Oil Rigs - Booming Oil Business

January 2nd, 2008 at 07:09am Under Oil Drilling+ Oil Rig+ Oil and gas+ Oil business+ Oil company+ Oil fields

Oil explorers expect to aim more for deepwater rigs this year as shortages caused crude oil prices to triple in the world’s second-biggest market for the oil rigs. This is the tightest oil rig market not seen in a lot of years. Stated by an U.N. Executive at Oil & Natural Gas, who has spent 31 years in oil exploration.

A boom in exploration in India,the fourth-biggest Asian economy, has tripled oil rig usage over the past four years, adding to a global shortage and causing delays in tapping natural gas off the Indian east coast. Transocean, the world’s largest offshore drilling company, may raise oil rig prices further after India completes the biggest auction of offshore blocks this month.

“Most of the oil rigs in Asia are from India”, said Tony Regan, a consultant in Singapore at Nexant, a U.S.chemicals, oil and gas consultant. “The demand for oil rigs will continue in response to the new exploration rounds”. India intends to offer 55 exploration areas this month and announces a new round for more rigs in March especially to serve the hydrocarbons plants in India.

Oil explorers have drilled less than half of the 218 wells agreed under exploration licenses awarded by the government since 2000, underscoring the need for more rigs. The area covered by the licenses is the size of Texas USA. India is deploying 31 floating rigs, some able to drill holes as deep as 9,100 meters, or 30,000 feet and to 85 rigs for the United States as of November. The Asia- Pacific region accounts for 108, or 31 percent of the world’s offshore oil rigs. Explorers worldwide were using 92 percent of the offshore oil rigs deployed. The rig utilization rate in South Asia was 97.6 percent. Oil Rig rents have tripled since 2005 for new oil rig contracts stretching up to 2012 as explorers seek to decrease the delay between discovery and development and refinery to take advantage of current high oil prices.  

Daily Oil Rig Costs

An offshore rig cost an average of $137,509 a day in December, compared with a worldwide average of $99,382 in January 2006. The number of rigs earning at least $300,000 a day in 2006 rose to 29. Offshore jack-up rig hiring rates have risen to as much as $200,000 a day from $40,000 a day in 2002-3. Reliance is paying $320,000 a day until August 2008 to rent the Deepwater Frontier rig, more than twice what the rig’s owner, Transocean, charged an earlier client, according to Transocean. The rent is set to rise to $477,000 a day, if Reliance extends the contract in 2008 for another three years. The increase in rig rentals has doubled the costs and delayed development at Reliance’s biggest gas discovery in the Krishna Godavari Basin. Two of Transocean’s rigs will arrive late. 

Transocean, whose oil rig helped make the first Indian offshore discovery in 1974 at Mumbai High, has increased its work force in India to about 1,700 on 10 rigs, or 15 percent of the global total, from 25 workers in 2001. The company, based in Houston, plans to add three oil rigs in India the upcoming year. Transocean, the world’s largest offshore drilling contractor with 82 units, made $296 million, or 10.2 percent, of total sales from India, according to its 2005 annual report. Revenue from India more than doubled since 2003, the fastest among Transocean’s main markets. Shares of Transocean climbed 16.07 percent last year compared with a 13.61 percent increase in the Standard and Poor’s 500 Index. Transocean shares closed at $80.89 Friday, trading at a multiple of 38 times. 

Oil Companies in India are entering the rig business because of the scramble for oil rigs worldwide, fueled by a boom in offshore exploration in the Gulf of Mexico and off China, West Africa and Brazil.

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