Despite tension over the future of fossil fuel and the impacts of COVID-19 on the petroleum sector, oil and gas exploration rigs are on the rise in Africa and other regions as daily cost soars to record high.
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A report released by Wood Mackenzie has shown that rig utilisation returned to pre-COVID levels, driving rates up 40 per cent in the past year as demand is forecast to increase by 20 per cent from 2024-2025.
   
Although the impact of the energy transition is weighing on Africa, new oil discoveries are being made on the continent even as Namibia’s state-owned oil company, NAMCOR, made a third oil discovery with Shell and QatarEnergy in the Jonker-1X deepwater exploration well in the Orange Basin, offshore southern Namibia in March this year.
   
The report by WoodMac revealed that Latin America, North America and Africa as well as parts of the Mediterranean would account for 75 per cent of global floating rig demand through 2027
   
“Are we at the tipping point of the deepwater rig market?” active floater utilisation has rebounded from a low of 65 per cent in 2018 to over 85 per cent in 2023,” the organisation said in the report. 
    
According to the report, the number of contracted ultra-deepwater (UDW) benign rigs has returned to pre-COVID levels and day rates for best-in-class floaters have doubled in the past two years.
    
Principal Analyst for Wood Mackenzie, Leslie Cook, said higher oil prices, the focus on energy security and deepwater’s emissions advantages have supported deepwater development and, to some extent, boosted exploration.
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“Active supply is now more in line with demand and rig cash flows are positive. We expect demand to continue to rise,” Cook noted. The document noted that the development has pushed rates up 40 per cent in the past year, adding that a further 18 per cent escalation for floater day rates is likely.
    
Before the end of the year, rates of $500,000/day or above may return for highly prized, advantaged ultra-deepwater rigs, the firm noted, adding that benign ultra-deepwater rigs have averaged $420,000/day in the first half of 2023, with utilization at 90 per cent.
    
Cook said: “With increasing demand and rates, we are approaching the tipping point for new builds and reactivations. We haven’t reached it yet, but for new builds, it’s not a question of if, but when. The need for decarbonisation, technological advancement, more efficiency and, ultimately, a fleet replacement will drive a new cycle. If rig economics remain robust and rig companies see contractual risks abate, this could be sooner rather than later.”
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