will be able to maximize activity while rates are low and avoid the delays bad weather can cause during the winter.”
Burdis believes that while there will be a major reduction in E&A activity in the North Sea through this year and into 2010, projects will pick up toward the end of next year. He expects activity in other areas to remain fairly steady.
“Although we have seen a reduction in activity in the North Sea, we still have a full program of activity planned in Norway, Australia, and Southeast Asia and are still pretty busy in the US Gulf of Mexico too. While the current situation means that we’re not going out and completing wells in the UKCS, we are busy with our other revenue streams from reservoir management and engineering,” Burdis said.
In brief, AGR Petroleum Services believes that taking advantage of rig campaigns offered by well management companies is a prudent way of ensuring activity is carried out as efficiently and effectively as possible. The company, whether right or wrong, is speaking from experience, having pioneered this campaign model in the North Sea more than four years ago.
The message to North Sea operating companies is clear – if operators are interested in getting the best deals, they need to secure contracts as soon as possible and begin drilling right away.
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