Drilling in Atlantic margin may get difficult

Oct 20, 1997 02:00 AM

Sept. 9, 1997 Ambitious plans to explore for oil deep off the coasts of Britain, Ireland and Norway face delays because of a world-wide shortage of deep-water drilling equipment.
The shortages will push into the next century the developments needed to replace reserves being depleted in more mature oil provinces in shallower North Sea water.
A global boom in deepwater exploration has led to a scramble to put under contract the few semi-submersible drill rigs or drillships that can reach deep ocean floors.
Oil companies are struggling to find cost-effective ways to carry out the drilling commitments they promised in Britain's last (17th) licensing round, announced in April, which opened up virgin Atlantic Margin waters.
Consultant Smith Rea Energy Associates estimate Atlantic margin waters, which stretch from south-west Ireland, past the west of the Shetland Islands to the Southern Barents Sea off Norway, could add a third to known recoverable reserves in the region.
The rig shortage is good newsfor drilling companies showing their wares at an industry convention in Aberdeen, Britain's oil capital. Drillers suffered a severe downturn in the late 1980s when a bubble of overcapacity burst.
Now they are looking to expand, but are forcing oil companies to share the risk of building exploration rigs or to sign long contracts that will guarantee payback.
"You can count on the fingers of one hand the number of rigs that will work in harsh environments in more than 1,000 metres (yards)," said Colin Fareweather, British contracts manager at world-wide driller Reading & Bates Corp . "All of the new acreage in the 17th round will need one of those five units," he added. They have responded by agreeing co-operative deals, with BP and Shell sharing one of the giant semi-submersible rigs that can be towed to new locations and Amerada Hess and Texaco sharing another. The Atlantic Margin Group of Statoil , Enterprise and Mobil are negotiating amongst themselves to pool resources. Conoco, Elf, Marathon and Philips are taking the lead in another consortium preparing to tender for supply by 1999 of a unit that can drill in 1,500 metre water depths.
With new builds slow to come on stream, drilling companies have converted old service rigs and accommodation platforms and upgraded smaller drill units to meet exploding demand. But the supply of appropriate hulls is drying up and some rigs are even leaving the North Sea, attracted out by longer contracts in more proven exploration provinces such as off the coast of Brazil.
Costs are soaring as well. One of the few companies to build speculatively, Rowan , has just contracted out its shallow-water Gorilla V jack-up rig, due for delivery in third quarter 1998, for some $180,000 a day. The previous highest in the North Sea was $50,000 less.
No oil company will admit it may not meet the terms of its exploration licences or that it lacked the foresight of Norwegian operators like Statoil who signed up drill rigs two years ago on long-term contracts at cheaper rates. But rising costs will slow the pace of Atlantic Margin exploration and discoveries may stay undeveloped.

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