Esgian Rig Analytics Market Roundup (Week 20)

In case you missed it, you can access our previous Rig Market Roundup here.

Esgian Rig Analytics story 

Following the recent departures of two Odfjell Drilling-managed semisubmersibles from Norway to Africa, four more rigs have been contracted to work outside of the North Sea region in an upcoming period, with three of them managed by Transocean. These latest fixtures have brought some interesting new moves, which will leave Norway with a significantly smaller fleet compared to previous years. Read more here…

The US Gulf of Mexico working jackup count has risen to six this month, after holding steady at five since mid-2022. More here…

Contracts

Shell has awarded Noble’s 12,000-ft drillship Noble Voyager (Maersk Voyager) a contract to drill an exploration well offshore Mauritania, expected to commence in continuation of the rig’s current contract with Shell. The new contract for Noble Voyager has an estimated duration of 60 days at an undisclosed day rate. The contract includes mobilization and demobilization fees and also has an option to extend the duration by up to 24 additional months, to be priced using an agreed fair market rate mechanism. Shell recently signed an amendment to its exploration and production contract for Block C10 offshore Mauritania, extending the exploration period in anticipation of drilling an exploration well on the block this year. Noble Voyager is currently operating offshore Mexico for Shell. Earlier in May, Noble indicated that Shell would also utilize the rig offshore Colombia later this year.

Noble Corporation has been awarded a long-term contract with Petrobras for the ultra-deepwater drillship Noble Faye Kozack to perform drilling operations at the BM-S-11 and Tupi fields offshore Brazil. The contract has a firm duration of 2.5 years, with expected commencement in Q4 2023. The contract value is approximately $500 million, including a mobilisation fee and additional services provided. Noble said the new contract will see a Noble drillship reenter Brazilian waters and mark the company’s first collaboration with Petrobras in many years. The 12,000-ft Noble Faye Kozack is a dual BOP 7th generation drillship built in 2013. It is currently operating in the US Gulf of Mexico for QuarterNorth after which it is scheduled to work for LLOG into August 2023.

Vantage Drilling has received letters of award for new jobs in West Africa and Asia with its jackups Topaz Driller and Soehanah. The 375-ft Topaz Driller is currently working for Petrobel offshore Egypt under a bareboat charter to ADES. Vantage said that this would continue through the second quarter of 2023, after which the unit will move onto a previously announced one-well contract with Eni offshore Morocco. Topaz Driller has now received a conditional letter of award for work in West Africa with a currently undisclosed client, to begin directly following the Morocco work. This would keep Topaz Driller working into the first quarter of 2024. The 375-ft Soehanah is currently working for Medco Energy offshore Indonesia on a contract scheduled to conclude in the third quarter of 2023, subject to well-in-progress provisions. Soehanah has received an unconditional letter of award for a new two-year contract with a currently undisclosed operator, to begin in direct continuation of the current contract. Vantage stated that the dayrate on this new contract is “significantly improved” compared to the rig’s current rate of $58,000.

Shelf Drilling has confirmed the award of a one-well contract extension to 350-ft jackup Shelf Drilling Mentor offshore Nigeria. The recent extension is around 120 days and is valued at around $16 million, keeping the rig working into July 2023. The operator for the contract is undisclosed by Shelf Drilling, though market sources have indicated the rig has been working for First E&P since July 2022.

Northern Offshore finalised contract extensions for the 400-ft jackup Energy Enticer, 400-ft jackup Energy Edge, and 375-ft jackup Energy Embracer to continue working offshore Qatar. Northern Offshore’s contract extensions will keep the jackup Energy Embracer busy until ~January 2025, Energy Enticer until ~September 2026, and Energy Edge until June 2026. On 9 May 2019, Northern Offshore announced the contract award from QatarEnergy for the Gusto MCS CJ-50 designs jackup units Energy Enticer and Energy Edge. The contract for the GustoMSC CJ46 jackup unit Energy Embracer was awarded on 27 January 2020.

Drilling Activity and Discoveries

Petrobras has informed the market that appraisal well 3-BRSA-1387D-SPS in the Aram block has identified the presence of hydrocarbons. The block is located in the Santos Basin in a water depth of 1,979 m (6,493 ft) of water. The well, which is being drilled by Constellation’s 12,000-ft drillship Brava Star, is in progress and will continue to be drilled to the target depth in order to verify the extent of the new discovery, in addition to characterising the conditions of the reservoirs found. Petrobras says the Aram block is an important asset for exploring the remaining pre-salt potential, particularly in the Santos Basin. The Aram wildcat well was also drilled by Brava Star, which is firm with Petrobras into mid-2026 with an option to extend. Petrobras operates the Aram block with 80% interest. CNPC holds the remaining 20%.

Trillion Energy International has drilled the Bayhanli 2 well at the SASB field in the Black Sea offshore Turkiye to a depth of 11,237 ft (3,425 m), identifying around 141 ft (43 m) of gas pay. The company is currently selecting perforation intervals to bring the well into production. After Bayhanli 2 is completed, GSP 333-ft jackup GSP Uranus will move on to drill the Alapli 2 well at the field. Bayhanli 2 is the company’s fifth well at SASB and Trillion is now evaluating how to maximize gas production from each well.

Demand

Equinor and Vår Energi issued requests for information (RFIs) for multiple programmes offshore Norway starting in late 2024/early 2025. The projects are located in the Barents Sea and the North Sea. If these projects progress to tenders, they are likely to draw a lot of interest among drilling contractors.

Cairn Oil & Gas is seeking global expressions of interest (EOIs) for the supply of an offshore jackup rig for the east and west coasts of India. Cairn Oil & Gas is part of Vedanta Resources Limited, which plans to invest $20 billion over the next four to five years in the expansion of brownfield capacity and setting up green field capacity for oil & gas, renewable energy, display glass, semiconductor, mining and smelting. The project will have an estimated duration of a minimum of 1 year, and 2+ years will be considered for the award based on commercial terms and rig suitability. The expected start window is set for Q2/Q3 2023. The minimum technical requirements include a water depth of 100m, 2000HP power, 10K psi BOP, and 7,500 psi working pressure. Responses to the request for EOIs are due by 31 May 2023.

Mobilisation/Rig Moves

The Shelf Drilling-owned 300-ft jackups Compact Driller and C.E. Thornton have completed customer acceptance. The jackup Compact Driller completed its contract preparations in the UAE in April 2023 and the C.E. Thornton completed its planned out-of-service period in India in May 2023 ahead of the new contract. Both rigs have started their new contracts with Oil and Gas Natural Gas Corporation (ONGC) for three years. Compact Driller is of a LeTourneau 116-C rig design and C.E. Thornton is of a LeTourneau Class 53-SC rig design. Shelf Drilling has 35 of 36 rigs under contract as of 15 May 2023.

Abu Qir Petroleum’s development drilling campaign at North El Amriya and North Idku (NEA/NI) in Egyptian waters of the Mediterranean is continuing, as Egyptian Drilling 375-ft jackup El Qaher I completed the drilling of the NEA #5 well this month and has moved on to drill the PY #1 well. Abu Qir Petroleum is a joint venture between Energean and Egyptian General Petroleum Corporation. NEA #6, the first well in the current drilling campaign, delivered first gas in March 2023. Energean noted the rate of decline from the well has been higher than expected. The recently-completed NEA #5 will be flow tested ahead of first gas in 2023. El Qaher I will be used to drill the PY #1 and NI #1 wells, which are also expected to come onstream this year. NEA/NI is adjacent to the Abu Qir concession. Energean stated that further infill and exploration targets to support production from Abu Qir are being studied for drilling in 2024.

Other News

Vantage Drilling International reported a net loss attributable to controlling interest of $2.3 million for the first quarter of 2023. Vantage previously reported a net loss of $16.4 million for the fourth quarter of 2022. Total revenues for the first quarter were $77.072 million, including $47.9 million in contract drilling services. EBITDA was $6.3 million. Vantage CEO Ihab Toma stated, “While we used cash in the first quarter of 2023, the work done during the quarter was important to putting the company back on the path to generating cash. Transitioning from legacy contracts to current market priced contracts underpins this strategy.”

Seadrill has given Vantage Drilling formal notice of termination of the marketing agreements for floating rigs West Polaris, West Capella and West Aquarius, and formal notice of termination of the management agreement for West Aquarius. Seadrill acquired these three rigs earlier this year as part of its acquisition of Aquadrill and had previously stated that it would be taking over management of the units. Seadrill had previously managed these rigs via an agreement with affiliate Seadrill Partners, which became Aquadrill in 2021. The 10,000-ft semisub West Aquarius, which recently left the yard in the Canary Islands after maintenance and reactivation work, is currently transitioning back to Seadrill’s management. The 10,000-ft drillships West Capella and West Polaris will continue to be managed by Vantage Drilling during their current and previously fixed contracts. West Capella is currently drilling an exploration well for Eni offshore Mozambique, after which it will move to Indonesia for a four-well contract with Harbour Energy that is expected to keep the rig working through the second quarter of 2024. West Polaris is under contract to ONGC into the third quarter of 2023. The rig is currently being offered into a tender to ONGC. If the rig is awarded a new contract with ONGC, Vantage will continue to manage it during that period.

Following extensive discussions between Orcadian Energy and the North Sea Transition Authority (NSTA), the NSTA has declined Orcadian’s request to extend Phase A of Licence P2320 located in the UK North Sea. As a consequence, the licence expired on 14 May 2023. In addition, the potential disposals of interests in sub-areas of the licence to Rapid Oil, announced in January 2023, and Carrick Resources, announced in August 2022, will now not proceed. Orcadian has been in farm-out discussions with multiple counterparties regarding the drilling of an exploration well within the former P2320 licence area and a number of those companies have agreed non-compete arrangements which should ensure that any reapplication for a licence over the same area, by any of those companies, would be made in partnership with Orcadian. The P2320 licence contained the Blakeney discovery which had 2C Resources of 25 MMbbl and which represented only about 0.5% of the combined Pilot, Elke, Narwhal and Blakeney development project NPV evaluated in the Competent Person’s Report, assuming a $60/bbl oil price. The licence also contained the Feugh, Dandy, and Crinan discoveries, and the Bowhead and Carra prospects. Orcadian intends to make an out-of-round application for a new licence covering the extensions of the Pilot field into the P2320 area, the Blakeney and Feugh discoveries, and the prospects identified using the TGS seismic data and Quantitative Interpretation products. It is anticipated that this process could take up to six months. Licence P2244 (the Pilot field) remains the company’s key asset and the company’s interest in this licence is unaffected by the NSTA decision on Licence P2320. The focus for the Pilot field is to find a farm-in partner or a new owner and the intention is to elicit offers during 2Q and 3Q of 2023 so that a new operator can take the project forward.

On 5 March 2023, Seadrill was served with a claim from SFL Hercules Ltd. (SFL), filed in the Oslo District Court in Norway, relating to Seadrill’s redelivery of the Hercules semisubmersible to SFL in December 2022. Seadrill previously operated the 10,000-ft semisub Hercules under a bareboat charter and management contract with SFL. The rig’s management was transferred to Odfjell Drilling last December. In its petition, SFL claims that the rig was not redelivered in the condition required under the contract with SFL and seeks damages in the amount of approximately NOK 300 million (about $28 million). Currently, the Hercules is out of service in connection with a special periodic survey (SPS) and upgrade work in Semco Maritime’s yard in Hanøytangen, Norway where it has been since late 2022. The SPS and upgrades have an estimated total cost of approximately $100 million, where most will be capitalized for accounting purposes, and the SPS is expected to be completed in June. The rig will then move to Canada and start a one-well contract with ExxonMobil. The duration is estimated to be about 135 days, including mobilisation, and the contract has an estimated value of $50 million. Thereafter, the rig will move to Namibia and begin a recently awarded contract with Galp Energia for two wells plus an optional well testing. Excluding optional days but including mobilisation, the duration will be approximately 115 days, with an estimated contract value of about $50 million. The rig will be open for new contracts from Q2 2024 onwards.

Looking to enhance safety and efficiency on its semisubmersible Island Innovator, drilling contractor Island Drilling has installed two SpaceX’s Starlink systems for testing on the rig. According to Island Drilling, this upgrade brings real-time data relay between offshore and onshore teams for faster decision-making and high-speed internet for data-heavy tasks and software updates, even at sea. It also enables instant contact with emergency services when needed and high-speed internet for the crew. The 4,000-ft semisub Island Innovator is currently in Hanøytangen, Norway where it is preparing for a contract with Dana Petroleum in the UK North Sea with a start date in June 2023. The rig arrived in Norway in April following a journey from Mauritania where it had been working during the first quarter of the year, conducting plugging and abandonment work at Tullow Oil’s Banda and Tiof fields with Petrofac managing these operations.

The UK’s North Sea Transition Authority (NSTA) has announced the offer of awards for 20 carbon storage licences at offshore sites, including some near Aberdeen, Teesside, Liverpool, and Lincolnshire. The NSTA launched the UK’s first-ever carbon storage licensing round in June 2022, with applications closing in September. The licencing round resulted in successful applications from 12 different companies. The 20 licences in total are around 12,000 square kilometres in size. This first round is likely to be the first of many as up to 100 CO2 stores could be needed for the UK to meet the net zero by 2050 target. The licences were selected following a process which considered attributes such as the geology, proximity to existing infrastructure – as is found at Bacton off the coast of Norfolk – and links to industrial clusters, which are expecting carbon storage to help meet decarbonisation goals. The need to share offshore space with other users of the seabed such as wind developers and petroleum operations was also considered as part of the process. Once a licence has been awarded by the NSTA and before a project can progress, it also needs to obtain a seabed lease from The Crown Estate or Crown Estate Scotland. Further consents and approvals will be required ahead of any appraisal activity taking place. The NSTA says that, once the new storage sites are in operation – and in some cases first injection could come in as little as six years – they could make a significant contribution to the aim of storing up to 30 million tonnes of CO2 per year by 2030, approximately 10% of total UK annual emissions, which were 341.5 million tonnes in 2021.

France’s BNP Paribas has announced that as part of its plan to strengthen its energy transition ambitions it will no longer provide any financing dedicated to the development of new oil and gas fields, regardless of the financing methods. The bank has set a target to reduce its financing of oil exploration and production by 80% by 2030. Besides no longer providing financing related to the development of new oil fields, BNP Paribas is also phasing out financing to non-diversified oil exploration and production players, along with reducing the share of the general corporate-purpose facilities allocated to oil exploration and production.

Energean expects to submit a final field development plan for the Olympus Area to the Israeli government in the third quarter of 2023 for approval and take final investment decision for the project before the end of the year. The company plans to develop the area as a tie-back to the Energean Power FPSO. Energean Power is already being used at the company’s Karish field offshore Israel. The Karish North gas discovery offshore Israel is also being tied into Energean Power. The company carried out a drilling campaign at the Olympus area on Block 12 offshore Israel over 2022. The Zeus and Athena wells discovered 25 bcm (around 160 mmboe) of natural gas resources, while the Hermes discovery was estimated at around 7 bcm (45 mmboe). Energean stated that the Olympus development is begin prioritized over the Tanin development offshore Israel, which is now expected to be deferred into the 2030s. The company said that the Olympus resources can be developed at a lower cost than Tanin due to the closer proximity to the FPSO. The Olympus resources also carry no seller royalties. Olympus gas production is anticipated to be sold into the Israeli market, with excess production to target demand in Egypt and Jordan.

Petrobras has received news regarding the rejection of the environmental licence for Block FZA-M-59 in Amapá Profundas, but also clarifies that it has not officially been notified by IBAMA. Once notification has been received, Petrobras intends to file a request for reconsideration. Petrobras says it understands that it has strictly followed all the requirements of the licensing process, and all the resources mobilised in Amapá and Pará for the pre-operational assessment, which involved a simulation to test emergency responses plans, were done strictly in accordance with IBAMA’s decisions and approvals. Petrobras notes the development of this block is a commitment the company made to ANP, and if not carried out, a contractual fine will be imposed. Petrobras stated that it remains committed to developing Brazil’s Equatorial Margin, recognising the importance of new frontiers to ensure the country’s energy security and the resources needed for a fair and sustainable energy transition. All efforts are being made to obtain the drilling license in the Potiguar Basin, according to the Strategic Plan 2023-27, as well as the execution of exploration projects planned in Brazil and internationally. In light of this decision, the rig and other resources that were mobilised to Block FZA-M-59 will be redirected in the next few days to other activities in the Southeastern Basins. The rig involved is understood to be Ocyan drillship ODN II, which is contracted to Petrobras until late 2026. Furthermore, Petrobras reaffirms that the well that is the object of this licensing effort is located 175 km (109 miles) off the coast of Amapá and over 500 km (311 miles) away from the mouth of the Amazon River.

Image credit: Vantage Drilling