Deepwater Drilling - oilfield service companies set for a revenue boom?
Posted by Edward Endicott on Wed, Mar 30, 2011 @ 10:02 AM
Tighter safety regulations, equipment specifications, and drilling procedures across the offshore industry after the Deepwater Horizon accident will boost business opportunities for oil field service companies, according to independent analyst Business Insights.
Business Insights’ latest report, "Future of Deepwater Drilling" forecasts that rates for ultra deepwater rigs will reach $600,000–650,000 per day within three years, up from $450,000 in late 2010. Increased inspections and intensified safety practices will result in an increase in drilling time, which will also add to the revenues of service companies.
Paul Marshall, an energy analyst at Business Insights, comments: “High oil prices will continue to drive the hunt for oil in frontier areas such as deepwater. However, oil and gas companies operating in deep waters will increasingly prefer safer, more secure, and technically capable rigs as the regulatory landscape changes and risks increase. As a result, oil field service companies, which generally provide technology, expertise, and ancillary operations to exploration and production companies, will charge higher prices to make their services and equipment compliant with the new stringent safety guidelines.“
However, the increased risk involved in working in deep waters may leave only a handful of large international companies operating in the US, resulting in lower activity across the industry.
Mr Marshall concludes: “Smaller independent companies will be pushed out of the industry as they lack the financial strength and resources to bear the increased costs and risks. Reduced activity in deep waters may dent service companies’ expectations of a revival in the oil and gas industry following the lows of the economic crisis and the Deepwater Horizon accident. In addition, a transformed deepwater operational landscape may not provide the contractual terms that indemnify service companies from the liabilities that arise from an oil spill.
“Going forward, a deepwater project may be contracted in such a way to share the risks and responsibilities across operators/exploration and production companies and service providers. This means that service companies that intend to operate in the deep water segment may have to enter into contracts that will not indemnify possible losses and will expose the companies to several billion dollars of liability.”
For more information on the report, click the title Future of Deepwater Drilling.