Drilling deep

Maintaining a modern fleet with long-term contracts while setting drilling records is Maersk Drilling’s way of doing business. Eloise Logan spoke to the firm’s chief technology officer.

The Maersk Voyager drillship. Photos from Maersk Drilling.

From its humble origins in 1972, with just two semisubmersibles and two barge rigs, Maersk Drilling, has grown to secure about 3% of the global offshore drilling market, with a fleet comprised of 23 drilling rigs, including drillships, deepwater semisubmersibles and high-end jackups.

The latest in the fleet’s expansion, the firm’s fourth XLE-design ultra-harsh environment jackup rig, is under construction, and the firm recently broke a drilling record in the Norwegian North Sea.

Yet, it’s not all smooth sailing for drillers, as Frederik Smidth, Maersk Drilling’s chief technology officer, acknowledges. The firm’s ambition is to contribute to group revenue a profit (NOPAT) of $1 billion from operations that are entirely incident-free by 2018—an ambition made more challenging by the current oil price climate.

Nonetheless, Maersk Drilling is well positioned to weather the storm, Smidth says. The company is a member of a successful group rooted in another industry. Although both shipping and the oil sector are cyclical, the cycles differ, thus offering the company a nicely diversified portfolio of assets. Maersk Drilling’s fleet is modern, advanced and efficient, and the company has been successful in securing long-term contracts for its rigs.

The Maersk Integrator jackup.

“It is quite obvious that the market, and the dayrates, have gone down,” says Smidth, who marks his 25th year with Maersk Drilling this year. “This is hard to quantify exactly, though, since there are not many new contracts that have been fixed. But there are very few contracts out there and some newbuilds coming on to the market in the next six months may struggle.”

Fortunately, this is not an issue for Maersk’s recent newbuilds. The three XLE-class ultra-harsh condition jackups and its latest ultra-deepwater drillship, Maersk Voyager, are all on long-term contracts.

The new drillship, delivered February 2015, will start a long-term contract (3.5 years plus 1-year option) with Italy’s Eni and partners Vitol and state company GNPC for offshore Ghana this July. Voyager, the last of four sister drillships, will be working on the Offshore Cape Three Points (OCTP).

Developing the next generation of rigs

It not just about contracts—it’s also about cutting edge technology that will enable exploration in the most challenging reservoirs including those with high-pressure, high-temperature (HPHT) environments. Maersk Drilling is cooperating with BP on its innovative 20K HPHT project. The firms have agreed to develop, over two years, next-generation systems and tools for deepwater exploration and production so BP can tap reservoirs with pressures up to 20,000 psi and temperatures up to 350°F.

Since the conceptual engineering partnership was announced in February 2013, BP in Houston and Maersk Drilling in Copenhagen are the two teams working on the project. Mid-2014, Maersk placed orders for four blowout preventors (BOPs) and two risers from US-based GE Oil and Gas. The equipment will be delivered and deployed on two Maersk Drilling-operated 20K drilling rigs by the end of 2018.

Smidth says the BOP contracts were signed in advance of any rig construction contracts because Maersk wanted to ensure the BOPs and risers were ready when required. They will not be retrofitted to existing rigs.

“We don’t think that existing rigs would be suitable,” he explained. “For the 20K project, the BOP has to be bigger and heavier. All the piping needs to be rated for that pressure, and the mud pumps, too.” GE is designing the BOPs and risers, with input particularly regarding on safety and off-time deliveries, from Maersk and BP staff based in GE’s Houston office.

The current thinking is that the two rigs dedicated to the project will be drillships due to the size and cost requirements. If they had been semisubmersibles, they would have needed to be extremely big and heavy, Smidth explains.

The majority of known HPHT areas are in otherwise benign locations, such as the US Gulf of Mexico, Mexico, the Mediterranean and the Caspian Sea, so the new drillships will not have to contend with hostile conditions outside of water depth and HPHT.

Rig market: Costs have to come down

Smidth.

Meanwhile, Smidth says that while the slump in the oil price is putting operators under pressure, in his opinion the rise in cost levels during the past 10 years is hard to justify. This escalation in costs was right across the value chain.

“We haven’t seen a crash in prices of newbuilds, and the cost level certainly has to come down. The industry has to realize that,” he says.

He notes that rigs were just beginning to be stacked and that if there was a “shake out at the bottom” of the much older rigs that had been kept alive and were now 20-30 years old, it would be “a good thing.”

Maersk Drilling is committed to its strategy of maintaining a fleet of high-quality, highly efficient rigs. In late February, Maersk Drilling set a drilling record in the Norwegian North Sea of 800 ft/hr. The jackup was the Maersk Innovator (built 2003), working for ConocoPhillips on Eldfisk. Innovator is contracted to ConocoPhillips until Feb 2017 (plus two one-year options).

The XLE class: First two built on spec

The first two XLE jackups were built on spec, Smidth says, while the third unit had a firm contract before construction began. As the world’s largest jackups, they are designed for extra deep water and hostile conditions. The rigs can drill in up to 492ft (150m) water depth and are intended for year-round operations in the North Sea.

The new rigs are designed to meet all the rules and regulations for the northern part of the Norwegian sector, but will also be well suited to the northern UK North Sea, the east coast of Canada, and the southern areas of Australia and New Zealand.

The first two XLE-class jackups, Maersk Intrepid and Maersk Interceptor, built in 2013 at Keppel FELS in Singapore, are both working on long-term contracts in the southern Norwegian North Sea.

Interceptor is contracted to Det Norske Oljeselskapet for the Ivor Aasen field development until December 2019, plus options (two one-year options), while Intrepid is contracted to Total Norge for the Martin Linge field on a four-year contract, with options (three one-year options).

The third identical XLE, the Maersk Integrator, was launched in Singapore mid-February. The delivery voyage on board semisubmersible OHT’s heavy load carrier Hawk 2 began on March 2. The rig should be ready to start work June 1, Smidth says.

While under construction, Integrator was under long-term contract for four years firm, with options (two one-year options), with Statoil for development drilling on the Gina Krog field in the Norwegian North Sea. Like the two earlier XLEs, Integrator was built at Keppel FELS. The fourth XLE, yet to be named, is under construction at Daewoo Shipbuilding in South Korea and is due for delivery in 2016. The yard move was driven by lower costs offered at Daewoo, according to Smidth.

XLE4 is not identical the previous three XLEs, having had some modifications based on requirements BP for an already-secured five-year contract to carry out plugging and abandonment work on the Valhall field.

When XLE4 starts the work in 2016, it will provide accommodation for 180 in one-person cabins. The previous three XLE class jackups have accommodations for 150, also in one-person cabins.