Offshore Rig Demand Surges, But New Orders Remain Elusive
The offshore rig market is experiencing a surge in demand, reminiscent of past booms, yet new orders are few and far between. Despite marketed utilization rates exceeding 90% and significantly increased day rates—up to and above $180,000 for jackups and over $500,000 for drillships—the rig construction sector is exercising caution. The hesitancy is largely due to limited access to capital and rising costs, with jackups priced at $250-300 million and drillships at over $850 million. Financial analysts indicate that long-term contracts with high day rates are necessary to justify newbuilds.
Currently, 32 rigs are under construction, comprising 14 jackups, eight drillships, six semisubmersibles, and four tenders. So far this year, three drillships and six jackups have been delivered. However, six rigs are slated to be delivered in 2024, with 18 more planned for 2025, and the final eight penciled in for 2026. The speculative nature of the orders is evident, as only two newbuild jackups in China have been awarded contracts since their construction began.
The speculative rig orders are not supported by stable contracts, with most units still awaiting their first charter. For instance, Sete Brasil’s drillships, including the _Arpoador_ and _Guarapari_, were relocated to Singapore but remain idle. The semisubmersibles, _Urca_ and _Frade_, are stranded in Brazil with uncertain futures. This trend is not unique to Sete Brasil; many speculative units are at risk of being converted, sold, or scrapped as market conditions remain challenging.
Chinese shipyards are constructing more rigs than their counterparts in other countries, with 18 rigs being built in China, including 10 jackups, three drillships, three tender rigs, and two semisubmersibles. In contrast, Singaporean shipyards are constructing six rigs, consisting of two jackups, two semisubmersibles, one tender rig, and one drillship.
The reluctance to invest in new offshore drilling rigs is further exacerbated by rising construction costs and high downpayment requirements. For instance, in Singapore, over 70% of the purchase price is required as a downpayment, which has priced out speculative investors. Drillers are thus focusing on reactivating