Semisubmersibles Tender: A Show Of Commitment To The Black Sea

BMI View : Ukraine's tender for two semisubmersibles shows its commitment to the development of its local production capabilities. These rigs will support the country ' s exploration of its deepwater gas resources in the Black Sea, where rig utilisation rates are high as interest in the region's potential grows. The availability of rigs for drilling campaigns could give Ukraine an advantage over neighbours such as Bulgaria and Romania in attracting investment , as the scarcity of rigs in the region poses a hurdle for prospective investors.

Ukraine is stepping up its game in boosting domestic gas production. National oil and gas company (NOC) Naftogaz announced on Tuesday a tender for two semisubmersible floating drilling rigs at a cost of US$1.4bn. The rigs will be deployed in the Black Sea, one of the areas where the country is looking for new resources , in its efforts to build up domestic gas output and ease its import reliance on Russian gas. Submissions will close on October 29 2012.

Boosting Domestic Production

A Ukrainian official told Reut ers in September 2012 that the country wants to reduce gas imports from Russia. He was quoted to have said that Ukraine will only import 27bcm from its neighbour in 2012, a 32.5% drop from 2010 levels. It also aims to reduce its import volume further to 24.5bcm in 2013.

This interest in cutting Russian gas imports has been fuelled by a rising gas import bill. According to Reuters, Ukraine could pay Russia up to US$430 per thousand cubic metres of gas in Q412 - a 21.3% increase from prices in Q311. This import burden is unsustainable given the troubled state of Ukraine ' s finances and will increasingly compromise its ability to keep dishing out politically im portant domestic gas subsidies ( see our online service, August 13, ' LNG Project To Loosen Russia's Iron Grip' ).

The lack of success in negotiating for a price decrease with Russia means that this import bill will not shrink anytime soon, given that Ukraine's existing infrastructure only supports pipeline gas imports from Russia. Russia ' s oil-indexed gas price formula which determines the costs of Ukraine's gas import will also see an elevated import bill as we forecast that oil prices will remain high by historical standards at above US$100/bbl.

With liquefied natural gas (LNG) import facilities not expected online until at least 2016, it will be difficult for Ukraine to cut its gas imports as domestic consumption continues to rise. Boosting domestic gas production is the only way out of this doldrum.

The Difficulty In Fighting Against Russian Imports
Ukraine's Gas Production And Import Requirement, 2012-2016 (bcm)

Black Sea Treasures

The government has been very pro-active in encouraging exploration in the country , with particular emphasis on its onshore unconventional and deepwater gas resources in the Black Sea. In August 2012, it selected a consortium led by ExxonMobil and Royal Dutch Shell to develop the offshore Skifska field in the Black Sea , anticipating that it would bring at least 5bn cubic metres (bcm) of gas online per year for the country.

However, the Black Sea appears to have a shortage of suitable rigs. According to data from RigZone, the Black Sea has 15 rigs, nearly half of the number available in the nearby Caspian Sea. Rig utilisation rate is also relatively high at 80.0%, surpassed only by that in East Africa, South Asia, the North Sea and the Canadian Atlantic , all areas of very high exploration and production ( E&P ) activity . Moreover, rigs currently available in the Black Sea are mainly either platform rigs or jackups, with limited deepwater capa bility .

Table: Offshore Rig Fleet By Region
Region Name Rigs Contracted Rig Fleet % Utilization
Source: Rigzone
Africa - Other 7 rigs 8 rigs 87.5%
Africa - West 60 rigs 82 rigs 73.2%
Asia - Caspian 17 rigs 28 rigs 60.7%
Asia - Far East 32 rigs 125 rigs 25.6%
Asia - South 43 rigs 53 rigs 81.1%
Asia - SouthEast 81 rigs 171 rigs 47.4%
Australia 11 rigs 16 rigs 68.8%
Black Sea 12 rigs 15 rigs 80.0%
Europe - East 3 rigs 5 rigs 60.0%
Europe - North Sea 164 rigs 173 rigs 94.8%
Mediterranean 21 rigs 28 rigs 75.0%
MidEast - Persian Gulf 85 rigs 121 rigs 70.2%
MidEast - Red Sea 7 rigs 13 rigs 53.8%
N. America - Canadian Atlantic 5 rigs 5 rigs 100.0%
N. America - Canadian Pacific 0 rigs 1 rigs 0.0%
N. America - Mexico 36 rigs 71 rigs 50.7%
N. America - US Alaska 4 rigs 7 rigs 57.1%
N. America - US GOM 92 rigs 232 rigs 39.7%
N. America - US Other 1 rigs 28 rigs 3.6%
S. America - Brazil 91 rigs 130 rigs 70.0%
S. America - Other & Carib. 10 rigs 18 rigs 55.6%
S. America - Venezuela 23 rigs 46 rigs 50

The purchase of two semisubmersibles will help Ukraine in the exploration and appraisal of its Black Sea shelf. The mobility they provide compared to platform rigs, their ability to withstand rough waters and their deepwater capabilities will facilitate exploration in the Black Sea. It will give Ukraine an edge against other countries which are also opening their Black Sea shelf for E&P such as Romania and Bulgaria. These rigs can help Ukraine better support firms working in its waters, particularly as rig demand in the Black Sea rises along with growing interest in this frontier region.

Table: Offshore Rigs In The Black Sea
Rig Name Manager Rig Type Status
Source: Rigzone
Nezalezhnist Chernomorneftegaz Jackup Ready Stacked
Petro Godovanets Chernomorneftegaz Jackup Drilling
Sea of Azov Rig 01 Chernomorneftegaz Platform Rig Drilling
Sea of Azov Rig 02 Chernomorneftegaz Platform Rig Workover
Sivash Chernomorneftegaz Jackup Drilling
Tavrida Chernomorneftegaz Jackup Ready Stacked
Ukraine Rig 02 Chernomorneftegaz Platform Rig Workover
Ukraine Rig 04 Chernomorneftegaz Platform Rig Workover
Ukraine Rig 05 Chernomorneftegaz Platform Rig Drilling
Ukraine Rig 06 Chernomorneftegaz Platform Rig Workover
Ukraine Rig 18 Chernomorneftegaz Platform Rig Workover
Ukraine Rig 19 Chernomorneftegaz Platform Rig Drilling
GSP Fortuna GSP Jackup Modification
GSP Jupiter GSP Jackup Drilling
GSP Prometeu GSP Jackup Drilling
This article is tagged to:
Sector: Oil & Gas
Geography: Ukraine

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