More than one in five jackups need to be scrapped, according to a new report by consultants Rystad Energy.
“With 100 newbuilds either completed and not delivered, or yet to be completed with delivery scheduled during the next few years and only 63 units retired in the downturn, the jackup market remains oversupplied resulting in low utilization levels and depressed rates,” Rystad noted in its research note.
As of mid-Q2 2017, global jackup utilisation is at 56%. The jackup fleet stands at 521 with 11% being cold stacked, 33% ready/warm stacked.
“For the oversupply situation to begin to correct itself, a minimum of 110 more jackups must be retired from existing supply,” Rystad maintained.
Many of the cold stacked jackups will likely never work again, Rystad noted, pointing out that day rates will have to exceed levels foreseeable in the medium-term to justify their reactivation cost.
“While contracting activity appears to be on an upswing, the data shows a market still in a trough as only a small number of contracts are long term. In order to begin to move out of the trough, contract durations need to improve. Otherwise, jackup contractors could find themselves on a ‘short-term’ contract treadmill,” Rystad warned.
Many of the newbuilds stranded in the shipyards will face an even tougher time securing work, the consultant posited, as operators are reluctant to hire a rig without an operational track-record unless the rig is owned by an established drilling contractor.
Founded in Oslo in 2004, Rystad today boasts nine offices around the world.