North American rig market driven by deepwater demand

After last year brought record oil prices, the offshore oil and gas industry could have been forgiven for an optimistic outlook. However, a worldwide economic crisis and oil prices slipping to less than $ 50 per barrel have made 2009 a very different year. While the market for semisubmersibles and drillships in the US Gulf of Mexico has remained fairly strong, the market for jackups has cratered. Facing jackup utilization of less than 60 %, many drilling contractors are looking to move from the US Gulf to Mexico to find work.
So far unaffected by the downturn in activity, another four newbuild drillships and seven semisubmersibles are expected to arrive in the US Gulf by the end of the year, all of which have firm contract commitments in place. Many of the newbuilds have deepwater capabilities, responding to the growing demand for deepwater activity in the US Gulf.

Discoveries
Recent weeks have seen major deepwater discoveries announced in the area. Chevron made a discovery at itsBuckskin prospect on Keathley Canyon Block 872, 44 miles (71 km) west of Chevron's 2004 Jack discovery. The Buckskin No. 1 discovery well encountered over 300 feet (91 m) of net pay.
The well is in around 6,920 feet (2,109 m) of water and was drilled to a depth of 29,404 feet (8,962 m) by Stena drillship Stena Drillmax.

Anadarko made two deepwater discoveries at the Heidelberg prospect on Green Canyon Block 850 and one at the Shenandoah well on Walker Ridge Block 52. Anadarko discovered more than 200 feet (61 m) of net oil pay in several Miocene sands at its Heidelberg prospect. Heidelberg is in around 5,000 feet (1,524 m) of water, and has been drilled to a depth of around 28,500 feet (8,687 m) by Noble semi Noble Amos Runner.
Anadarko encountered net oil pay of around 300 feet (91 m) at the Shenandoah discovery well. Shenandoah is in around 5,750 feet (1,753 m) of water and was drilled to a total depth of about 30,000 feet (9,144 m) by Noble semisubmersible Noble Paul Romano.

Plains Exploration and Production drilled a confirmation well at its Friesian project on Green Canyon Block 643 and encountered around 389 net feet (119 m) of oil saturated Miocene aged sands with three main sand lobes encountering more than 210 net feet (64 m) of high quality oil pay plus a fourth sand lobe encountering 179 additional feet (55 m) of oil pay that was not fully evaluated.
Brazilian state company Petrobras is continuing with its plans for the US Gulf's first floating production, storage and offloading vessel (FPSO) for the Cascade and Chinook fields in the Walker Ridge area. The unit will be installed in the first quarter of 2010. Petrobras will invest $ 15.9 bn internationally between 2009 and 2013, 28 % of which will be used in the United States, particularly in the US Gulf. Petrobras has said it will complete all of its planned projects in the US Gulf, but some projects will be delayed as the company focuses on the massive opportunities afforded by the Tupi field in the Santos Basin and other pre-salt fields offshore Brazil.

Mexico
The Mexican government finally passed some reforms relating to oil and gas exploration and state oil company Petroleos Mexicanos (Pemex), following a bitter political battle that saw the reform's opponents shut down Mexico's Congress for several days in 2008. Following the passage of the reforms, Mexico is looking to increase its oil production as output from the Cantarell field in the Gulf of Mexico continues to decline.
The reforms allow Pemex greater autonomy in managing its finances and projects, and make it easier for Pemex to work with foreign oil and gas companies, using outsider expertise to increase its production and move into new areas.

Pemex is looking to exploit its own deepwater resources and now plans to drill 27 deepwater exploration wells in the Gulf of Mexico by 2012. Pemex has already begun drilling in the deepwater Gulf of Mexico with Noble semisubmersible Noble Max Smith and Diamond Offshore semi Ocean Voyager.
Larsen Oil & Gas semi PetroRig III, SeaDragon Offshore semi Oban B and IPC semisubmersible La Muralla are all contracted to begin operations in 2010. Pemex plans to have around 20 deepwater rigs operating in the near term.

If Pemex discovers commercial reserves before 2010, the company expects to begin producing oil from its deepwater Golfo de Mexico B project in 2015 at a rate of 13,000 bpd, increasing to 92,000 bpd by 2017.
Along with increased deepwater activity, Mexico is becoming an important area for jackups, particularly as the US Gulf jackup market is in decline. Drilling contractor Pride International believes Mexico is the only region where jackup demand could increase during 2009. During the fourth quarter of 2008, the company mobilized rigs between the US Gulf and Mexico as activity in the regions declined or remained uncertain.

Five of Pride's rigs in the US Gulf have been or are in the process of being cold stacked and two others are idle. With exploration and production spending in the US expectedto decline further over the year, the company plans to cold stack two additional rigs while maintaining a full crew on one idle rig. The company has six mat-supported rigs currently operating in Mexico and is in the process of assessing the need for the rigs by Pemex in 2009.
Pride Senior Vice President of Marketing and Business Development Kevin Robert said that Pride may be able to mobilize some of its 250-foot (76-m) mat slot and 20-foot (6-m) mar cantilever rigs in the US to Mexico and is working with Pemex to identify drilling programs on its schedule.

Randal Stilley, CEO of Pride's mat-supported jackup business said it is likely that there will be renewals for Pride's existing mat-supported fleet in Mexico later in 2009. However, Pemex has not renewed its contract for mat-supported jackup Pride Arkansas, which expires at the end of the month.
Robert said Pemex is planning a tender for five to eight independent leg cantilever jack-up rigs to operate in 300-foot (91-m) and 350-foot (107-m) water depths. The contracts are expected to pull jackups from the US Gulf of Mexico to begin drilling in the second half of 2009. Other companies are also finding work in Mexico. ENSCO has seen "incremental demand" from Pemex, which has contracted jackups ENSCO 89 and ENSCO 93 for drilling operations beginning in March, joining jackup ENSCO 81, which has been working in Mexico since last year.

Alaska
Following the Chukchi Sea Lease Sale No. 193 in February 2008, there are no lease sales scheduled for the Alaska area in 2009. However, lease sales are scheduled for the Beaufort Sea and Cook Inlet in 2010. Cook Inlet Lease Sale No. 211 was originally planned for 2009, but was deferred one year in response to an MMS-issued request for information.
The MMS has also begun to gather information for an environmental impact statement (EIS) for a future lease sale in the North Aleutian Basin planning area. Publication of the draft EIS is scheduled for the winter 2010, with the lease sale tentatively scheduled for 2011. Currently 17 rigs are deployed offshore Alaska, 16 of which are platform rigs. However, only two of these rigs are drilling. The rest remain stacked or on standby in the Cook Inlet.

Alaska is looking to increase oil and gas activity in the Cook Inlet. The Alaska Department of Natural Resources (ADNR) has completed a best interest finding for the area, allowing the agency to conduct lease sales in the area for another 10 years. The finding determined that the benefits of exploration in the area outweighed the downsides.
To increase activity, ADNR has proposed unitizing leases in the area, as many lease operators in the Cook Inlet have not moved forward with drilling plans. ADNR may unitize the Corsair and Kitchen units with the proposed Northern Light Unit, forcing Escopeta, Pacific Energy, ConocoPhillips and Renaissance to work together. The companies have until March to come to an agreement with ADNR on Cook Inlet activities.