Demand for offshore offshore drilling rigs has surged this year even as U.S. oil rig growth has plateaued. According to Baker Hughes, there are now 622 oil rigs operating in the US, down from 683 operating in March 2020 at the start of the pandemic and unchanged from six weeks ago. This caused daily rates to jump and drilling contractors’ inventories to rise Transocean Ltd. (NISE: RIG) up 49.7% since the beginning of the year; Valaris doo (NISE: VAL) grew by 75.1% while Noble Corp. Plc (NISE: NO) strengthened by 45.1%. In sharp contrast, demand for offshore rigs is strong, with S&P Global reporting that daily rates recently hit $400,000, up from $300,000 in June and less than $200,000 two years ago.
James West, Evercore’s senior executive, outlined three key reasons for this development:
- American oil companies Exxon Mobil (NOT: XOM), Chevron (NOT: CVKS) i ConocoPhillips (NISE: COP ) have already secured the equipment they need in the country, while their private rivals show little appetite for expansion due to budget constraints and lower oil prices.
- These oil companies are also moving more of their drilling offshore and overseas because America’s shale production capabilities are now limited because all the major acreage is already taken.
- National oil companies (NOCs), including those in Saudi Arabia, Abu Dhabi and Kuwait, are currently expanding offshore production as they seek to regain market share from majors that have recently been more focused on returning excess cash to shareholders in the form of dividends and share buybacks. , not expanding production.
The energy crisis is causing a mad dash for floating LNG terminals
In the natural gas sector, demand for floating LNG storage and regasification units (LNG-FSRUs) has surged this year, with Europe facing tight energy supplies as Russia progressively cuts pipeline gas flows.
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Demand for LNG imports has intensified after disruptions to the key Nord Stream pipeline system canceled any chance of Russia reopening its gas taps. This forced dozens of countries in Europe to turn to FSRU or floating LNG terminalswhich are essentially mobile terminals that unload super-cooled fuel and feed it into land networks.
They currently exist 48 FSRUs in operation worldwidewith Rystad Energi revealing that all but six of them are locked into contracts.
According to energy think tank Ember, the EU has drawn up plans for as many as 19 new FSRU projects at an estimated cost of €9.5 billion.
The biggest users are Korean shipbuilding, for which FSRUs are the main source of income. Korea is definitive world leader in this field. According to local media, Korean shipbuilders managed to book 46% more orders year-to-date. And the government’s goal is for the country to win 75% of the market share by 2030.
The setting couldn’t be better. With such a tight supply of these vessels, charter costs in Germany have doubled year-on-year to $200,000 per day.
“Last year there was a surplus of FSRU, and this year there is a deficit. So far there have been enough vessels on the market, but as most are now occupied, it is becoming increasingly difficultPer Christian Fett, global head of LNG at shipbrokers Fearnley LNG in Oslo, told Bloomberg.
Based in Texas Accelerate Energi Inc. is sending three FSRUs to Europe with a combined flow capacity to import 15 billion cubic meters of gas, or about 10% of Russia’s pipeline and LNG imports in 2021. Demand for terminals in Europe is so high that it could make them less affordable for developing countries to use FSRU for its needs. “The risk is real that underutilized facilities in other regions of the world could be moved to Europe, which is allowed by the existing charter conditions.“said Kaushal Ramesh, senior analyst at consultancy Ristad Energy.
The Netherlands made its first LNG shipment at a new terminal, boosting Europe’s efforts to wean itself off Russian gas. Previously, the Netherlands could only import LNG via Rotterdam; however, this changed with the commissioning of two FSRUs, Golar Igloo and Eemshaven LNG, anchored in Eemshaven. The FSRU project was completed in record time. Use the sharing tools found via the share button at the top or side of the articles. With a couple of floating ships that are now supplying gas to the landlocked Czech Republic and Germany.
“The arrival of the new LNG terminal is an important step not only for the Netherlands, but also for the whole of Europe to completely end dependence on energy from Russia as soon as possible.“, said Rob Jetten, Dutch Minister for Climate and Energy. FRSUs offer the fastest and most efficient way for Europe to end its reliance on pipelines that bring large volumes of natural gas from Russia.
Alex Kimani for Oilprice.com
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