Unexpected amelioration in the rig market

The egyptian petroleum sector is on the verge of a huge change in its rig market, due to the recent exploration bids offered by the government in the Mediterranean, Gulf of Suez, Eastern and Western desert, Nile delta and Sinai.

The six Mediterranean concessions that were given to international operators assured the high demand on offshore rigs in the coming phase.
The rise in the exploration and rigs quest will also see a lift in the foreign investments flowing into the country, which will surely increase the country’s production.
Petrobel and GUPCO are the major two operators in the marine area;. The two JV’s are on a constant race for the domination of the oil and gas industry in this area. Their daily rental cost of drilling rigs estimate around $ 50,000 to $ 165,000,  mainly provided by Transocean, Egyptian drilling company (EDC), Saipem and Pyramid Drilling Company (PDI).

The Western Desert is mainly led by Khalda Petroleum Company (KPC), which come first in the onshore drilling, “represent the core of petroleum sector reserves due to its huge output of oil and gas, because of their successful system and strategy” according to experts. In the end of 2008 Khalda had 25 rigs operating in different locations in the Western desert, and due to the global crisis, the firm only kept the vital ones to survive through recession. Although, the decrease in the number of rigs operating to reach 11, Khalda’s production still ranks second  just after Petrobel.

Looking back to the prices of onshore rigs now and to what they were from two years, the prices decreased 35%, drawing the attention of exploration companies to expand their drilling plans to benefit from the low price of rented rigs.

Chart showing the decrease in rig prices in 2008/09 and 2009/10 fiscal year

Large number of companies had to decrease their drilling activity due to recession, while others took advantage of these low prices to go for more exploration. Naftogaz of Ukraine, who recently announced a new commercial discovery in its acquisition in Alam Al Shawish, was one of these companies to raise its prosperity. Naftogaz is in the process of founding a joint company with The Egyptian General Petroleum Corporation (EGPC).
In general, looking throughout the last three months, the number of operating rigs expected to increase in the upcoming stage, in both onshore and offshore rigs market.

Chart showing the number of operating rigs from July 2008 till December 2009

The chart shows the variation between the number of working rigs from July 2008 to December 2009, and that swing indicates an awaiting rise in the rig market.


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