CGX Head hints that daily rental for rigs as high as US$1.5M 

Jul 17, 2023 News

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Kaieteur News – Executive Chairman for CGX (Guyana) Energy, Professor Suresh Narine, has hinted that today’s rig prices ranges from a staggering US$1M to US$1.5M.

The CGX Head made that comment during a virtual panel discussion last Wednesday.

The discussion was hosted by Ghana Petroleum Commission in partnership with the Ghana Chamber of Commerce Guyana (GCCG) and ALA Strategic Consult Ltd, and focused on opportunities for Ghana’s oil & gas service companies in Guyana’s petroleum industry and how they can add value to developing local content in Guyana.

Professor Narine is the Head of CGX, a Canadian oil and gas exploration company that holds an interest in the Corentyne block in the Guyana Basin – a proven petroleum basin. Since 1997, CGX has been an active explorer both onshore and offshore Guyana and now have two discoveries under their belt.

Professor Narine in his address advised Ghanian investors who are looking for opportunities in Guyana’s oil and gas industry to first establish a presence in country.

“We meet with a tremendous amount of people wanting to locate in Guyana because of the pregnant opportunities. So naturally many of those companies are seeking to secure a contract before even establishing a presence in country,” he said.

He continued, “There is an onus on those investors to take the risk to partner properly in country and have a presence; it’s very difficult for operators to be in a discussion with ‘what-ifs’. If the numbers are convincing enough and they are present, and there are fertile opportunities for companies in Ghana, my advice to you is to be present on the ground.”

Professor Narine went on to explain that very few companies are able to give contracts to companies that are not in country.

“And you will lose out to those configurations already on the ground,” he added.

In making his point, CGX Head explained that even if a company can promise better economics like cheaper services, oil and gas operators will still go to those they know they can rely on.

“When you are drilling offshore with today rig prices, generally every 24hours will cost between a million and 1.5M US, so you want your services to be close to you, and you want to know that they have the capacity on the ground,” he said.

Professor Narine continued, “You don’t want to have a relationship with an oil spill response company that have to mobilise from across the Atlantic you want to make sure they have inventory in country.”

As such he added, “So that’s the key to business partnerships its get on the ground have that visibility make those commitments.”

CGX Head comments about rigs prices being about US$1M daily, comes on the heels of a report by Wood Mackenzie, global research and consultancy group, which said that rig utilization has returned to pre-COVID levels, driving rates up by 40% in the past year, with an expected increase of 18%.

Wood MacKenzie anticipates before the end of the year, rates of US$500,000/day or above may return for highly-prized, advantaged ultra-deepwater rigs. Benign ultra-deepwater rigs have averaged US$420,000/day in the first half of 2023, with utilization at 90%.

“Higher oil prices, the focus on energy security and deepwater’s emissions advantages have supported deepwater development and, to some extent, boosted exploration,” said Leslie Cook, principal analyst for Wood Mackenzie, adding, “Active supply is now more in line with demand and rig cash flows are positive. We expect demand to continue to rise.”

“With increasing demand and rates, we are approaching the tipping point for new builds and reactivations,” said Cook.

“We haven’t reached it yet, but for new builds, it’s not a question of if, but when. The need for decarbonisation, technological advancement, more efficiency and, ultimately, fleet replacement will drive a new cycle. If rig economics remain robust and rig companies see contractual risks abate, this could be sooner rather than later,” he added.

Wood MacKenzie also reported that the demand for rig utilization is forecast to increase another 20% from 2024-2025.

The report questioned, “Are we at the tipping point of the deepwater rig market?” as active floater utilisation has rebounded from a low of 65% in 2018 to over 85% in 2023, the number of contracted ultra-deepwater (UDW) benign rigs has returned to pre-COVID levels and day rates for best-in-class floaters have doubled in the past two years.

Much of this expected growth will come from the “Golden Triangle” of Latin America, North America and Africa, as well as parts of the Mediterranean. Wood Mackenzie projects that these areas will account for 75% of global floating rig demand through 2027.

A few months ago, Kaieteur News reported that American drilling company, Noble Corporation is being paid over $84M (US$420,000) daily for each of its four drill ships that is being utilised in the Stabroek Block, by ExxonMobil Guyana. Notably, CGX is also utilizing one of Noble’s drill ships for their operations in the Corentyne Oil Block.

Owing to the 2016 Production Sharing Agreement (PSA), Guyana signed onto with Exxon – all of the company’s expense will be recovered. Under the deal, Exxon receives profits after 75 percent is withdrawn to cover operational expenses.

 

 

 

 

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• energy, Executive Chairman, ExxonMobil, Guyana, Kaieteur News, Professor Narine, Professor Suresh Narine, Stabroek Block, Wood Mackenzie

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