Rental rates for offshore oil and gas rigs have skyrocketed, fueled by a rush to increase output due to the Ukraine conflict and a rebound in demand following the COVID-19 pandemic.
After several lean years that prompted a wave of mergers and pushed them to scrap older rigs, drilling companies are in a better position to demand higher dayrates for their equipment now that demand is rebounding.
The cost of hiring a rig on a daily basis, known as the dayrate, has risen the most for deepwater equipment in the “Golden Triangle” stretching from the US Gulf of Mexico to offshore West Africa and Brazil.
‘Rates are rapidly rising, particularly in West Africa,’ said Cinnamon Edralin, head of rig market analysis at Oslo-based Esgian. ‘We were at $200,000 last year; this year, we are firmly in the $300,000s and quickly approaching $400,000.’
The conflict in Ukraine has boosted demand for rigs as the US, Europe, and other allies seek alternatives to Russian oil and gas supplies. By 2027, the European Union intends to phase out the use of Russian hydrocarbons.
In its quarterly report, offshore specialist Seadrill predicted that activity on the Norwegian continental shelf, a vital source of gas for Europe, would increase in 2023, boosted by tax breaks and a ‘focus on energy security.’
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