State of the market

The newbuild supply overhang in Asia-Pacific continued to ease over the month of May. Shelf Drilling firmed up a three-year contract for one of the two newbuilds it acquired earlier this year from China Merchants Heavy Industry (CMHI) shipyard, Shelf Drilling Achiever, which will see the unit mobilise imminently to the Middle East for the job. Meanwhile, the contractor is actively marketing the other unit, Shelf Drilling Journey, in Southeast Asia and elsewhere. Another newbuild that has left Asia is Zhenhai 2 (ex-Jap Driller 1), which Shanghai Zhenhua Heavy Industries has bareboat chartered to Marinsa Specialised Vessels for two years. The rig is already en route from China to Mexico where it is expected to undertake a campaign for PEMEX. It will be joined there by Borr units Grid and Gersemi, which finally finished preparations and left Singapore for Mexico. This is on top of the two additional newbuilds that COSL has bareboat chartered from CMHI and began working for CNOOC in June (more on these units in the Chartering Activity section below).

Demand outlook

Demand in Southeast Asia is set to continue on its upward trajectory to average around 40.5 units in 2020, up from the 34.7 units for 2019. In the Far East, average demand is anticipated to reach 45.5 units for next year, up from 43.1 units in 2019.

New rig requirements

In Vietnam, JVPC is in the planning stages for its 2020 drilling campaign and is currently looking to drill at least two wells to maintain production levels at the Rang Dong complex on Block 15-2. Vietsovpetro came out with two more requirements in the last month, the first being for a one-well workover scope on the Bach Ho field in Block 09-1 commencing as soon as a unit can be secured. Separately, the operator issued an invitation to bid for a unit to drill an exploration well, plus one option well, on the same block starting around August 2019. With these, the operator now has three ongoing tenders.

In Indonesia, Pertamina Hulu Energi West Madura Offshore (PHE WMO) needs a rig to drill one exploration over about three months, including testing, by early fourth quarter 2019. Sister operator Pertamina Hulu Energi Nunukan Company (PHENC) issued a new notice for a repeat pre-qualification (PQ) process to seek a unit to drill three firm vertical exploration/appraisal wells over a duration of about a year. The PQ has since closed ahead of the formal retender to come. The earlier exercise, for which Apexindo was the sole bidder offering Raniworo, failed because the commercial proposals did not meet the requirement of the engineering estimate of the project. PHE Mahakam also issued a notice for a PQ exercise covering two units, Rig C and Rig D, for the operator's multi-rig operations in the Mahakam Delta area. Rig C is for two years plus two, one-year options, while Rig D will have a duration of 18 months plus two, one-year options, with the start-up for both targeted at around May 2020.

Finally, in Malaysia, Petronas Carigali is out with yet another tender, this time for a unit to drill three firm exploration wells offshore Sarawak and one optional exploration well off Sabah. The campaign is scheduled to start in third quarter 2019, spanning 242 firm days, plus 35 days for the option well.

Chartering activity

On the awards front, Seadrill finally confirmed that West Telesto has secured a contract to drill six wells plus options offshore Malaysia. The contractor said it is unable to disclose for whom the rig will be working on this occasion, but the operator is widely known to be IPC. The rig has arrived in Southeast Asia from India and is set to start by July, and the charter should keep it busy until March 2020. In Indonesia, Vantage extended its bareboat charter of Soehanah to Apexindo until the end of the year, which means the Indonesian contractor has managed to firm up an extension for the incumbent unit with Pertamina Hulu Energi for the same period. Finally, in the Far East, CNOOC has taken on three more units in the past month or so: newbuilds Zhaoshanghailong 5 and Zhaoshanghailong 6, as well as CPOE-10. The first two units have been bareboat chartered by COSL from China Merchant Heavy Industries under a two years plus two, two-year options contract each, and then chartered out to the state operator. All three units are set to work in the Bohai Gulf.

Market developments

At least two more fixtures are expected to be firmed up soon for work offshore Malaysia. Market sources indicate that both ConocoPhillips and Petronas Carigali, for its Bayan redevelopment programme, have made their rig selections and should award the contracts soon to Asia-Pacific-based units. In Thailand, PTTEP's tender for a jackup or tender-assist rig (TAR) has closed. As with most exercises in Thailand, the tender is a limited one for which only incumbents and contractors that have worked with the operator before were invited to take part. There are at least four participants, including Sapura Drilling, Vantage, Borr, and Energy Drilling. In Indonesia, Pertamina Hulu Kalimantan Timur (PHKT) received three bids from Apexindo, COSL Indo, and PT Hitek Nusantara, for its tender covering 42 wells over about two years starting November 2019. It is understood all three participants offered newbuilds.

Gain insight into every rig, vessel and platform at sea including work, maintenance and availability schedules, day rates, contract details, technical specifications, future demand and more with Petrodata by IHS Markit.

Teo Yun Yun is a Principal Analyst Offshore Rigs at IHS Markit.

Posted 17 July 2019

Posted 17 July 2019 by Yun Yun Teo, Principal Analyst, Offshore Rigs, S&P Global Commodity Insights

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.