Splash 24/7 – Report makes case for urgent scrapping of rigs

Written by Sam Chambers

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21 December 2015 – A new report from Icarus Consultants suggests another 100 rigs need to be scrapped to give the offshore market any chance of equilibrium.

Despite a rash of retirements in the first half of the year there has been nothing scrapped in the last three months.

“The floater sector has, at least, made a start, with 44 units, mostly from Transocean and Diamond, being sent to the knackers yard this year but consensus of opinion from analysts is that another 100 units need to go the same route,” Icarus noted.

The consultants warned there are still 42 floaters currently under construction which will enter the market over the next two years and this is not counting those for Sete Brasil which may or may not amount to another 15 UDW units.

Only five out of an estimated 526 jackups worldwide were sent to scrap this year.

Currently there are around 60 idle jackups that are over the age of 30 years and another 90 of the same age that come off contract in 2016. The current chartered overall fleet amounts only to 61% utilisation with around 118 idle jackups and 63 cold stacked. Moreover, Icarus warned: “The number of idle rigs will swell alarmingly when the 125 jackups currently under construction hit the market in 2016 and 2017.”

The report concluded: “Something has to give, scrapping has to begin in earnest and even relatively new premium rigs will go into cold stack. By not retiring rigs the downturn will be extended as the market would remain severely overcrowded.”