Offshore rig construction market heats up

In addition to the ever-climbing price of oil, I can tell that the industry believes that offshore oil and gas exploration and development are coming back: The offshore rig construction market is heating up.

Offshore drilling contractors are lining up rigs for construction in shipyards worldwide. And it's not only the ultra-deepwater rigs that are getting added to the fleet -- high-specification jackups are being built with just as much gusto.

Despite the drilling moratorium and permitting delays in the US Gulf of Mexico, the offshore drilling market is red hot. In addition to a growing demand for hydrocarbons resulting in a increased need for offshore drilling, Petrobras has contracted the majority of the ultra-deepwater fleet for the foreseeable future for drilling campaigns offshore Brazil, which leaves a void for other producers. (Plus, Petrobras is moving forward with a tender for the construction of up to 28 deepwater drilling rigs to be built in Brazil.)

Enter a growing newbuild offshore rig fleet.

In the last two days, five new rigs have been added to the newbuild list.

Aker Drilling has contracted a firm two ultra-deepwater drillships from Daewoo Shipbuilding in South Korea for $600 million a pop, in addition to having a stipulation for another two optional rigs built into the contract.

Additionally, Noble Corp. contracted Hyundai Heavy Industries for two ultra-deepwater drillships for a combined price of $1.2 billion, also with an additional two rig option.

Atwood Oceanics optioned for another high-spec jackup from PPL Shipyard for $190 million; this is in addition to the original two the company ordered in October 2010. Another two jackup options remain on the table.

Just in the last few months, other newbuild construction contracts include  Standard Drilling's order of a $180 million jackup from Keppel Fels and Mermaid Maritime's order of two jackup drilling rigs with an option for another two for $360 million from KFels.

Also, Noble Corp. ordered two high-spec jackups from Sembcorp for $440 million.

Earlier this month, Diamond Offshore ordered two ultra-deepwater drillships from HHI for $590 million a piece, with an option for another.

In October 2010, Seadrill ordered two turnkey jackup drilling rigs from Jurong Shipyard, with an option for another four. In November 2011, Seadrill ordered two firm ultra-deepwater drillships from Samsung for $600 million each, with another two-rig option it can exercise.

Not counting Petrobras, that's 18 new rigs in three months to join the line, with potentially another 14 rigs in options.

Additionally, Transocean is paying $195 million for an under-construction jackup with PPL Shipyard; and Seadrill bought two under-construction ultra-deepwater semisubs for $1.2 billion from Jurong Shipyard, as well as the under-construction CJ-70 harsh-environment jackup for $257 million.

Drilling contractors have cited strong backlogs and considered ultra-deepwater drilling waiting lists as reasons why they're adding to their fleets.

Whatever the reason, the strong newbuild offshore rig construction market certainly points to a rejuvenated drilling and development environment in the future.

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Phaedra Friend Troy is the content director for PennEnergy.com, an all-energy website that provides oil and gas, power and infrastructure news, analysis, reports and more. Sign up for a free daily enewsletter today.