UK’s North Sea Faces Rig Shortage

The government is putting together an action plan to solve a rig shortage crisis in the North Sea, but experts claim that no new rigs are available for hire until the end of 2007, the Sunday Herald reported. Surging demand for equipment is caused by the high oil price, which has made previously abandoned discoveries economically viable again. The shortage of exploring rigs has forced the industry and the Department of Trade and Industry to come up with a plan, yet to be published, which involves the sharing of rigs. Mobile rigs are used to drill for oil and assess the extent of a find. Rigs, which sat disused in the Moray Firth three years ago, in a flat exploration market, are now the hottest properties on the sea. Some industry experts doubt if the plan to have operators sign joint contracts for rigs can work. Soaring oil prices have turned oil field economics on its head. Fields previously thought to be too difficult and expensive to develop properly are suddenly viable economic opportunities. A booming exploration market off west Africa and Asia also draws rigs far away from small North Sea fields. There are just 75 exploration rigs in the North Sea, far fewer than in the past. With demand outstripping supply, contractors can demand longer contracts at a more expensive day rate. Rigs that were hiring at $60-70,000 a day four years ago are now being hired out for $300,000 a day. There are currently around 500 exploration rigs in the water across the world, and the shortage is unlikely to disappear any time soon. (Source: Sunday Herald)