Jack-up rates soar as Asia faces "acute shortage"
Drilling budgets will have to be radically revised following a sharp hike in the daily rate for shallow water jack-ups.
Unprecedented demand from Iran (which normally hires one jack-up but is today using 13), Qatar and Abu Dhabi (which is using 4 when before it hired none) has hit Asia and in particular India where contractors confirm an acute shortage. "All the idle capacity is soaked up," a contractor tells us.
"You could fill the vacuum with supply from southeast Asia but there's nothing there either." Witness a June tender by Cairn Energy for a jack-up for Phase II of the 'Lakshmi' development in October. Four companies bid, among them Sedco Forex, Diamond Offshore and Ensco.
Cairn disqualified Diamond because it couldn't meet the delivery schedule and Ensco on technical grounds, leaving only Sedco Forex demanding a hefty and quite unprecedented price tag of $75,000 a day! "The price has shot up 50% over the past three months!" warns a second contractor. April's daily rate for a jack-up averaged between $40-$50,000.
Cairn expects to pay less than Sedco's offer - but not by much. If the rig drought continues, Sedco's price might become the new benchmark.
Other contractors in Mumbai report that ONGC and Reliance mistakenly believe they can get jack-ups between $40-50,000 a day.