The costs of renting offshore oil and gas rigs have more than doubled over the last two years, and could rise to $500,000 per day, oil company executives claimed on Wednesday, amid a tight hydrocarbon supply situation and as energy security continues to trump energy transition efforts.
At the top end, some drilling companies have seen daily rental rates already near $400,000. And, with market conditions as they are, drillers are commanding higher rates for their equipment in what looks to be the end of a couple of rocky pandemic years that saw drillers engage in cost-cutting measures, including scrapping dividends, restructuring, and scrapping older, less-efficient drilling rigs.
With those lean years apparently behind them and tight oil and gas markets prevailing, companies such as Transocean expect to see an uptick in calls for its equipment.
Transocean CFO Mark Mey sees a possibility of a $500,000 daily rate in the company’s future. In fact, Mey thinks that those high rates are “inevitable” if the macro environment indeed stays intact, according to Reuters.
As for the timing, Mey told Reuters that he expects to hit that mark within ten months—right about the time that many of Transocean’s contracts are set to expire, and when new ones are due to be signed.
Seadrill, according to Reuters, expects to hit the $500,000 mark even sooner, by year’s end.
The rosy outlook for offshore drilling has been mounting for months. In August, Transocean CEO Jeremy Thigpen said that the offshore recovery was already underway, with day rates continuing to rise—and that the oil and gas supply situation would carry this momentum into the future.
In July, Schlumberger spoke of its positive outlook for the offshore business, predicting that it would “outpace visibly at 2016-2019 cycle, adding that the return of offshore is a characteristic that will only expand going forward.