Statoil ASA, Norway’s biggest oil and gas producer, developed a rig designed for domestic demands and said it may take an ownership stake in the facilities as it struggles with high costs and a scarcity of drilling platforms.
Statoil will hold a tender to build at least two rigs, offering contracts that may with extensions last for 20 years, the company said today in a statement. Contracts will be decided on in the third quarter and the rigs are expected to be delivered in 2014. The company targets a 20 percent increase in efficiency on the new rigs, Statoil said.
“The rigs delivered to the Norwegian continental shelf in recent years were first and foremost constructed for operations in deep water,” Chief Procurement Officer Jon Arnt Jacobsen said. “They are big and too costly for our requirements and challenges. We are therefore taking steps to rejuvenate the rig fleet and ensure that the right rig meets the right requirements.”
Statoil is struggling to maintain domestic output as production falls at its maturing North Sea fields and local finds become smaller. Stringent Norwegian offshore rules limit supply and contribute to higher rates. Only 34 rigs are operating offshore Norway today, according to Statoil. Oil producers including Exxon Mobil Corp. and ConocoPhillips have said drilling costs in Norway need to fall to improve recovery from aging fields.
“The North Sea is an incredibly tight market,” said Kim Andre Uggedal, an analyst at Agilis Securities. “Statoil has had a problem with this. They were supposed to get three rigs from what used to be Awilco Drilling Ltd. but those have been very delayed. And you can see from their production that they’ve struggled with their entire drilling program.”
Statoil, which operates about 80 percent of Norway’s oil and gas production, missed both its initial and revised production estimates for 2010 and this month cut its output target for 2012 to about 2 million barrels of oil equivalent a day, from a previous target of 2.06 million to 2.16 million.
The planned rigs will be so-called category D rigs and able to operate at water depths of 100 meters (328 feet) to 500 meters and drill down to 8,500 meters, Statoil said. They will be deployed on mature fields, primarily to drill production wells and well completion to enhance oil recovery, the company said.
Statoil has pre-qualified Keppel Corp., Jurong Shipyard Pte, Daewoo Shipbuilding & Marine Engineering Co. and Samsung Heavy Industries Co. as yards to deliver the rigs. It has pre- qualified oil service suppliers Aker Solutions ASA and National Oilwell Varco Inc., Oeystein Arvid Haaland, head of drilling and well, said at a press conference webcast from Stavanger.
The company plans about $16 billion in capital spending and about $3 billion exploration spending this year, compared with a planned $13 billion in capital expenditure and $2.3 billion in spending on exploration last year. It plans about 25 exploration wells in 2011, up from about 15 last year.
“In the past years only five out 100 rigs built have been built without deepwater capabilities,” said Hanne Lekva, head of Statoil’s rig strategy, said at the press conference. “That means that there are large, expensive rigs coming to Norway going forward.”
Companies including Aker Drilling ASA and Seadrill Ltd. are betting on rising demand for rigs that can drill in tough environments as oil prices surge and resources dwindle in easier-to-access areas. Stricter safety regulations after the Deepwater Horizon explosion in the Gulf of Mexico and more finds in ultra-deep waters have also spurred a jump in orders for more modern rigs that are designed for deepwater environments.
Statoil’s initiative can benefit “companies that have experience from the Norwegian continental shelf, such as Fred. Olsen Energy, the new North Atlantic Drilling, Transocean Ltd. if they can get long-term contracts,” Uggedal said.
Statoil said it received “a lot of interest” and met with 13 companies today to discuss the tender. While the company “doesn’t wish” to own the rigs, it would take an ownership stake if required to get them built, said Jacobsen.
“What we’re concerned with is that we get these rigs on the right terms and so we want to look at how a potential ownership will contribute to that,” he said at the press conference. “It’s an option we’re requesting in this tender.”
To contact the reporter on this story: Marianne Stigset in Oslo at firstname.lastname@example.org