COVID-19 Could Dismantle A Quarter Of The Global Offshore Drilling Fleet

The COVID-19 Crisis Will Impact Global Demand for Offshore Drilling Units and Trigger a New Round of Scrapping, Says Rystad Energy.

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An assessment of active platforms in the global offshore vessel fleet reveals that up to 59 out of 213 units are potential candidates for retirement. This includes 22 drillships and 37 semi-submersibles, equivalent to a quarter of the units.

Global demand for floaters, which had just started to recover before the pandemic, is now expected to remain under pressure until 2022. Meanwhile, 25 new floaters are planned for delivery in 2023.

Naturally, weak demand will keep utilization at low levels unless there is a significant increase in oil prices. Rystad Energy has created three scenarios that annualize supply and demand over platform years, showing the range of expected utilization levels based on platform wear and new construction deliveries.

Utilization began to plummet in 2016 and has fluctuated between 45% and 55% since then, with 2020 levels expected to be at 50%. Utilization could reach 77% in 2023 if all 59 floaters identified by Rystad Energy are retired and no new construction is delivered – an optimistic scenario. Utilization will decline as units are retired and no new constructions are delivered.

In the last scenario, which assumes the delivery of new units but not the complete retirement of identified platforms, utilization could drop to 52% depending on how many units are decommissioned.

“Capacity wear could set the stage for a return to utilization and play a key role as the offshore drilling industry seeks to strengthen its finances. After drillers emerge from restructuring, we could see more mergers and acquisitions, which could again result in further turmoil,” said Jo Friedmann, Senior Analyst of Energy Services at Rystad Energy.