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Drilling Overview |
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According to industrial estimates, the consumption of petroleum as well as other liquid fuels may grow to 95 million barrels per day in 2015 and 118 million barrels per day in 2030. As land based oil wells have reached saturation, the search for oil has been extended to the offshore avenues - ocean floors of the world. Today, offshore oil production constitutes 60% of the overall world oil production. The global capital investment in the E&P industry is estimated to be more than $ 300 billion per annum. Operators are increasingly looking at offshore opportunities in the deep waters of the Gulf of Mexico, West Africa, Latin America and in the Asia Pacific Region. |
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Natural Gas is a cleaner and more efficient alternative to oil and coal. It is often found along with oil reserves and is transported in pipelines or LNG carriers to regions like North America, Europe and North East Asia, where the demand is the highest. The demand for Natural Gas is expected to grow faster than any other kind of primary energy source.
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Natural gas currently accounts for around 8% of the total energy mix in India as against the global average of 24%. The un-met demand for natural gas is estimated to increase from about 113 MMSCMD (FY 2007-08) to 396 MMSCMD by the year 2022. This is excluding the north eastern region of India, which is not yet connected to the gas supply network.
Offshore drilling typically refers to the act of extracting underground resources which lie underwater near the shoreline. Most commonly, offshore drilling is used to describe oil extraction off the coasts of continents, though offshore drilling is also referred to drilling in lakes and inland seas. |
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The global jack-up market comprises more than 400 rigs with the top six drilling firms accounting for more than half of the market. |
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In India, the chief player in the offshore drilling is ONGC (Oil and Natural Gas Commission), which owns more than half of the exploration area. Private players like Reliance, Cairns, etc. are also beginning to gain a foothold into the offshore sector, thanks to the NELP block auction programmes.The main rig providers in India are ONGC, Aban Loyd, GE Shipping, Jagson international, etc. |
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Drilling Scenario: Pre and Post Recession |
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Currently there is a shortage of rigs available for offshore E&P, especially in the deep sea exploration. The high day rates of operating the rigs are driven by demand/supply fundamentals and rise in the cost of manpower, services and raw materials. Demand for 6th generation drill-ships capable of drilling in harsher environments has increased due to oil findings in harsh environments like the Arctic region, deep waters, etc. This demand for offshore activity is not being met currently. Shipyards constructing such offshore deepwater rigs are fully booked and the lead time for a new build is between 3-4 years. |
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During the 2-3 years prior to the downturn, the international oil sector was marked by rising oil prices, inadequate drilling capacity, dearth of skilled resources and escalating exploration & production costs. In markets outside the US, competition was stiff due to the availability of few land rigs, with aggressive explorers like Saudi Arabia bidding up costs. As a result, global drilling outside the US rose by 2.3% (pegged at 52,614 wells) in 2006, following a sustained rise in global demand and political instability in the key supplying regions.
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Wells drilled outside the US increased about 3%, to just over 54,000 wells during 2006, the highest growth in 20 years. Offshore drilling activity increased around 9% to more than 3,800 wells spread across the Far East, as well as the South Pacific. The offshore recovery that began in West Europe a couple of years ago is expected to continue. |
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Despite the rising oil prices prior to the recession, the numbers of offshore discoveries made were actually falling. This is probably due to the saturation of the shallow water basins. Thus, the trend in offshore has been towards moving to deeper waters for oil exploration.
Even the recession has not slowed down this trend as can be seen in the results of the U.S. Minerals Management Service Central Gulf of Mexico Lease Sale No. 208 in March 2008. In this sale of blocks, around 65 companies purchased blocks, with the total investment being $ 703 million. Out of these, more than 40% of the blocks sold were deeper than 5250 feet (1600m).
The recession has had an impact on the rig day rates that are required for offshore drilling. There has been a steady fall in the Rig Day rate index in the last few months. The worst hit region is the US Gulf of Mexico, where the index has been at its lowest since 2005. It has remained at this low level for the last 2 months, and only 42% of the rig fleet here is being currently utilized. |
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Future Outlook |
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