Rig utilisation ramps up in Asia Pacific, reveals Westwood

In the wake of growing energy security concerns, Westwood Global Energy, an energy market research and consultancy firm, has outlined that the rig activity in the Asia Pacific (APAC) region – comprising Southeast Asia and Australia – has been stepped up this year. Although, the majority of stacked jack-ups are being reactivated for assignments in the Middle East.

Westwood informed on Tuesday that the rig activity in the APAC region had become much busier in 2022. However, all that activity is not completely due to increasing rig demand from operators in Southeast Asia. While several cold stacked and stranded newbuild jack-ups are being reactivated, this is being done for contracts outside the region, primarily in the Middle East.

There have been significant changes, in particular for jack-ups and tender-assisted rigs from March 2022, shortly after the Russian invasion of Ukraine. This has led to the ramping up of committed jack-ups and marketed utilisation is now near 90 per cent. Westwood underlines that further improvement of utilisation could be seen in the future, potentially hitting 95 per cent by the end of the year.

Westwood informs that there are only three active drillships in Southeast Asia. Two of these three are working, while Transocean’s Dhirubhai Deepwater KG2 is the lone stacked unit. Although, the rig could be departing the area for a contract elsewhere soon.

Furthermore, day rates for new drillship fixtures this year have been in the $220,000 range, but it is understood that upcoming rates are likely to be closer to $270,000, not including managed pressure drilling (MPD) services, a premium that can add $50,000 or more to the rate, as explained by the energy market research firm.

Based on Westwood’s research, there are presently 12 semi-submersibles in the APAC region with seven being in Southeast Asia while five of those are marketed. The company points out that four of these five units are working, but only two have contracts that extend beyond 2022. The energy market research provider highlights that only three new semi-submersible contracts have been signed this year with day rates still below $200,000.

Moreover, RigLogix data shows 16 rig requirements in the rig enquiry stage in Southeast Asia, but only six of these 16 will last more than 100 days, thus, Westwood claims that these numbers ensure “no rig supply growth and could even drive a rig or two out of the region.”

The firm elaborates that all five semi-submersibles offshore Australia are currently working and while one of those will go idle in July, three of the five are spoken for into 2024. Of the three new contracts signed in 2022, the most recent fixture hit $379,000, well above the previous high of $265,000.

There are currently over 17 floating rigs in Australia, with seven of those lasting over 100 days, thus, with five semi-submersibles in the area, some of those will have to try and string together short-term contracts with some idle time expected should all five remain there.

Westwood underscores that the APAC jack-up market on the surface may not seem as exciting as it should be given where oil prices are, but marketed utilisation in 2022 has improved by 12 per cent and now stands at 90 per cent. This number is a bit misleading and warrants a closer look, according to the energy market research provider, since of the 45 marketed rigs in Southeast Asia that are contracted or committed, six are destined for Saudi Arabia.

In addition to those six, the company says that there are another four newbuilds that are also slated to move there. Therefore, 15 jack-ups will have departed Southeast Asia for contracts with Saudi Aramco by the end of 2022 or early 2023.

A recent contract award for Borr Drilling’s Saga got the attention of the market with a four-year deal at a rate reportedly just below $105,000 while Valaris announced a four-year contract for the Valaris 115 with the same operator in the same rate range. Westwood discloses that day rates for recent shorter-term contract awards have been wide-ranging, from as low as $67,000 to as high as $90,000. In Australia, 2022 fixtures have seen rates in a much tighter range of $112,000-$118,000.

Additionally, the APAC region currently has over 40 programmes in some stage of rig enquiry, including 13 in Australia alone, quite a number given that there are only two jack-ups in the country. In Southeast Asia, the largest number of jack-up requirements are in Malaysia, followed by Indonesia and Vietnam, as pointed out by Westwood.

The energy market research firm states that the need for a safety case and high operating expenses and unions makes Australia a very difficult market to penetrate. In line with this, the Noble Tom Prosser and Valaris 107 are the two primary rigs operating here, while the Valaris 249 recently began work offshore New Zealand. Based on Westwood’s analysis, the rigs may try to enter the Australian market in February 2023 when that contract ends.

Westwood reveals that Southeast Asia is now the lone region in the world where tender-assist barge-type rigs operate and currently, there are 14 of these rigs in the region. The firm further elaborates that nine are working or are committed to work, providing 75 per cent utilisation.

The company’s research shows that much of the work with these rigs is carried out offshore Thailand for state oil company PTTEP, which will employ eight of the nine committed units. These contracts are a mixture of long-term (three-year) and shorter-term (five-month) deals driven by Thailand’s need to boost gas production.

The energy research provider also outlines that one unit currently in China will be going to Myanmar at the end of the year, adding that there are rumours, which indicate that one more may enter the APAC market from West Africa. Taking this into consideration, there is a potential for utilisation to surpass the 90 per cent threshold later this year.

The company says that little data is available regarding day rates, but sources suggest fixtures are likely in the $50,000-$65,000 range. On the other hand, overall rates in the tender market for existing contracts range from as low as $48,000 to as high as $75,000.

The energy market research firm also emphasises that rising inflation is having a direct impact on operating costs, forecasting that increased travel fares will only accelerate the use of local crews and supplies where possible. As a result of this, rig owners are seeking adjustments to day rates, but so far, “we have yet to hear if any have been successful.” 

Westwood concludes that the increase in hiring and using local crews could present a good opportunity for training to come to the forefront in an effort to address this in the long term.