It was a busy week in the offshore drilling sector as new work was secured by Noble and Valaris rigs. Updates on drilling activities were not lacking either, as well results were confirmed in Namibia and Norway, and plans were confirmed for a new well in Denmark.
In case you missed it, you can access our previous Rig Market Roundup here.
Contracts
LLOG has exercised a six-month option for Noble 12,000-ft drillship Noble Valiant in the US GOM, ahead of the start of the rig’s previously-fixed six-month contract. The new extension keeps Noble Valiant working into early 2025. The six-month contract extension is to begin in direct continuation of the rig’s upcoming contract, which begins in late January 2024. Both the first six months and the newly-exercised option will see the rig working at a clean operating dayrate of $470,000, excluding mobilisation and potential fees for use of managed pressure drilling (MPD). Noble Valiant is currently finishing work with Murphy Oil Corporation in the US GOM after completing the Oso #1 well.
Noble has been awarded a contract with Wintershall Noordzee for the 350-ft harsh environment jackup Noble Resilient to plug and abandon two wells in the Danish North Sea. The contract has an estimated duration of 60 days, with expected start date in April 2024. The jackup was recently involved in an incident in a port in Denmark where another vessel became unmoored and allided with the rig, but a plan for repairs is now in place which has provided a line of sight to firm up this contract with Wintershall Noordzee. The rig is currently completing a scheduled special periodic survey (SPS) and undergoing repairs in Frederikshavn, Denmark. Later in 2024, it is expected to work in the UK North Sea under a two-well contract awarded by Petrogas in October 2023.
Valaris has secured new work for its 12,000-ft drillships in the Americas, with a two-year contract extension for Valaris DS-16 in the US GOM and an option exercised for Valaris DS-17 in Brazil. Valaris DS-16 got a two-year contract extension from Occidental subsidiary Anadarko Petroleum Corp. in the US GOM, beginning in June 2024 in direct continuation of the rig’s existing firm programme, which started in mid-2022. This extension replaces a previously agreed one-year priced option. An additional dayrate will be charged when managed pressure drilling (MPD) services ae provided over this contract period. Equinor exercised a 60-day priced option for the Valaris DS-17 offshore Brazil. This option commences in March 2025 in direct continuation of the existing contract. Valaris stated that the operating dayrate for this option period is $447,000, including MPD and additional services.
Several Valaris jackups have secured new contracts or had options exercised worldwide, keeping units working in the North Sea and Trinidad & Tobago. Meanwhile, a previously-fixed contract for a jackup offshore Australia has been terminated before it began. In the UK North Sea, Harbour Energy and Valaris agreed to a three-year contract extension for 400-ft harsh environment unit Valaris 120, starting in third quarter 2025 in direct continuation of the rig’s existing terms with Harbour Energy. The unit has been with Harbour since mid-2020. TotalEnergies awarded a new contract in the UK North Sea to 400-ft harsh environment jackup Valaris Stavanger. This term has an estimated duration of 330 days excluding options and is to begin in March 2024. Valaris valued the contract at $48 million, including minor rig modifications. The 400-ft harsh environment jackup Valaris 123 has won a one-well contract with Ithaca Energy in the UK North Sea. This is expected to begin in April 2024 with a minimum duration of 45 to 72 days and a minimum total contract value of $6.3 million. The new contract helps keep Valaris 123 working before its scheduled six-well contract with TAQA for a carbon capture and storage project, which begins in the fourth quarter of 2024. Shell exercised two one-well priced options for the 400-ft harsh environment jackup Valaris 121, to begin in the summer of 2024 in direct continuation of its current contract with Shell. Combined, the two options have an estimated duration of 406 days and contract value of around $55 million. The 400-ft harsh environment jackup Valaris 247 will be leaving the North Sea this year for a two-well contract with an undisclosed operator offshore Australia to start in mid-2024. The rig has now secured further work in the form of a one-well contract with Eni, to begin in the third quarter of 2024 in direct continuation of the previous term. Eni’s contract has a minimum duration of 45 days and an operating dayrate of $180,000. The 400-ft Valaris 249 has been working for an undisclosed operator offshore Trinidad since July 2023. The operator has exercised a one-well option for the rig with a minimum length of 35 days at a dayrate of $137,500. Valaris 249 will remain offshore Trinidad for a one-well programme with Perenco. The rig has also been awarded a new 300-day contract offshore Trinidad to commence in the fourth quarter of 2024 in direct continuation of the work with Perenco. This new contract is at a dayrate of $162,500. The same operator that has contracted Valaris 249 for work offshore Trinidad had also previously hired 400-ft jackup Valaris 107 for a one-well programme offshore Australia. This contract has now been terminated. The terminated contract had an estimated duration of 60 days at a dayrate of $120,000. Valaris 107 has other work lined up in Australia for 2024.
Drilling Activity and Discoveries
Portugal-based Galp has confirmed the discovery of a “significant column of light oil in reservoir-bearing sands of high quality,” at the Mopane-1x well, in block PEL83, offshore Namibia. The news follows the 2 January announcement, when Galp first reported preliminary signs of hydrocarbon presence at the well. Galp said Wednesday it had drilled and logged the Mopane-1X, confirmed a significant oil column, and said it would continue to analyse the acquired data. The company plans to perform a Drill Stem Test (DST) in the coming weeks to assess the commerciality of the discovery. Galp is using the 10,000-ft Odfjell Drilling-managed semisubmersible Hercules for the operation. The drilling operations at Mopane-1X will proceed to explore deeper targets. Upon completion, the rig will be relocated to the Mopane-2X location to further evaluate the extent of the Mopane discovery. Galp is the operator of PEL 83 with 80% interest, while its partners NAMCOR and Custos each hold 10% interest.
Equinor’s exploration well 30/4-4 in the North Sea off Norway is dry. The well was drilled about seven kilometres north of the Martin Linge field and 180 kilometres west of Bergen. The well 30/4-4 Sara is located in production licence 043 FS, which is operated by Equinor with Petoro and Sval Energi acting as partners. This was the first exploration well in the licence. Equinor secured a drilling permit and safety consent for the well in August 2023 and the 10,000-ft Transocean Spitsbergen semisub started drilling in December in water depths of 128 metres. The primary exploration target for the well was to prove petroleum in sandstone in the Hermod Member in the Palaeocene. The well encountered 114 metres of Hermod sandstones with very good reservoir quality. The well is dry. Extensive wireline data has been collected. The well 30/4-4 was drilled to a vertical depth of 2135 metres below sea level and was terminated in shale from the Cenozoic. The well will be permanently plugged and abandoned.
2023 was an active year on the Norwegian shelf with 92 fields in operation at year-end, 27 projects under development, and many exploration wells drilled. According to the Norwegian Offshore Directorate (NOD), the high activity levels seen in 2023 will continue through 2024. As a result of high levels of development activity, oil and gas production is expected to remain stable for the next few years. Over the short term, the new fields coming on stream will offset lower production from ageing fields. Compared with forecasts presented last year, the NOD sees a relatively large increase in investments for 2023 and 2024. In 2023, 34 exploration wells were spudded, which is on par with recent years. 23 of these were wildcat wells with 14 discoveries made: 11 in the North Sea, 2 in the Norwegian Sea, and 1 in the Barents Sea. The largest discovery was Wellesley’s 35/10-10 S (Carmen) in production licence 1148. This discovery may contain between 9 and 46 million standard cubic metres (Sm3) of oil. The resource growth from discoveries made in 2023 is about 50 million standard cubic metres of oil equivalent (Sm3 o.e.). In 2024, between 40 and 50 exploration wells are expected to be drilled in Norway. Exploration around existing infrastructure is considered important so that discoveries can be tied back to existing fields while they are still in operation. Nevertheless, the NOD is encouraging operators to explore actively in more frontier areas in order to realise more of the resource potential.
Eni has begun drilling the Murene exploration well on Block CI-205 offshore Côte d’Ivoire with the Saipem-managed 12,000-ft drillship Deep Value Driller. This is the second well that Deep Value Driller has worked on for Eni under its current contract. Deep Value Driller was bareboat chartered by Saipem in 2023. Saipem is using the rig for an 11-well drilling contract with Eni offshore Côte d’Ivoire. Deep Value Driller began work offshore Côte d’Ivoire in October 2023 with drilling at the Baleine field, which is located on Blocks CI-101 and CI-802. Eni also holds interests in deepwater blocks CI-205, CI-501, CI-401, and CI-801.
TotalEnergies has made a Final Investment Decision (FID) on the Harald East Middle Jurassic well (HEMJ), located in the Danish North Sea. The well is expected to be drilled in the summer of 2024. The field is operated by TotalEnergies in partnership with BlueNord and Nordsøfonden. The HEMJ well will be drilled in the Harald East area, located close to the Norwegian border and the gas is exported through the Tyra East facilities. In a success case, the well could deliver production by the end of 2024. This well is drilled into the Jurassic with good reservoir properties, however with a wide range of subsurface outcomes with respect to volume. The concept for hook-up and potential life extension of Harald will be decided after the well has been drilled. In Denmark, TotalEnergies has under contract the 400-ft jackup, Shelf Drilling Winnner (ex-Noble Sam Turner). The rig started drilling the first of two planned Halfdan infill wells in June 2023 and it is still at the location on the Halfdan field. It is under contract with TotalEnergies into March 2025.
Demand
Lebanon’s energy ministry launched the nation’s third oil & gas exploration licensing round on 27 December 2023, inviting bids for nine available blocks. The offered blocks include unlicensed areas within Lebanon’s maritime exclusive economic zone (EEZ), namely blocks 1, 2, 3, 4, 5, 6, 7, 8 and 10. Of the nine blocks currently on offer, blocks 3, 6 and 7 are newly offered acreage, while the other six have been included in the previous rounds. Blocks 8 and 10 received bids in the Second Offshore Licensing Round, from the consortium involving TotalEnergies, Eni and QatarEnergy, which are currently under evaluation. During the First Offshore Licensing Round in 2017, Block 9 in the same region was awarded to the consortium comprising TotalEnergies, Eni, and Novatek. Additionally, Block 4 was part of the consortium’s acquisition during the same round but was relinquished in October 2022. Novatek left the consortium in late 2022 and QatarEnergy took over a 30% stake in early 2023. The deadline to place bids is 2 July 2024.
ONGC has opened commercial bids for the ongoing rig requirement to contract three HPHT jackups for three years, with an estimated starting date in Q3 2024. The bidders are Jagson Drilling, Greatship, Aban Offshore, and Shelf Drilling. Jagson Drilling was the lowest bidder with the 1975-built 300-ft Deepsea Treasure with a dayrate of $96k. The other bidders were Greatship with the 2009-built 350-ft Keppel FELS Mod V “B” Class Greatdrill Chetna at $122k, Aban Offshore with the 1982-built 350-ft LeTourneau 116-C Enterprise 351 at $123k, and finally Shelf Drilling with the 1983-built 375-ft LeTourneau Super 300 Class Baltic at $150k. It is understood that Aban Offshore would bareboat charter the Enterprise jackup if awarded a contract. The operator also has a tender for four jackups for three years, with an estimated starting date in Q4 2024.
Mobilisation/Rig Moves
The Foresight-owned 350-ft jackup Vivekanand 1 has commenced operations with Oil and Natural Gas Corporation (ONGC) offshore India. The Vivekanand 1 rig completed its previous campaign with ONGC in India in mid-November 2023, and the rig performed its contract preparations in Mumbai, India. This contract was awarded under Category I awards in Q4 2022. With the commencement of this three-year campaign with the same operator, the rig will be busy until Q1 2027. Vivekanand 1 is a LeTourneau Super 116E Class rig that operates in water depths of 350 ft.
The Valaris-owned 400-ft N Class jackup Valaris Norway has completed its contract with THREE60 Energy, on behalf of North Sea Natural Resources (NSNR), and is heading to its next location. The rig mobilised for NSNR to the Devil’s Hole Horst (DHH) appraisal well location in the Central North Sea in October 2023 following the completion of operations for NEO Energy. Now that it has completed its NSNR scope, the jackup is being towed to Liverpool Bay where it is expected to arrive around 15 January 2024. Once there, it will work for Eni throughout 2024 after which it will be replaced by the 225-ft jackup Valaris 72, which was awarded a P&A contract with Eni in the East Irish Sea in early November 2023. Namely, since the Valaris 72 is already busy under a previous contract with Eni into December 2024, the Valaris Norway will take over the work under this contract until Valaris 72 becomes available.
Diamond Offshore’s 10,000-ft semisub Ocean Courage started its four-year contract with Petrobras in Brazil in early December 2023. The rig commenced the contract following its on-schedule delivery post a comprehensive five-year special periodic survey, job preparation, and acceptance testing. The contract was awarded in November 2022, and is set to run until December 2027. Ocean Courage is currently operating in the Campos basin.
Following Valaris’ exercise of its options and the delivery of the 12,000-ft newbuild drillships Valaris DS-13 and Valaris DS-14 in December 2023, the rigs have now left South Korea and are being mobilised to Las Palmas in the Canary Islands to be stacked until they are contracted for work. Valaris took delivery of the DSME 12000 design rigs from Hanwha Ocean in South Korea for an aggregate purchase price of around $337 million.
Valaris 12,000-ft drillship Valaris DS-8 has started work with Petrobras offshore Brazil on a three-year contract. The rig commenced the three-year contract on 31 December 2023, ahead of a previously expected start date in February 2024. This latest contract was fixed in February 2023 and saw the previously cold stacked unit undergo several months of reactivation in the Canary Islands before leaving for Brazil in October 2023.
Stena Drilling’s 10,000-ft drillship Stena Carron left Guyana on 11 January 2024 for Las Palmas for its special periodic survey (SPS). The drillship is expected to stay in Las Palmas for a few weeks before returning to Guyana to continue its contract with ExxonMobil. The operator exercised the option on December 2022 for a six-month extension.
Other News
Thai oil company PTTEP and its Japanese partner Inpex are set to conduct a study on carbon storage potential in the northern Gulf of Thailand. The study will lay the foundation for potential development of Carbon Capture and Storage (CCS) Hub in the Eastern Economic Corridor of Thailand (EEC). PTTEP is also progressing with the first CCS project in Thailand at the Arthit gas field in the Gulf of Thailand., where it expects to start CCS operation in 2027 to reduce 700,000–1,000,000 tonnes of CO2 per year from gas production. Also, in Australia, regulator NOPSEMA last month accepted Inpex’s Bonaparte Basin offshore CO2 storage evaluation drilling plan. Inpex is proposing to drill two exploration wells in the G-7-AP permit in the initial exploration drilling campaign, and there is a possibility that up to three additional wells with associated pre-drill site surveys may also be undertaken during the life of the Environment Plan (EP).
Following payment delays by General Hydrocarbons Limited (GHL) under a drilling contract with Dolphin Drilling in Nigeria, Dolphin has received part payment and proposed payment plan related to remaining past due payments. Following a contract award in 2022, Dolphin Drilling’s 6,000-ft semisub Blackford Dolphin started its 12-month contract with GHL in March 2023. The dayrate under the contract is $230,000. Dolphin Drilling informed of GHL’s past due payments representing net $17.3 million in its Q3 2023 report in late November 2023. The drilling contractor has now received $2 million that brings the total collected since the date of Q3 2023 reporting to $2.5 million. GHL has sent a payment plan proposal related to the remaining past due payments, which the company is considering. Dolphin has recently terminated another contract for the same rig in Nigeria following a failure by Peak Petroleum to pay the mobilisation fee and the two are currently in dispute over the termination. This contract was supposed to start in direct continuation of the GHL contract. However, as a result of the termination, the rig became available after March 2024 and Dolphin is in talks with Oil India for a contract in India, which was previously supposed to be carried out by the 1,500-ft semisub Borgland Dolphin.
TotalEnergies is boosting its interest in two offshore Namibian blocks in the Orange basin, notable for the Venus discovery. The French supermajor is poised to acquire additional stakes from Impact Oil and Gas in Block 2912 (9.39%) and in Block 2913B (10.5%), the latter being the site of the Venus-1 prospect drilled in 2022. TotalEnergies operates both blocks. Completion of the deal is contingent upon approval from Namibian authorities and the joint venture parties, which include QatarEnergy and state-run Namcor. Following the completion, TotalEnergies will hold a 45.25% interest in Block 2913B and a 42.5% interest in Block 2912. Impact Oil and Gas will retain a 9.5% interest in each licence. The company will receive $99 million payment upon closing, being reimbursed for past incurred costs associated with these additional interests.
Beacon Offshore Energy LLC and its subsidiaries have taken the final investment decision to develop the Winterfell discovery in the US GOM as a subsea tieback. Winterfell is located in Green Canyon Blocks 943, 944, 987 and 988 in around 5,200 ft of water. Winterfell was originally discovered in 2021 with appraisal drilling conducted in 2022. The field will be developed via a subsea tieback to the Heidelberg spar on Green Canyon Block 860, operated by Occidental subsidiary Anadarko. The first oil is expected in the second quarter of 2024 and is projected to deliver gross production of around 22,000 boe/d from three initial wells. Beacon has been carrying out operations at Winterfell in recent months with the 12,000-ft drillship West Vela, which is currently managed by Diamond Offshore. This work is expected to conclude around March 2024, after which the rig’s management will be taken over by Seadrill and it will go to work for QuarterNorth Energy. Beacon and its subsidiaries hold a 35.41% interest in Winterfell, which is operated by subsidiary BOE Exploration & Production LLC. Other stakeholders include a Kosmos Energy subsidiary with 25.04%, Westlawn GOM Asset 3 Holdco LLC with 15.0%, Red Willow Offshore with 12.5%, Alta Mar Energy (Winterfell) with 7.55% and CSL Exploration with 4.5%.
The Government of Newfoundland and Labrador is proceeding with Phase III of its review of the Canadian province’s current offshore oil and gas interests and has hired the financial advisory group Rothschild & Co. to present some of the assets in its portfolio to potential buyers. The provincial government holds a 4.9% equity position in Hebron, 8.7% in the Hibernia Southern Extension, 5.0% in the White Rose Extension project as well as asset and exploration teams and intellectual property within the state-owned Oil and Gas Corporation of Newfoundland and Labrador. The government began its review in previous years, receiving an initial report by Rothschild & Co. in April 2022 and moving ahead with Phase II of the review in March 2023. Newfoundland and Labrador said that exercise does not bind it to any subsequent action but will enable it to make an “informed decision on whether to proceed to detailed negotiations to sell those assets.”
Dolphin Drilling has announced a judgement handed down by the Court of Appeal in the UK regarding a legacy tax case. The decision will be appealed. The case is related to tax deductions claimed by Dolphin Drilling under the oil contractor activities rules. Namely, Dolphin in 2011 received a letter of award to provide oilfield services to Total E&P (UK) in connection with drilling activities at the Dunbar oil platform, involving the provision of a semisubmersible unit. To fulfil the contract, Dolphin bareboat chartered the Borgsten Dolphin rig from an associated, non-UK company. The contract with Total included an agreement related to the upgrade and conversion of the unit into a tender support vessel (TSV) to meet Total’s requirements. The UK Tax Authorities (HMRC) concluded that the deductions claimed by Dolphin in respect of amounts paid for the hire of the Borgsten, in calculating its profits for corporation tax purposes should be restricted as the Borgsten was a “relevant asset” within the meaning of Part 8ZA of the Corporation Tax Act 2021 on the basis that it is a structure that can be used to provide accommodation for individuals who work in connection with exploration or exploitation activities. The authorities issued closure notices in relation to the Dolphin’s tax liability. Following two successful appeals defending Dolphin’s position in the First-tier Tax Tribunal in November 2020, and against HMRC’s appeal to the Upper Tribunal in August 2022, the judgement handed down now by the Court of Appeal has found in favour of HMRC. The value of the tax claim is £9.9M, together with interest and costs of £2.9M to date this would total £12.8M (∼$16.3M). Dolphin Drilling has taken steps to immediately appeal this decision, which could take months or potentially years to reach a final outcome. Dolphin has expressed its disappointment not only in the Court’s interpretation of the case, but also in “a fundamental shift in interpretation of the language in the relevant legal test which has potentially significant ramifications for assets within UK territorial waters.”
Image: Valaris 247; Credit: Perenco
