High Times and Tight Markets for Jackup Industry

The heated global jackup rig market has day rates for premium units climbing higher.

HDR of Offshore Jack Up Rig in The Middle of The Sea at Sunset Time
The jackup market is experiencing increased activity and higher day rates.
Source: nielubieklonu/Getty Images/iStockphoto

The current upcycle in the offshore drilling market is not limited to the floaters, as the global jackup rig fleet is seeing a marked increase in both activity and day rates, according to Matthew Donovan, a senior rig analyst for Esgian.

At the Offshore Regional Forum hosted by the International Association of Drilling Contractors (IADC) on 26 September, Donovan noted that the supply for premium jackup rigs will remain tight over the next few years.

He said the fleet currently totals 500 units, including 22 under construction and 60 cold-stacked units, noting that the Middle East continues to dominate the jackup rig market.

For example, a flurry of deals earlier this summer saw multiple units go to the region either on a multiyear contract between Italy’s Saipem to an undisclosed operator or as part of ADNOC Drilling’s multiyear fleet expansion program. Saipem said at the time of the deal that it expects to have seven rigs in the region by the end of 2023.

Activity in the area is not limited to drilling rigs. ADNOC Logistics and Services recently expanded its fleet of jackup barges (JUB) by 25% after having taken delivery of eight self-propelled JUBs through its Zakher Marine International Holdings subsidiary.

Donovan noted that smaller markets, like the US Gulf of Mexico and South America, are tighter due to flat demand. He noted that contract durations for jackups remain high, averaging 624 days in the first half of 2023. He said that rigs fixed to new contracts in 2022 are completing reactivations and contract preparations, adding that utilization is expected to remain high over the next several years due to long-term contracts in key areas.

Hot spots for jackup demand include the Middle East, India, China, Southeast Asia, and Mexico. “While demand remains high, some aging units are likely to exit the competitive fleet over the next several years, replaced by newbuilds and reactivated,” he said.

Jackup day rates are on the rise, with leading-edge day rates for premium jackups now in the $160,000 range, with some harsh environment jobs reported in the $200,000 range. The average fixture day rates for the first half of 2023 were $106,017, as compared to $84,238 in the same period a year ago.