Offshore rig boom

For years, the Gulf of Mexico, which is the birthplace of offshore drilling and a very active region for underwater exploration, dictated global contract terms for drilling equipment. In 2001, about 148 rigs were in the Gulf. Now, about 90 remain, and more will leave soon.

Although the hurricanes Katrina and Rita last year destroyed five rigs, the sharp drop in numbers is almost entirely due to the fact that drilling companies are signing long-term deals to send rigs overseas. With the emergence of several offshore zones, the Gulf is losing out to hotter prospects off the coasts of Africa, the Middle East, and China. By contrast, many of the Gulf of Mexico?s richest targets have already drilled out, leaving only expensive deep-water and ultra-deep reservoirs untapped.

Houston?s GlobalSantaFe Corp., for example, agreed late last month to send four jack-ups rigs to the Persian Gulf, where Aramco, the Saudi national oil company, will pay more than $160,000 a day to drill for oil and gas for four years. Ensco International Inc. will send a jack-up to Tunisia next year, where it will fetch day rates of more than $200,000 for as much as two years of work. Contracts for the larger deep-water rigs are fetching day rates exceeding $500,000.

This demand has sparked a dramatic increase in offshore rig building with companies worldwide currently building 91 major offshore rigs, up from fewer than 10 in 2003. To build a jack-up rig costs $160 million to $190 million and deep-water rigs can cost as much as $600 million.