• 3 minutes e-car sales collapse
  • 6 minutes America Is Exceptional in Its Political Divide
  • 11 minutes Perovskites, a ‘dirt cheap’ alternative to silicon, just got a lot more efficient
  • 8 days Does Toyota Know Something That We Don’t?
  • 1 day America should go after China but it should be done in a wise way.
  • 7 days World could get rid of Putin and Russia but nobody is bold enough
  • 9 days China is using Chinese Names of Cities on their Border with Russia.
  • 11 days Russian Officials Voice Concerns About Chinese-Funded Rail Line
  • 11 days OPINION: Putin’s Genocidal Myth A scholarly treatise on the thousands of years of Ukrainian history. RCW
  • 11 days CHINA Economy IMPLODING - Fastest Price Fall in 14 Years & Stock Market Crashes to 5 Year Low
  • 9 days CHINA Economy Disaster - Employee Shortages, Retirement Age, Birth Rate & Ageing Population
  • 1 day How Far Have We Really Gotten With Alternative Energy
  • 10 days Putin and Xi Bet on the Global South
  • 11 days "(Another) Putin Critic 'Falls' Out Of Window, Dies"
Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

More Info

Premium Content

The Bad News Continues For Offshore Oil And Gas

The oil price bust, which resulted from the global crude oil glut, has created yet more oversupply, this time in the offshore industry, where a rig and vessel glut is forming.

Offshore drilling has been one of the worst hit sectors during the oil price slump, with exploration expenditure having significantly dropped over the past two years and expected to continue to fall this year. This has left an oversupply of vessels and rigs, and to make things worse, new-build assets are entering the market.

Many vessels and rigs are now being built speculatively, without existing contracts for their use, and those speculative assets will not find customers until at least 2019, a manager at a Norway-based company that specializes in preservation and corrosion protection in the oil, gas and shipping industries, has warned.

According to Allan Durham, managing director at Stavanger-based Presserv, at least 61 floaters are on order, including drill ships and semi-submersibles, and 85 percent of those are being built speculatively, mostly in southeast Asia, Energy Voice reports.

This will do little to ease the pain of the current asset oversupply in Singapore’s oil services sector, for example. According to analysts at Maybank Kim Eng quoted by The Business Times, 2017 will not be an easy year for the industry, and improved utilization rates that may come from higher oil prices may not come fast enough to save some players from burning all their cash. Related: EIA Boosts Bullish Oil Sentiment With 7.1-Million Barrel Draw

A total of 112 new jack-ups will become available from the second quarter of this year, while 32 jack-ups are set for retirement in 2017. The result: 80 new-build jack-ups in an already oversupplied market, Durham told Energy Voice.

According to an Evercore ISI offshore market update quoted by Offshore Magazine, the contracted floater count at the end of last year was 150, a 2.9-percent drop from November and a 30-percent slump from a year ago.

Still, some signs of improvement emerged, with the working floater count rising for the first time in five months. The working jack-up count rose for a second straight month, the first time this has happened since July 2014, according to Evercore.

As far as jack-up contracts are concerned, Evercore’s analysis showed that 160 deals were announced in 2016 at daily rates averaging US$86,000. This rate was 18.2-percent lower than the 2015 average of US$105,000 in 263 jack-up contracts.

Even at this lowered contracting pace, there are rigs sitting idle globally.

“The longer an asset lies unused, the more work and greater the cost involved in reactivating it when the market regains buoyancy,” Energy Voice quoted Durham as saying.

Related: Saudi Arabia Continues To Lead The OPEC Cuts

That said, energy consultancy Douglas-Westwood expects the global offshore maintenance, modifications and operations (MMO) expenditure on around 8,700 fixed and floating assets globally to increase by 4.1 percent annually between 2017 and 2021, from US$81 billion in 2017 to US$95 billion in 2021.

Ageing infrastructure and the need to stick to standards would drive this higher spending, Douglas-Westwood noted, adding that Asia and North America would be leaders in the spend from now until 2021 with 24 percent and 20 percent of expenditure, respectively.

While maintenance on offshore assets is seen rising this year and the next four, total oil and gas exploration investment is still expected to drop in 2017, according to a report by Wood Mackenzie.

“Overall investment will at best match 2016 year’s spend of around US$40 billion, and may yet fall further,” WoodMac said.


In 2017, the energy consultancy estimates that oil and gas exploration investment will drop to US$37 billion--the lowest exploration investment level since at least 2009. In comparison, exploration investment in 2014 was US$100 billion.

However, recovery is on the way in 2018, according to WoodMac, and by the following year investments in exploration should reach about US$50 billion, growing further still in 2020 to US$60 billion.

By Tsvetana Paraskova for Oilprice.com

More Top Reads From Oilprice.com:

Download The Free Oilprice App Today

Back to homepage

Leave a comment
  • adec on January 05 2017 said:
    Old news. backward-looking. Some hidden agenda.
  • Jack Ma on January 05 2017 said:
    Not bad news at all.

    Never waste a crisis - The petrodollar war rages on.
    Accumulate these shares - buy the balance sheets dirt cheap.

    DO, NE, ESV, RIG
    Opportunity is never bad news.

    Warmest regards
  • EdBCN on January 09 2017 said:
    When will the threat of EVs start to cause dis-investment in these long-lead-time offshore projects? It's one thing to invest in something that won't pay off for ten years when you are certain that everyone will still be driving gasmobiles in large numbers, but what if EVs start looking ever more likely, what happens then? And when will investors' attitudes change? What would it take? EVs at 5% of the market and battery prices falling? Just wondering.

Leave a comment

EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News