Offshore rig market improvement in 2021 driven by high EPC spend – Westwood

The latest analysis from the specialist energy market research and consultancy specialist, Westwood Global Energy Group, has revealed a year-on-year growth for the global offshore rig market at the close of 2021, up 200 per cent from 2020.

This has been bolstered by significant engineering, procurement and construction (EPC) spend, closing last year at $41.7bn, close to 2019 levels, Westwood has explained.

Further analysis shows that global rig contract fixtures, including options exercised, totalled 142 in 4Q 2021, representing 54,829 rig days, which is a 155 per cent increase compared to the previous quarter, adding some much-needed optimism following a period of turbulence.

Alex Middleton, Senior Market Analyst at Westwood said: “Several major drilling regions, including North America, South America and the Middle East have experienced minimal fallout. In fact, South America has fared particularly well, ending last year in better shape than before the pandemic. Brazil remained particularly buoyant, with high EPC spend coupled with no instances of contract cancellations resulting in continued drilling throughout the period.”

However, industry growth is globally uneven with Africa, Southeast Asia, and the North Sea falling behind due to the pausing of major drilling projects in response to political and legal uncertainty.

As an example, Westwood mentioned the controversial Cambo project in the UK West of Shetland, which was put on hold in 4Q 2021, after Shell announced it was pulling out of the development. In response, Siccar Point Energy (SPE), the operator with 70 per cent interest in the project, decided to pause the project since it couldn’t proceed with the original timescale.

According to SPE, Cambo could deliver 170 million barrels of oil over 25 years, and 53.5 billion cubic feet of gas. Exploration licences date back to 2001 and the current licence is due to expire in March 2022. The UK government is required to approve drilling.

Middleton continued: “For these regions, contracted rigs have been on a downward trajectory, hitting rock bottom at the close of 2020. Drilling projects have been halted amidst uncertainty, however, there are several major projects on the horizon that, if picked up, could help drive a recovery.”

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