Bloomberg News

Statoil’s Tailored Oil Rigs to Help Curb Rising Fees, Lobby Says

November 15, 2012

Statoil ASA (STL)’s plans to use oil rigs tailor-made for its operations in Norway will help curb rising hire costs, according to an industry group.

“Statoil has taken the initiative to build its own rigs, and that will improve availability,” Gro Braekken, director- general of Norwegian Oil & Gas, said today in an interview. “This is an adjustment of supply and demand. When it gets too expensive, the companies will intervene.”

Rig charges have risen as oil producers step up exploration offshore. Recent rig orders by Statoil may help to stem climbing costs as the units add to available capacity, while ownership allows the company and its partners to sidestep hire fees. The design of the new rigs, tailored to boost oil recovery at mature fields, also frees up others for exploration, Braekken said.

Hire rates have gained more than 80 percent in the past five years and will climb by a third by 2017, according to Norwegian Oil & Gas, which represents explorers and producers. Statoil’s orders will help to bring the number of rigs operating in Norway to 40 from 30 in the period, the lobby group said.

Statoil, which accounts for about 80 percent of Norway’s oil and gas production, has already awarded contracts for four semi-submersible rigs to Songa Offshore SE (SONG) and may order more, Head of Rig Strategy and Procurement Torgeir Loeland said in September.

The company, 67 percent owned by the state, also plans to award contracts for three jack-up rigs next year, two of which may be used at the Oseberg and Gullfaks fields. It has ordered three light well-intervention ships and a rig specially tailored for increased oil recovery.

U.K. Transfers

Rig rates in Norway exceed U.K. fees by about 90 percent, a government-appointed commission concluded in August. Braekken, a member of the commission, said terms for transferring rigs from the U.K. continental shelf to Norway should be simplified.

“It would really help if the upgrades were predictable and didn’t take one to two years,” she said. “It would both reduce costs and increase availability.”

Efforts to boost recruitment would also help ease competition over wages between the companies, she said.

Total costs in the Norwegian oil industry will probably rise 27 percent in the next five years, Bjoern Harald Martinsen, economics manager at Norwegian Oil & Gas, said today in a presentation. Labor expenses may advance at roughly the same pace, he said.

To contact the reporter on this story: Mikael Holter in Oslo at mholter2@bloomberg.net

To contact the editor responsible for this story: Jonas Bergman at jbergman@bloomberg.net


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