Moving offshore rigs between regions for different jobs is a sector trend. Given the differing regulatory requirements globally, how can a rig owner make their asset attractive to an operator without over-investing in an upfront cost?
Market forces are increasing interregional rig mobilisation activities, predominately for offshore drilling rigs but also accommodation units (floating hotels). Since January 2021, Vysus Group has been supporting an increased demand for rig mobilisation services of 20-40%. In a challenging economic climate for the oil and gas sector, the supply of rigs outstrips demand. Forbes reports the lowest weekly tally of drilling rigs in the Gulf of Mexico for two decades. The situation is exacerbated by the trend for shorter drilling campaigns, typically from four to five years in length to a matter of months today.
Established operators and new market entrants want good units to hire that are ready to operate in their project’s region, wherever that basin is located. Knowing that a rig will meet the regulatory regime without costly delay to a schedule is fundamental to success. Turnaround timings can be tight, especially when campaigns are short or weather windows to reach a field are restricted. For a rig owner seeking to move an asset to win a contract, guaranteeing swift compliance will mean a higher score against the selection criteria in the rig procurement process.
How does an owner considering, or about to invest in, mobilising their rig elsewhere best navigate what’s needed from a regulatory perspective? Our asset-owning clients face three key issues.
- This is an upfront investment, in many cases before a drilling contract is signed
- The global regulatory landscape for health, safety and environmental requirements is differing
- Limited or no internal resources for compliance matters or, conversely, a mix of teams and processes following acquisitions and mergers
Regulatory nuances and differences
Regional agreements covering offshore oil and activities vary in comprehensiveness and approaches: prescriptive, performance-based or a hybrid of the two. Some offshore regulatory regimes are more developed (Australia, the UK, Norway and the Gulf of Mexico, for instance) than others (such as the Middle East or Eastern and Western Africa).
Moving a rig with a history of operating in a well-established regime to a similar jurisdiction is relatively straightforward, but there are nuances. A key area is the manner of demonstrating compliance or type of documentation required. Getting this wrong can unexpectedly hold operations up if the regulator’s expectations are not met. There are also savings to be made in efficiently transposing information held on multiple systems and in various documents in an applicable way for the new regulator. Deploying a rig from a less-defined to a more regulated region demands more upfront work by its nature, but the opportunities can be quickly assessed with in-depth regulatory and operational understanding.
Being cost-effective with upfront investment
Wherever a rig is heading – whatever stage an asset owner is at with rig procurement or their in-house resources –being cost effective is possible and highly desirable. To make well-informed decisions, we help asset-owning clients to identify the regulatory gaps and understand what compliance will mean for their business. An important factor for this, and when preparing documentation, is focusing on what will really matter to the respective authority, avoiding common mistakes or unnecessary additional work with little added value. Our support is shaped by extensive sector expertise. Over the past two years, our ModuSpecTM
team has completed 100+ rig intake projects and, throughout the last decade, supported over 60% of newbuild rigs starting up in Northern Europe. In total, we have helped with 15,000 rig intakes, are a leader in well management services and offer in-depth regulatory knowledge, advising regulators globally.
Paperwork is powerful
An upfront investment in regulatory matters can be extremely beneficial to a rig owner, including:
- improved business opportunities when hunting for contracts in an aggressive market
- greater leeway when negotiating contract rates
- reduced risk of penalties should there be any hold ups or lay ups because of the need to respond to regulatory questions.
Hirers will benefit from smooth operations, with no hidden problems to their plans. Confidence worth paying for.
Having the right paperwork is powerful for rig owners. Having well-manged documents for the rig procurement process of interregional rig transfer is a solid starting point