It has been a long time since there was anything worth writing about the floater market in the Asia Pacific, but the second half of 2018 has seen a positive tsunami of activity in the sector. A slew of contracts have been awarded, rigs have been scrapped, rigs departed or soon to depart, rigs arriving from other regions, and, horror of horrors, even one instance of a contractor actually turning down a contract.
Since July we have seen new contract awards to regionally based floaters Ensco 8504, Maersk Deliverer, Dhirubhai Deepwater KG2, Ocean Monarch, Noble Clyde Boudreaux, Hakuryu 5, Scarabeo 7, Ocean Apex, West Capella and Stena Clyde who actually refused the charter. However, six of these awards do not start until 2019 which is the reason why there are still ten out of seventeen regionally based floater still sitting idle. Throw into the mix a highly pivotal double contract award for Seadrill for two UDW drillships, West Capella and West Carina, the latter currently on its way into the region from Brazil. The rate for the latter is reported as around $200,000, a significant statement in a market where rates for UDW rigs have languished for several years between $100,000 to $135,000.
Apart from the West Carina another UDW floater is on its way over here. COSL have been contracted to manage and operate the UDW floater SS Amazonia, a Friede and Goldman Ex-D design semi rated for 7,875 ft which had been re-possessed by China’s ICBC Leasing after former owner Schahin went into bankruptcy. Initially the rig, already en-route, will go to China but COSL have stated its intention to market the rig into the Asia Pacific region, specifically mentioning Myanmar. Once these two arrive the count of UDW units in the region will be thirteen, vastly outnumbering the deepwater and mid water units which account for only five. By the second quarter of 2019 COSL will have added another floater to the region’s fleet with the arrival of deepwater semi Hai Yang Shi You 982 into New Zealand.
Meanwhile four floaters have departed the region for pastures new. Ocean GreatWhite has gone to the North Sea as befits a harsh environment rig, Ensco DS-9 high-tailed it to South America, Nanhai IX gone home to China and Deepsea Metro I is joining its sister rig Deepsea Metro II, now called the Fatih, in Turkey after its sale to Turkish Petroleum (TPAO).
Add to the those departures three other units dispatched to the scrapyards. Only one of these, Stena Clyde, was considered competitive, the others, Belford Dolphin and Noble Dave Beard, were cold stacked. The region still has seven floaters cold stacked and it is surely reaching crunch time on whether these units, all but two stacked since 2016, are going to continue the long wait for reactivation or head off to an India scrapyard. The longer they sit idle the more it costs to reactivate them and there are no contracts in view that would justify the reactivation costs. These include SC Lancer, Ocean America, Ocean Onyx, Deepwater Luanda, Ocean Rover, Sevan Driller and West Orion.
Does all this activity herald a bright new day for the sector? Well there are sixteen tenders that have yet to be awarded which might suggest so, but close examination of them reveals that all but one are short term, one, two or three wells or workovers and plug and abandonment projects. The exception is the three plus two-year charter for Inpex in Australia but that does not commence until end of 2019. What is also noticeable is that all but three are for mid-water units, i.e. in water depths below 5,000ft.
In addition to the tenders that are currently in play there have been seventeen market surveys / Expressions of Interest issued since 2017 which have yet to manifest themselves into tenders. This time though eight are for deepwater or ultra-deepwater units although some of these were supposed to have started by now and may have just been price checks. Mostly though these are again for short term work with the two relatively long-term projects, one for five months and the other for six wells, only starting in late 2019 and early 2021 respectively.
So, as we can see, much of the forthcoming work is for water depths below 5,000ft suitable for a standard mid-water floater something the region has very few of after the downturn forced a mass recycling of these elderly units. If an operator with a mid- water requirement fails to latch onto the much in demand Hakuryu 5 or fails to prise the Scarabeo 7 away from Eni then he is looking at contracting one of just three deepwater units or one of thirteen UDW rigs of which six are moored or moored/DP. These though will come with an UDW price tag and not at mid-water rates and we have seen from the most recent fixture here that these are heading north of $200,000. Will someone bring in a mid-water floater from outside? More to the point are there any left? Could be some good sense behind China’s CMHI shipyard’s decision to build a new mid-water semi.
So, the market is somewhat scrambled, with more work around than before but mostly short term. The rigs remaining in the region will start winning charters but will also face idle time in between. The prognosis for 2019 is that the utilization rate will yo-yo as rigs begin and end short term charters but one thing for certain is that rates are inevitably going to start moving upwards.