Let’s make a perspective on the global offshore market offers projections to 2035.

To assist navigate and understand the current cycle in the offshore rig market, our offshore drilling outlook provides a reference case for the evolving offshore markets for jack ups and floating rigs (semisubmersibles and drill ships) through 2035—delivering a view on market conditions and timing for recovery.

2020’s market started with the lowest activity levels seen in 20 years, on 21st April 2020 oil prices turned negative. At that same vein, operators have not increased offshore-exploration capital expenditures. Although some premium rigs have been reactivated recently, we anticipate that the market will be slow to recover.

In 2018 alone, 37 jack-ups were retired, the highest number seen in the past five years. Despite these retirements, there was still an oversupply of jack-ups. Marketed utilization has been reduced to about 62 to 69 percent, and new contracts were for day rates that were an average of 15 percent lower than they were in 2017. For floaters, 20 rigs retired in 2018, which led day rates to increase 25 percent in 2018, accompanied by an increase in the number of fixtures signed.

By 2035, we project that exploration and production companies will need to add 43 million barrels per day of new crude from unsanctioned projects to meet demand. Closing this gap will require additional output from both shale and offshore. We expect offshore to account for about 30 percent of this new crude production, with roughly half of the total offshore volume coming from deep-water and higher-cost ultra deep-water resources.

As non-national-oil-company operators shift focus to deep-water fields because of increasing break-even costs of shallow-water fields, jack-up demand should grow 1 percent per year through 2035. Following this trend, utilization will recover to above 80 percent by 2023, driven by a large number of retirements and continued deferment of the order book. The chronic jack up oversupply appears set to end, as extensive retirements of older and lower-spec rigs in the near future are expected to lead to a 9 percent decline in the overall jack up fleet by 2035.

Over the course of 2020, floating-rig demand will drop slightly because of unstable oil prices, but growth—to the tune of 6 percent per annum between 2020 and 2027, then 2 percent per annum until 2035—is expected to follow. Key growth regions will be Africa, Brazil, and the Gulf of Mexico. We anticipate that supply will remain relatively stable through 2026, leading utilization to recover to 80 percent by 2026 and long-term floater-supply growth to reach about 13 percent by 2035.

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