More than US$92 million could be injected into the economy over the next five years when the government closes a deal to rent acreage in the Gulf of Paria seabed to Transocean, the Swiss-based drilling contractor that operates one of the largest fleets in the world. Six drillships are presently anchored offshore Chaguaramas as parties finalise terms and secure approvals. The irony, of course, is that this maritime business is courtesy the latest oil shock.
As oil prices plumbed new lows in recent months, creating a fall in demand for rigs, Transocean sought permits to cold stack the six drillships in T&T’s protected waters outside the hurricane belt, a maritime advantage long promoted by InvesTT, the investment agency that brokered the draft deal along with the Maritime Services Division in the Ministry of Transport.
A source familiar with the details said each of the six drillships would fetch a lay-up fee of US$80,000 per year and spend an additional US$3 million per ship annually on supplies such as diesel. Transocean is required to pump the money into the local economy based on local content rules stipulated in the five-year agreement.
“So we would have in the draft contract built-in environmental protections, obviously, but we would have also built-in things like ensuring there was a local representative office of the company here [in Trinidad] and that the owners of the ships have insurance in place that would cover them to remove the wreck if any of the ships were to be wrecked in the five years. We have local content legislation in there, so basically anything that they need to purchase for the ship that’s available locally, they have to purchase locally,” said a source who did not want to be named.
Five of the ships have been moored in Chaguaramas for about two months. A sixth vessel put down anchor two weeks ago.
“They are not in lay-up at the moment; they are currently fully staffed, so they are basically anchored awaiting permission to lay-up. Right now they have about 40 people on each ship, and that will go down to about four to five on each ship once they actually cold stack.”
Cold stacking refers to a process of taking drillships offline in periods of low demand where day rates don’t allow operators to break even, much less turn a profit. Transocean’s drillships fetch daily rates between US$237,000 and US$650,000. When there is no work, operators batten down hatches and cut staff to the bare minimum required to reduce costs. But finding safe harbour is a priority. This, sources said, was where T&T has an advantage.
The Gulf of Paria offers a naturally sheltered harbour with winds coming from the northeast and swells averaging under one metre throughout the year. Apart from its slate of marine service companies on the island, two things sealed the site selection agreement: T&T’s strategic location below the hurricane belt and its proximity to exploration work under way in the region.
“The consideration for Transocean is the minute the (oil) price crosses US$80 a barrel, they would pop these ships back into production,” sources said, “or if they get a drilling contract. They’ve actually already opened the office with the intention of looking for contracts in Guyana and Suriname, using Trinidad as a jump-off point. So we have now five of the largest drillships in the world, from the largest drilling company in the world, basically at standby to work anywhere in the region.”
Once the deal proceeds, it registers as a small win for the Ministry of Trade and Investment, which has sought to attract investments to the maritime sector.
In the meantime, a Moody’s report published this month suggests there could be more lay-up business for T&T if oil prices remain depressed and drillships go idle.
“A persistent oversupply of rigs combined with low oil prices will prolong the downturn in the offshore contract drilling industry, weakening the credit quality of offshore drillers through 2017,” a Moody’s Investor Services statement said.