E&E News | December 13, 2016 | Nathanial Gronewold
Four years ago, Statoil ASA executive William Maloney proudly invited a handful of energy reporters to the Maersk Developer, which was then busy drilling a well in the deepest reaches of the Gulf of Mexico for the Norwegian oil and gas giant.
Maloney led a tour of the Developer's decks in a bid to showcase his company's commitment to long-term investments in deepwater drilling, the most complicated of all oil and gas operations. Statoil was determined to become lead operator on wells developed in U.S. federally managed waters, he said then. In 2012, it cost upward of $1 million a day to run a rig like the Developer in the Gulf of Mexico, but Statoil hardly cared.
"We have a machine going now with permits and rigs," Maloney said then. "Just because we had some dry holes doesn't mean we don't have a persistence to keep going."
The crude oil price crash has changed these calculations, leaving the future of risky and expensive deepwater offshore drilling in doubt.
These days, investors have zero tolerance for offshore dry holes. Noble Energy Inc. drilled one in waters off the Falkland Islands last year; the company promptly abandoned the islands, all too aware of the steeply lower crude prices compared with 2012, when offshore drillers were flying high.
The Maersk Developer today sits idled, with no work to do. Two more Maersk vessels lost their contracts this year, a semisubmersible and a drillship. Maersk is hardly alone in reporting contract cancellations, losing work that firms had hoped would be generating high revenues for years.
Less than half the number of rigs active in the Gulf in 2012 remain there today, and no new offshore vessels were added to that fleet last week, according to data published Friday by Baker Hughes Inc. The Gulf's rig count may contract further next year, despite a modest recovery in the crude oil price. The drillship Maersk Viking's contract with Exxon Mobil Corp. expires in mid-2017, according to the rig contractor's newest fleet status report.
Even if it finds new work, the Viking won't be raking in the sort of cash it had been only a few years ago. During an investors' gathering in Houston hosted by the private equity research firm Privcap, Robert Gold, an adviser at Ridgewood Energy, pointed out that rigs that used to command day rates of $500,000 or more are now finding themselves settling for prices as low as $99,000 per day. Rig contractors will continue to suffer such "incredible cost depreciation" for some time, he said.
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