Offshore drilling industry is on the verge of the largest ever retirement cycle in history, as 88 units within the floater market will have to be taken out between 2015 and 2017, Rystad Energy, an oil and gas consultancy firm has reported.
Research shows that this retirement is a consequence of demand reduction from 262 units in 2014 to an expected 220 units in 2016 as a result of lower activity from E&P companies and despite the oil price stabilizing around 65 USD/bbl over the past quarter. Yet, between 2015-2017, the floater market awaits an influx of 64 new units.
“Over the last six months we have seen rig owners responding to the poor market outlook by retiring floating units to balance supply and demand. This will lead to 49 units in 2015 only, bringing it to record high levels in one year,” says Joachim Bjørni, Analyst at Rystad Energy. “The last time we saw a similar number of retirements was after the oil crisis in 1985.”
Rig owners have to retire an additional 36 units in 2016 to balance the floater demand. With demand expected to increase again in 2017, Rystad Energy estimates only a few additional units to be retired to balance the market.