At the same time, rig contractors and the oilfield service companies are reaping rewards from the upswing in activity with day rates reaching levels three and four times that of only a year ago.
The problem is that the rush for rigs is a worldwide phenomenon and there are simply not enough working units to go around.
Explorers without rig slots have to be prepared to queue or to hope for chance openings in the rigs’ busy schedules.
Rig workers are also in short supply and rig hire rates have skyrocketed, quadrupling in some cases.
This is being felt across the range of skills required, but particularly engineers, drillers, rig managers and experienced tradesmen.
Figures supplied by the Australasian Chapter of the International Association of Drilling Contractors indicate there are nine offshore jack-ups and semi-submersibles in Australia at the moment and a tenth is due to arrive shortly. This is more than double the usual number at any one time, yet it is not enough – all of these rigs have a full book of drilling commitments for 2006. Some have been contracted for the next 18 months.
The IADC’s information about land rigs paints a similar story. All of the 32 rigs within Australia, New Zealand and Papua New Guinea are working and have a continuous string of term contracts extending through 2006.
Most of these rigs are located in Australia and three more are expected to arrive in the next few months – one from Indonesia brought in by OD&E and another two from Canada brought in by Precision Drilling and believed to be under long-term contract to Santos.
There is no doubt that even more rigs are required to feed the demand frenzy as explorers without booked drilling slots onshore and offshore are being forced to stand in lengthening queues.
Companies that have secured rigs are keeping them, as evidenced by the recent move from Shell to contract the semi-submersible Atwood Falcon for work offshore Sarawak until mid-2009. Even taking a conservative time scale, few in the industry see the pace slackening in the next 15 months.
The North Sea fleet of around 70 rigs has virtually 100% utilisation through to the end of 2006. All the jack-ups in that region have full commitments and only three of the 35 semi-submersibles have any drilling slots left.
In the Gulf of Mexico, the rig shortage has been exacerbated by losses to hurricanes Katrina and Rita. Initial reports say that four jack-ups are missing, presumed sunk, and one is a wreck washed up on an island off Texas. In addition, several semi-submersibles have suffered damage to their mooring systems as they were torn loose by the storms.
The time needed to upgrade a few old rigs that require recertification is estimated to be between six and nine months, while the first of the fleet of 42 speculative new jack-ups now under construction (mostly in South East Asian shipyards) will not even put a dent in the market when they are delivered in 2006 and 2007.
Six of the seven semi-submersibles under construction (again in South East Asia) are top-of-the range rigs costing US$300-600 million and they already have firm work contracts when they join the workforce in 2008/09.
Back in Australia, the rig slots available for new exploration drilling are being cramped by plans for extensive development drilling programs, especially offshore.
The big offshore operators are very busy. Woodside has work scheduled at Enfield/Vincent, Pluto and Thylacine/Geographe.
BHP Billiton will be drilling at Stybarrow, then Pyrenees and possibly Scarborough. Roc Oil will be busy at Cliff Head. AED Oil will be working at Puffin. Apache Energy has ongoing work in the Harriet region. And there could be a development program for Chevron at Gorgon/Jansz.
All of this activity will occupy rigs for at least 12 months.
Meanwhile in New Zealand, work is scheduled next year for Maari and Tui fields in the offshore Taranaki Basin.
Explorers are lining up to use the OD&E Rig 41 after it finishes its year-long Pohokura campaign next year, drilling from a coastal site but deviating up to six kilometres under the seabed to optimise gas recovery and wastewater disposal. OD&E has said there could up to another year's work for the rig in Taranaki.
Some small operators have responded creatively to the rig shortage.
In Australia, White Sands Petroleum, a new Brisbane-based private company, has imported a state-of-the-art European rig and is exchanging its drilling services in return for equity stakes in prospects.
In New Zealand, one Taranaki player, Greymouth Petroleum, has even built its own unit, converting an old fire-engine into a drilling rig. Greymouth said the rig would be available for hire to other explorers when the company was not using it.
But it would take many such moves to make a significant impact on the rig shortage, and the other small operators building or buying their own rigs would soon run up against the shortage of trained workers.
The shortage of rig workers is being felt across the range of skills required, but particularly with engineers, drillers, rig managers and experienced tradesmen.
In Australia the usual fall-back of recruiting people from the mining industry with the lure of higher salaries, particularly for offshore work, has dried up because the parallel mining boom is matching the wages that the oil industry can offer.
It's worth noting that Greymouth Petroleum have not only built their own rig. They have also put momney towards setting up a 'drilling school' in the New Zealand oil capital of New Plymouth. Economic development agency Venture Taranaki, the Gas and Petrochemical Training Organisation, and Marine and Offshore Pacific are helping with the establishment of the school.
Another consequence of skyrocketing rig demand have been rising costs of rig hire.
An average day-rate for a semi-submersible has risen to US$220,000-US$250,000 – up from around US$45,000 just 12 months ago. Some of the premium deep-water rigs have quadrupled their rates and contractors are now asking up to US$400,000 a day for their services.
There is no quick solution for the rig shortage as oilfield components for spare parts, steel for rig new-builds and shipyard space are all in short supply.
It seems unlikely a balance of rig supply and demand will be achieved for some time.
