Offshore boom creates shipyard backlog

More than 100 new offshore drilling rigs and drill ships scheduled for delivery during the next few years will likely be late because of a backlog of shipyard work, said Mark Burns, Gulf of Mexico vice president and division manager at Noble Corp.

Burns claims that the newbuildings will not be delivered on time because of slippages in construction times as a result of too much work taken on by many of the large shipyards. With 64 new jack-ups, 31 semi submersibles and 12 drill ships currently under construction, Burns estimates that most of the semi submersible drilling rigs being built won’t hit the market until 2008 or 2009.

At least 55 of the new rigs planned will be financed by smaller companies or start-ups that may have trouble weathering the increasing cost of labour and equipment, Burns said. He questioned whether the new companies would stay with the projects long term. An aging work force and higher insurance costs after last year’s hurricanes are making it more difficult for smaller companies to succeed in the offshore drilling market and “This will be an opportunity for established drilling contractors, such as ourselves, to acquire these units at some point in time,” he said.

“New players that enter into the industry face high insurance costs, particularly if they’re going to work in the U.S. Gulf of Mexico, and other operating issues, so again, we are not as drilling contractors concerned with oversupply or new-build supply.”

Offshore drilling for oil and natural gas, fuelled by high oil prices and record industry profits earlier this year, remains robust in spite of recent declines in commodity prices. Earlier this year, drilling day rates surpassed $500,000 for the first time ever amid a shortage of deep-water equipment.