Energy research firm Rystad says that the downturn in the oil and gas industry brought on by Covid-19 could see up to one quarter of all drillships and semi-submersible rigs scrapped.
Rystad Energy analysis shows that up to 59 of the 213 units are potential candidates for retirement, made up of 22 drillships and 37 semi-submersibles.
“Global demand for floaters had just started to recover before the pandemic and is now expected to remain under pressure until 2022. Demand is expected to fall from 129 rig years in 2019 to 110 rig years in 2020 and 103 rig years in 2021, before slowly inching back up to 117 rig years in 2022 and 122 rig years in 2023,” Rystad said.
There are currently 25 newbuild floaters planned for delivery towards 2023, and weak demand is going to keep utilisation at low levels unless there is a meaningful increase in the price of oil.
Units that were cold stacked relatively early on during the prior downturn will be some of the first rigs to be retired in this downturn, Rystad says. Reactivation costs of between $40m to $100m mean they are unlikely to return to work given current rates and contract durations.