Statoil awards Cat D rig contracts to Songa

Statoil has awarded the contract for construction of two new drilling rigs for use on the Norwegian continental shelf (NCS) to Songa Offshore. Statoil announced the tender for the new category D (Cat D) rigs in May. These rigs have specially designed by the industry on behalf of Statoil for mature fields on the Norwegian continental shelf (NCS). The purpose is to make drilling and completion of production wells less expensive, more effective and safer, and thereby boost oil recovery.

The contract for the two category D rigs is worth an aggregate $2.47 billion for a fixed eight-year charter period.

A hull designer, several topside suppliers, yard and rig entrepreneurs have helped develop the category D rig concept. Songa has assigned the rig construction work to the DSME shipyard in South-Korea. Aker Solutions has been picked as the supplier of the drilling equipment.

“Stepping up our industrialisation of the NCS we are very pleased to announce that Songa will help realize our industrial approach and we wish to give them recognition for their long-term perspective on this partnership”, says Jon Arnt Jacobsen, Statoil’s chief procurement officer. “Through joint efforts we intend to rejuvenate the rig fleet on the NCS and ensure that we use the right rig for the right purpose.”

“This procurement process has certainly attracted great interest among rig entrepreneurs, contractors and investors”, said Mr. Jacobsen. “Many bidders have taken part in this process and the competition has been keen. Considering that we are ready to start this less than two years after the idea was launched, I consider this a success story!”

Capable of operating in 100 to 500 m of water the Cat D drilling rig can drill wells down to 8,500 m. It will be a workhorse for mature fields, primarily drilling production wells and completing wells, enabling Statoil and its partners to produce more oil from the fields.

New workhorses at Troll

Troll is the very cornerstone of Norwegian gas production, and also one of the largest oil fields on the NCS, oil production in 2010 totaling more than 120 000 barrels per day.

Holding many world records Troll will now also be the first field to be serviced by the new specially designed rigs. Statoil has awarded the contract for the charter of the two first category D rigs on behalf of the Troll licens

“Statoil and its Troll partners have high ambitions for the further development of the field and we are pleased to have taken a decision to charter two specially designed rigs”, says Hans Jakob Hegge, Statoil’s senior vice president for Eastern North Sea operations in Development and Production Norway. “We will now have a tool capable of performing the demanding tasks ahead. The rig capacity on the NCS is limited, and increased capacity is essential to ensure enhanced recovery. The new rigs are expected to operate 20 percent more efficiently than conventional rigs, and we look forward to having the new rigs up and running from 2014.”

Suppliers from Norway and Korea

The project concept and design has taken one year and the implementation period is expected to take three years, including detail engineering, construction and transportation to the NCS.

The mobiliszation from the shipbuilder in South-Korea to the North Sea is included in the contract value and will take about three months. The rig hand-over is scheduled for the second half of 2014.

The fixed contract period is for eight years per rig, with four three-year options, i.e. in practice a 20-year contract per rig. This is a long-term approach, which ensures rig capacity for Statoil’s growth ambitions, as well as predictability for the rig company.

Statoil is considering including two more category D rigs in its portfolio. For this purpose Statoil has secured the opportunity to exercise its option for two category D rigs from Songa Offshore, but is also continuing its evaluation of the received bids from other bidders.

During the last half of 2011 Statoil will consider various contractual solutions to ensure the construction of another two category D rigs, including the opportunity to take an ownership position in the rigs.

Asbjørn Vavik, CEO of Songa Offshore SE, says, “We are pleased to secure a contract for two newbuild high specification semisubmersibles for mid-water harsh environment in the Norwegian North Sea, which is consistent with our strategy of fleet renewal. We consider this an excellent opportunity to further strengthen our relationship with Statoil and manifest our position as a leading provider of offshore rigs for the Norwegian North Sea region. The contract value for the fixed 8 years contracts represents a significant increase in our backlog and earnings visibility.”

July 5, 2011