Rush to exploit new offshore oil hampered by shortage of drilling ships
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As President George W. Bush considers repealing a ban on drilling off most of the coast of the United States, a shortage of ships used for such drilling promises to impede any rapid turnaround in oil exploration.
Slow growth in oil supplies, at a time of soaring demand, has been a major factor in the spike in oil and gasoline prices. In recent years, a global shortage of drill ships has created a critical bottleneck, frustrating energy company executives and constraining their ability to exploit known reserves or find new ones.
As oil trades at more than $135 a barrel - up from $68 a year ago - drill ships around the world are booked solid for the next five years. Some oil companies have been forced to postpone exploration while waiting for a drilling rig, executives and analysts said.
Demand is so high that shipbuilders, the biggest of which are in Asia, have raised prices since last year by as much as $100 million per vessel to about half a billion dollars.
"The crunch on rigs is everywhere," said Alberto Guimarães, a senior executive in charge of developments in the Gulf of Mexico at Petrobras, the Brazilian oil company that has discovered some of the most promising offshore oil but been unable to get at it.
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"Almost 100 percent of the oil companies are constrained in their investment program because there is no rig available," he said.
As a result, drilling costs for some of the newest deep-water rigs in the Gulf of Mexico, for example, have reached about $600,000 a day, compared with $150,000 a day in 2002.
These record prices have spurred a wave of drill ship construction, which could spark a wave of offshore oil exploration that would eventually bring more supplies to an oil-thirsty market and push down prices.
Already, 16 new drill ships are scheduled to be delivered to oil companies this year - more than double the number delivered over the last six years combined. In fact, 75 ultra-deep-water rigs should be delivered between 2008 and 2011, according to ODS-Petrodata, a company that tracks drilling rigs.
Shipyards from South Korea to Norway are working overtime to meet a huge influx of orders.
Robert Long, the chief executive officer of Transocean, the largest drilling company in the world, said he had nine new deep-water rigs under construction, eight of which have already been contracted for periods ranging from four to seven years once they leave the shipyards. He expects to get the new ships between the beginning of 2009 and the end of 2010.
Transocean believes the deep-water market will continue to be constrained until at least 2012. More than three-quarters of the drill ships currently under construction have already been contracted to oil companies eager to benefit from triple-digit oil prices, Long said.
Petrobras, whose full name is Petróleo Brasileiro, is expected to drive much of the growth in the booming market. The company has outlined an aggressive program to increase its drilling capacity, and plans to contract or build 69 deep-water drill ships by 2017.
Brazil stunned the oil world when it announced the discovery of a massive oil field 200 miles, or 320 kilometers, south of Rio de Janeiro in November, turning the country's deep blue waters into the most exciting oil frontier. Energy experts said the field could turn out to be just a small part of the largest oil discovery in 30 years.
But seven months later, the trouble is still how to get at it. Petrobras has only three rigs capable of drilling in waters that exceed 6,500 feet, or 1,980 meters, where the new fields are located.
But drilling constraints are not the only problem facing international oil companies, which are seeking to expand at a furious pace after a decade of under-investment in the 1990s. They have also had to contend with a doubling of development costs across the industry in the past five years, more acute competition for energy resources, shortages in steel, engineering, and manufacturing capacity, and pressures posed by an aging work force.
Also, gaining access to countries that hold oil reserves is becoming tougher. Many oil-rich governments see fewer incentives to lift production as they reap the benefits of higher prices.
As a result, explorers are scouring ever-more remote corners of the globe in their hunt for hydrocarbons. That quest has unlocked petroleum reserves offshore from Africa and Brazil, and opened up promising exploration regions in the South China Sea, offshore India, or around the coast of Australia. But those sites will remain largely off limits until the new drill ships arrive.
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