Statoil will cancel the contract with the China Oilfield Services Ltd. (COSL) vessel, COSL Pioneer, about 13 months before the expiry date of August 2016, reports the company. COSL Pioneer has been suspended since 8 October 2014 and Statoil has not managed to find alternative activity for the rig during the intervening period.
“We regret the need to have to cancel this contract and wish to emphasize that this is not due to how the rig has delivered,” says Statoil supply chain senior vice president, Jon Arnt Jacobsen. “COSL Pioneer and its crew have demonstrated a good safety culture and delivered efficient drilling operations to Statoil. Cancellation is a consequence of overcapacity in the rig portfolio.” The rig is currently carrying out an assignment on the Visund field and is scheduled to complete this work at the end of September.
In the beginning of July, Statoil also announced that the drilling rig, Scarabeo 5, will be temporarily suspended. Scarabeo 5 will be taken out of operations at the end of September for the rest of the year.
According to the company, the move will have no impact on Statoil’s production targets or planned exploration activity on the Norwegian shelf. The company will still be drilling 20-25 exploration wells on the Norwegian shelf in 2014, where the company operates about two-thirds of all wells.
Statoil’s decision reflects an industrywide trend of offshore floaters and jackup contract cancellations.
According to data from Norwegian consultancy Rystad Energy, upstream companies will need to make investment decisions on a total of 800 onshore and offshore oil and gas projects worth $500 billion and totaling nearly 60 billion boe throughout 2015.
Of those, global offshore oil and gas exploration projects, from the Barents Sea to the Gulf of Mexico, worth more than an aggregated $150 billion, are likely to be put on hold this year as consistently low oil prices render them uneconomic.
Due to the need to access more complex and hard to reach fields entrenched in deeper water, along with higher production costs due to raw materials costs and new technology, such fields have become prohibitively expensive against global low commodity prices, Rystad reports.
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