Rising requirements for rigs in the Middle East is increasing competition for jackup refurbishment and conversion. Elaine Maslin reports.
About quarter of the world’s 480-strong jackup drilling rig fleet resides in the Persian Gulf and demand for units in the region is predicted to keep on rising.
Much of the demand is coming from Saudi Arabia and Abu Dhabi (Saudi Aramco and Abu Dhabi National Oil Company, or ADNOC), whose offshore operations have been increasing, and also outside the region, including nearby offshore Egypt, and West India.
Image Caption: Jackups fill the skyline at Lamprell’s facility in the Hamriyah Free Zone, Sharjah, Dubai.
ADNOC also has ambitious plans. It is working on the US$10 billion Integrated Gas Development (IGD) project, which will see gas from the Umm Shaif field processed at Ruwais and Habshan.
In total, ADNOC says it is planning in excess of $US48 billion on upstream projects, with about 50% of that on offshore developments, including artificial islands, to raise its production capacity from 2.7MM bbl/d to 3.5MM bbl/d by 2017.
New markets are also potentially opening, with interest growing in the deeper waters of the Red Sea, and the potential for operators and contractors to return to Iran now on the horizon.
About 128 jackups are currently being built globally, but additional 130 need to be built by 2020 to meet demand, says Ian Anderson, marketing director of rig builder Lamprell’s Hamriyah facility, citing comments by a Pareto analyst. In addition, about 80% of the global fleet is more than 30 years old and in need of updating.
“There is a lot of exploration in shallow waters (the Persian Gulf, also known as the Arabian Gulf, is mostly below 180ft water depth), so there is a lot of requirement for jackups,” says Moss Daemi, director Middle East, India and North Africa, DNV GL Oil & Gas. “At the same time there is demand for refurbishment of old rigs and conversions to accommodation units.”
Image Caption: Moss Daemi
Jackup operators in the region include Shelf Drilling Holdings Limited, which has 38 shallow water-focused jackup rigs operating in the Arabian Gulf and elsewhere. Anderson says Shelf Drilling is looking to either sell or reactivate four rigs it has stacked, and is also looking at new builds. National Drilling Company (NDC), a subsidiary of ADNOC, lists 15 jackups. Noble Drilling operates 16 jackup rigs out of Qatar.
UAE-based Millennium Offshore Services, operates six jackup accommodation units, most of which are converted drilling units. Its latest, the MOS Frontier, is a LeTourneau 116, currently undergoing conversion, and destined to relocate to Asia Pacific.
Conversion to accommodation units could also be a strong market, but operators prefer jackups with four legs, of which there are limited supply, Anderson says, rather than the majority three. The advantage of four legs is the ability to more quickly pre-load the legs, during installation, he says.
Image Caption: Jim Moffatt
To meet demand in the Middle East, rigs are being brought in from areas including India. They have typically deteriorated from heat and humidity, and can need 500-tonnes of steel replacing, particularly in the splash zone area, Anderson says.
However, the work can still be costeffective. Reactivating a 1981-built rig to work for Saudi Aramco for five years could cost US$60 million, against US$185 million for a newbuild 116E, depending on the deck and drilling equipment requirements. A JU 2000E would be US$230-240 million, Anderson says, but would also command a US$180,000 day rate. DNV’s Daemi puts the cost of a new jackup for the region at US$140-200 million, compared to US$60-90 for an upgrade.
“To keep up with class, a lot of the existing jackups will need to be brought in to the yard,” Anderson says. “We see a steady stream of rigs being reactivated or converted. There is talk about scrapping, but I’ve been in this business 25 years and I have never seen one scrapped.” Some have gone into Iran, and have been used as fishing boat stations, he says.
With its entrance into the Middle East in 1974, Lamprell is one of the more established players in the region.
After a turbulent 2012 that saw multiple profit warnings, Lamprell fought back in 2013 with new directors, including Chief Executive Officer Jim Moffatt, and, more recently, Chief Financial Officer Joanne Curin. The company also underwent refinancing.
Lamprell’s bread and butter are LeTourneau design jackups, of which it had seven in construction at the start of December. November 2013 saw the delivery of its 14th jackup drilling rig.
Image Caption: Construction underway at Lamprell, Hamriyah.
Lamprell’s heritage, however, is jackup rig refurbishment, which started in 1992, 15 years before the first newbuild was delivered in 2007.
To date, the firm has seen more than 350 jackups docked for refurbishment, repair or conversion. Anderson says Lamprell had 60% of the refurbishment market in the Middle East in 2012.
“One of the biggest operators right now is Saudi Aramco, which is looking for anything it can get, but rigs have to meet their standards,” Anderson says. “Saudi Aramco is taking 30-year-old jackups, but they need work done on them. Abu Dhabi is another area beefing up its fleet right now.” Standards required include zero discharge, helideck access and egress on both sides, resulting in upgrade periods of 12-14 months.
But Lamprell is no longer the only player in the region. Dubai’s Drydocks World, Adyard Abu Dhabi (a subsidiary of Topaz Group), Nakilat-Keppel O&M in Qatar, a joint venture between Keppel Fels and Nakilat, Oman Drydock Company, and Asry in Bahrain, could all be potential competition.
Drydocks World recently signed a memorandum of understanding with Polish company MARS Fundusz Inwestycyjny Zamkniety (MARS Closed-End Investment Fund), which outlined an agreement to cooperate on various opportunities in the offshore services and maritime sectors, including the repair, refurbishment and conversion and new building of oil rigs.
Image Caption: Damen Sharjah Shipyard’s newly opened facility at Hamriyah.
The latest entrant is Damen Shipyards Sharjah, set up by Albwardy Marine Engineering, a joint venture between Albwardy Marine Engineering and Damen Shipyards, which also operates repair, docking and diving facilities at Dubai’s Shipyards Al Jadaf, Dubai Maritime City and Fujairah.
In November, the company headquarters moved to its new site in the Hamriyah Free Zone, Sharjah. Alongside ship dry-docking repairs and conversions, and new buildings of Damen and non-Damen designs, the company lists the oil and gas sector, specifically rig repairs and conversions, as one of its new areas of focus.
The Damen Shipyards Sharjah facility covers 284,000sq m, with 1.2km of quayside and up to 9m water depths. A 5200-tonne Rolls-Royce shiplift enables the yard to repair and launch ships up to 120m-long. For alongside repairs, DSS is limited to 140m, due port restrictions. Part of the facility is a 130m x 34m x 34m covered blasting and painting hall, which enables grit blasting and high-pressure water blasting on the repair berths.
The yard has a new build order book, mostly from parent company Damen Group, comprising two multicats, two shoalbusters, two barges, for Kuwaiti firm Bimco, one aluminum crew boat, for an Abu Dhabi client, and 10 azimuth stern drive tugs, two of which are also for Bimco.
Lars Seistrup, its managing director, says: “The next step will be the oil and gas sector. A lot of rigs are coming into the Arabian Gulf and they will need some level of upgrade and modification.”
Image Caption: Damen Sharjah Shipyard’s MD Lars Seistrup.
However, refurbishment is not the corebusiness stream for either company, norfor others in the market.
“(Rig repair is) good business for us, but it is not going to be the corner stone of the business,” says Moffatt, who wants the business to maintain a spread of business streams, for business resilience.
New build is also very much still part of the plan, with Lamprell planning to launch a new rig design to operate in 400ft water depth. Currently, it has designs up to 350ft. OE
A busy new year for Lamprell
Lamprell has facilities at Jebel Ali, Hamriyah and Sharjah. It also recently set up Lamprell Arabia in Saudi Arabia, and owns MIS Arabia, which mostly focuses on fabrication of pressure vessels for Aramco.
Hamriyah is home to the company’s newbuild, conversion and upgrade operations, with 1.5km of deep water quayside.
Ongoing projects at Hamriyah are: Four LeTourneau Super 116E jackups for National Drilling Company (NDC), part of ADNOC; Seajacks Hydra, wind farm installation vessel, for UK-based Seajacks; the second of two new jackup drilling rigs for Eurasia Drilling Company (EDC) for use in the Caspian Sea; the Jindal Pioneer, which is the second of two rigs for Jindal Pipes (Singapore) Pte., for use offshore India; Super 116E jackup GreatDrill Chaaru, for India’s Greatship Group; and refurbishment projects on Noble Drilling’s Gus Androes, Roy Rhodes, and David Tinsley jackup drilling rigs.
The jackup for EDC is being built so that it can be transferred in nine pieces to the Caspian Sea via canal barges, before then being assembled at Astrakhan.
Lamprell’s Jebel Ali facility is currently building a 10,000-tonne, two level wellhead deck and 14,500-tonne, three level production, utilities and quarters deck, for Nexen’s North Sea Golden Eagle development, and due to complete in May of 2014.
The Sharjah facility, at Port Khalid, focuses on newbuild jackups and currently has the MOS Frontier accommodation jackup conversion project, and offshore metering towers (jackets and decks) for Leighton Offshore.•