The news coming out of Chinese shipyards regarding deliveries of the 87 jackups they still have under construction is that there is precious little news. All is silent with the occasional revelation that individual rigs remain under construction or have been launched.
Currently there are seventy (70) jackups under construction as various Chinese yards. Of these there are twenty-five (25) that have been ordered by bona-fide drilling contractors such as Seadrill, Northern Offshore, COSL, Dynamic, KS Drilling, Shengli and Apexindo. The remaining forty-five (45) have all been ordered on pure speculation with the intention of flipping them for a profit.
Deliveries on some of the seventy (70) have already been officially pushed back into late 2016 or later or were naturally behind schedule anyway. Twenty-seven (27) units were to have been delivered in 2015 and first quarter of 2016 according to their original construction schedule but have not appeared in the market. A high percentage of these are probably ready for delivery but are yet to be accepted by their owners. Not much information is being made available on these units.
Even for the twenty-five (25) rigs ordered by drilling companies there is no certainty that the drillers will accept delivery of the rigs they have ordered, although Shengli and Northern Offshore appear set to accept their rigs when ready. Seadrill have announced that they will not take delivery of any of their eight jackups in 2016 and then further announced that they consider the eight (8) rigs under construction at DSIC to be “an option to buy” which sounds ominous for DSIC. It would be a surprise if Dynamic, Apexindo and KS Drilling took delivery of their rigs without a contract in place, a remote event at this juncture. Paragon has continually stated that accepting delivery of the three Prospector rigs still under construction is unlikely. Some of the threats are probably posturing as the rigs are likely to be accepted once the market improves. Its just that the owners do not want to pay for them until then.
But the real question is what will happen to the other forty-five (45) jackups whose chances of being flipped for a profit are currently absolutely zero and whose chances of making any sale at all would depend on how much of a hit they are prepared to take on the original shipyard price. As most have only made a down payment of 5% they have relatively little to lose by walking away as compared to paying the $180-200m to the shipyard, taking delivery, and then perhaps only being able to sell on for $140m. This though is a moot point as the owners would not be able to get financing from the banks without a contract for the rig and in such a cut throat market as this one it is highly unlikely that they would win any contracts when competing against bone-fide drillers, themselves desperate for work.
Of course we have John Fredriksen sniffing around with his Sandbox venture with the stated intention of buying up distressed assets. Maersk Drilling has indicated they are in a position to move in on any opportunities but they will only aim for high spec harsh environment unit of which there are very few under construction. There are also rumours of a certain offshoot US drilling company in talks with CMIC to examine the possibility of taking over operatorship of their unsold jackup inventory on some sort of a lease purchase deal, presumably they would then be able to start a fleet replenishment exercise and condemn their old jackups to the scrapyard. There is no doubt there are other clever deals being thought through at present.
The emergence of Iran, allowed back into the international market, is seen by many of the speculators as The Opportunity, but it has been so since the building boom started and very few units were actually picked up by Iran, mostly 300ft rated smaller units. The National Iranian Drilling Company is said to be in negotiations with domestic and international investors from Asia and Europe with a view to acquiring five (5) jackups with a budget at $200 million for each and is said to have signed a memorandum of understanding with Chinese companies apparently based on a lease purchase scenario. Owners may be salivating but five (5) out of forty-five (45) is hardly encouraging. The other great hope was Mexico but that market has collapsed completely.
However, it is known that most of the Chinese yards are being very lenient with the owners, allowing completed units to remain in the yard at no cost and offering to help find buyers for the rigs at which point they would refund the down payment to the original owners, But this is certainly not a seller’s market. Patently this shows the yards are taking a very patient and long term view, albeit knowing they have government guarantees in their back pocket in case things don’t go as planned.
Although there are twelve (12) shipyards in China currently constructing jackups, three (3), namely CMHI, SWS and DSIC, have the most exposure and account for forty (40) of the seventy (70)) units under construction with CMHI most exposed with eighteen (18). With little prospects of sales in the near future it is not surprising there is little news nor that they are showing leniency to owners when the alternative is dumping them on the market at fire sale prices.
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Pioneering technology expert tells ADIPEC Energy Dialogue up to 80 per cent of plant shutdowns could be mitigated through combination of advanced electrification, automation and digitalisation technologies
Greater use of renewables in power management processes offers oil and gas companies opportunities to create efficiencies, sustainability and affordability when modernising equipment, or planning new CAPEX projects
Abu Dhabi, UAE – XX August 2020 – Leveraging the synergies created by the convergence of electrification, automation and digitalisation, can create significant cost savings for oil and gas companies when making both operational and capital investment decisions, according to Dr Peter Terwiesch, President of Industrial Automation at ABB, a Swiss-Swedish multinational company, operating mainly in robotics, power, heavy electrical equipment, and automation technology areas.
Participating in the latest ADIPEC Energy Dialogue, Dr Terwiesch said up to 80 per cent of energy industry plant shutdowns, caused by human error, or rotating machinery or power outages, could be mitigated through a combination of electrification, automation and digitalisation.
“Savings are clearly possible not only on the operation side but also, using the same synergies between dimensions, you can bring down the cost schedule and risk of capital investment, especially in a time when making projects work economically is harder,” explained Dr Terwiesch.
A pioneering technology leader, who works closely with utility, industry, transportation and infrastructure customers, Dr Terwiesch said despite the increasing investment by oil and gas companies in renewables and the growing use of renewables to generate electricity, both for individual and industrial uses, hydrocarbons will continue to have an important role in creating energy, in the short to medium term.
“If you look at the energy density constraints, clearly electricity is gaining share but electricity is not the source of energy; it is a conduit of energy. The energy has to come from somewhere and that can be hydrocarbons, or nuclear, or renewables.” he said.
Nevertheless, he added, the greater use of renewables to generate electricity offers oil and gas companies the option of integrating a higher share of renewables into power management processes to create efficiencies, sustainability and affordability when modernising equipment, or planning new CAPEX projects.
The ADIPEC Energy Dialogue is a series of online thought leadership events created by dmg events, organisers of the annual Abu Dhabi International Exhibition and Conference. Featuring key stakeholders and decision-makers in the oil and gas industry, the dialogues focus on how the industry is evolving and transforming in response to the rapidly changing energy market.
With this year’s in person ADIPEC exhibition and conference postponed to November 2021, the ADIPEC Energy Dialogue, along with insightful webinars, podcasts and on line panels continue to connect the oil and gas industry, with the challenges and opportunities shaping energy markets in the run up to, and following, a planned three-day live stream virtual ADIPEC conference taking place from November 9-11.
An industry first of its kind, the online conference will bring together energy leaders, ministers and global oil and gas CEOs to assess the collective measures the industry needs to put in place to fast-track recovery, post COVID-19.
To watch the full ADIPEC Energy Dialogue series go to: https://www.youtube.com/watch?v=QZzUd32n3_s&t=6s
Utility-scale battery storage systems are increasingly being installed in the United States. In 2010, the United States had seven operational battery storage systems, which accounted for 59 megawatts (MW) of power capacity (the maximum amount of power output a battery can provide in any instant) and 21 megawatthours (MWh) of energy capacity (the total amount of energy that can be stored or discharged by a battery). By the end of 2018, the United States had 125 operational battery storage systems, providing a total of 869 MW of installed power capacity and 1,236 MWh of energy capacity.
Battery storage systems store electricity produced by generators or pulled directly from the electrical grid, and they redistribute the power later as needed. These systems have a wide variety of applications, including integrating renewables into the grid, peak shaving, frequency regulation, and providing backup power.
Most utility-scale battery storage capacity is installed in regions covered by independent system operators (ISOs) or regional transmission organizations (RTOs). Historically, most battery systems are in the PJM Interconnection (PJM), which manages the power grid in 13 eastern and Midwestern states as well as the District of Columbia, and in the California Independent System Operator (CAISO). Together, PJM and CAISO accounted for 55% of the total battery storage power capacity built between 2010 and 2018. However, in 2018, more than 58% (130 MW) of new storage power capacity additions, representing 69% (337 MWh) of energy capacity additions, were installed in states outside of those areas.
In 2018, many regions outside of CAISO and PJM began adding greater amounts of battery storage capacity to their power grids, including Alaska and Hawaii, the Electric Reliability Council of Texas (ERCOT), and the Midcontinent Independent System Operator (MISO). Many of the additions were the result of procurement requirements, financial incentives, and long-term planning mechanisms that promote the use of energy storage in the respective states. Alaska and Hawaii, which have isolated power grids, are expanding battery storage capacity to increase grid reliability and reduce dependence on expensive fossil fuel imports.
Source: U.S. Energy Information Administration, Form EIA-860, Annual Electric Generator Report
Note: The cost range represents cost data elements from the 25th to 75th percentiles for each year of reported cost data.
Average costs per unit of energy capacity decreased 61% between 2015 and 2017, dropping from $2,153 per kilowatthour (kWh) to $834 per kWh. The large decrease in cost makes battery storage more economical, helping accelerate capacity growth. Affordable battery storage also plays an important role in the continued integration of storage with intermittent renewable electricity sources such as wind and solar.
Additional information on these topics is available in the U.S. Energy Information Administration’s (EIA) recently updated Battery Storage in the United States: An Update on Market Trends. This report explores trends in battery storage capacity additions and describes the current state of the market, including information on applications, cost, market and policy drivers, and future project developments.