The changing dynamics of the rig market
Sameer Mohammed, CEO and managing director of Ocean Oilfield Integrated Solutions, talks to The Energy Year about how the company has aligned itself with changing rig market dynamics and the benefits of hydraulic workover units (HWOs). Ocean Oilfield offers integrated solutions in oil and gas drilling, shipyard services, supplies, engineering and marine services.
What strategy has the company implemented to align itself with the changing market dynamics?
Ocean Oilfield Integrated Solutions provides equipment and spare parts with extensive coverage of the GCC region and an especially strong position in Abu Dhabi. We have a shipyard in the Hamriyah Free Zone in Sharjah, and in December 2021 we launched another shipyard in Abu Dhabi to be close to ADNOC. The new shipyard is crucial for our ICV [in-country value] score, a pillar for companies working in the UAE.
We have recently rebranded and added an integrated approach to our business, offering five main services: shipyard and rig repair services, engineering services, drilling services, trading and, lastly, marine services, which includes the catering of different supply vessels and crew boats. This integrated approach was designed to capitalise on the momentum the industry is now experiencing.
The high demand for oil and gas and the favourable price scenario are incentives that have made us eager to capture the numerous opportunities in the market. We started our drilling arm in mid-2020 expecting an uptick. The industry is cyclical and we planned to prepare for the good times.
What was our strategy? We invested capex to buy new assets, and we prepared ourselves to be prequalified with major oil companies and drilling contractors. Moreover, we acquired two jackup rigs with their corresponding contracts, which was a smart move that meant we were already active in the UAE market.
In the last two years we have tried to acquire more rigs, as many companies went bankrupt and sold off their inactive assets at cheaper rates. Yet, many of the major players anticipated a market recovery and started making major asset purchases. Today, we have a scarcity of rigs and a huge demand, and thus, the price of these assets has skyrocketed.
What benefits do HWOs bring to ADNOC?
Part of our integrated and diversified strategy is catering services related to well repairs and workovers. We acquired an HWO and have upgraded it. Even though this type of unit is relatively new in the UAE, ADNOC was keen to explore this new avenue for its workover activities.
The rationale behind HWOs is to achieve more efficiency in time and cost by operating a small, modular-type unit instead of using a large drilling rig. ADNOC is still using conventional drilling rigs to do well repairs. This is why we introduced HWOs, which have caught the NOC’s attention. HWO units bring many benefits to the client.
When it comes to maintaining and repairing old wells, heavy rigs require a significant effort in terms of resources, personnel and time. By contrast, HWO units are modular, easy to move and deploy, and are operated with less personnel and a lower cost. They are also much more efficient in terms of emissions.
We were awarded a trial contract last year by ADNOC. The NOC did not have the expertise to run such operations with this unit so we are helping them to prove its success for well interventions. Our HWO unit is now working on the Al Ghallan artificial island. There are more than 10 islands in the vicinity, and each island will have about 400 wells.
These wells, after producing for some years, will experience problems and will require a change of pumps and equipment, and HWO units will be required to do such repairs. While a job of this type would normally take 30 days with a conventional rig, we can have it done in 15 days. ADNOC has plenty of ageing wells that require repairs, which means that is a great opportunity for us.
What unique capabilities do you have when it comes to building, owning and operating HWOs?
Moving forwards, our strategy is not only to operate HWO units but also to build them. We are currently manufacturing these units locally in Abu Dhabi. We announced the launch of our 460K HWO rig in January 2023, with 460 tonnes of pulling force.
We also have a 340K HWO in our portfolio. This one is designed to be lighter, the reason being that it can go offshore, not just onshore. This means that we can cater for both onshore and offshore needs. Although we are looking to deploy our HWO units in the region, we have inquiries from several locations including Southeast Asia.
We design, build, own and operate HWO units. We have our own design for these units – we redesigned them so that they match the requirements of clients of ours such as ADNOC. Under our drilling services unit, we have a fleet that includes three jackup rigs and two hydraulic workover units.
However, we will fabricate more of these depending on the demand of the market. It takes around five to seven months to build one. The only setback we might have in this process is the delays in the supply chain for certain components such as pumps and engines. If you want to build a rig, you must rely on and collaborate with suppliers.
How buoyant is your shipyard and rig repair business line?
Many companies have struggled to find shipyards to host their jackup rigs to undergo repairs and upgrades. As we have a shipyard, we do this type of work in-house. Our rigs are prepared, maintained and supervised in our own yard before going on a contract with a client. This is very important.
Our shipyard in Hamriyah has two jackups for repair from companies that don’t have shipyard capacity. We repair and maintain not only our own assets, but also those of other companies. We work on rigs owned by many of our competitors on the drilling side of the business.
Our shipyard utilisation rate stands at 100% given the high rig activity in the region, in addition to our eagerness to fabricate HWO units. Now, we are looking at options to grow our shipyard capacity. Our clients are struggling to find space in shipyards to repair their rigs.
This demand will only increase as they are boosting their rig fleet and constantly deploying them. In fact, they are requesting that we consider expanding as they have more demand for repairs. We are now studying this option to see how sustainable it will be in the long term.
What national and international goals do you have for Ocean Oilfield Integrated Solutions?
We are aiming to have two more rigs under our portfolio in the next two years, and to expand our shipyard facility to have the capability to handle more refurbishment and EPC projects. We intend to have a fleet of five operating rigs. Saudi is a very prospective market and the natural expansion step for many companies. That is why we are looking at the bigger picture, and looking beyond the GCC.
The boom in Saudi Arabia is making the region very attractive with many companies coming here to deploy their assets and services. This is also creating a very competitive environment and a vacuum of these assets in other parts of the world. Last year alone, more than 40 jackups from all over the world migrated to the Middle East.
This is why we are placing Southeast Asia under our radar, aiming to fill the gaps left in other markets. Countries such as Thailand, Brunei, Malaysia, Indonesia and even Australia have very high-potential oil and gas markets. The same goes with West Africa, which has a demand for more rigs. We are looking at new opportunities in other parts of the world.
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