Today’s oil and gas industry is a study in contrasts. There may be too much gas in North America, but there is too little spare capacity in global oil production.  And, if the onshore pressure pumping market faces an inflection point as rapidly rising capacity runs headlong into softening demand, the equipment balance offshore is the exact opposite.

Offshore, the impending inflection point concerns when demand for ultra deepwater drilling units will expand down market to generate higher demand (and rig rates) for deepwater and mid-water units.

That inflection point may be sooner than expected. Globally, the number of offshore drilling units at work is horseshoe-close to the 2008 peak.

“The total count today is at 548 rigs, down 1% from the peak,” observed James West, Barclay’s U.S. oil services analyst. “This compares to 519 rigs right before Macondo and 452 rigs in the post-Macondo bottom.”

That is a remarkable recovery considering the speed at which it unfolded. Working rig count offshore grew 9% in the last four months of 2011 on the basis of improving demand for drilling services in deeper and more remote areas.

As a result, most news in the offshore sector is centered in the high-spec market where rising demand has drillers mulling newbuild or rig upgrade programs. Recent examples include Maersk Drilling, which earlier expressed interest in eight newbuild deepwater units and is reportedly shopping for shipyards in Asia as the effort nears a commencement point.

Elsewhere, the company inked a two-well, 165-day contract with ConocoPhillips in January for the Maersk Resolve, one of the company’s four high-efficiency class jackups. The rig, which is rated to 350 ft, will earn $157,000 per day when it begins work in the U.K. North Sea in May 2012. 

Meanwhile, Diamond Offshore is pursuing a $300 million upgrade to turn the cold-stacked Ocean Voyager into the Ocean Onyx, increasing the vessel’s operating depth to 6,000 ft. The project is expected to finish in the second half 2013.

Closer to home, the Gulf of Mexico is exhibiting some post-Macondo positive momentum. The ODS-Petrodata rig count found GOM utilization climbing above 60% as of Jan. 13, 2012.

Recent news of expanding activity includes a $530,000-per-day rig rate for the Noble Jim Day, which will go to work in January 2013 under a three-year contract for Shell in the deepwater GOM. The unit, which is rated to 12,000 ft, is a sixth-generation semisubmersible and will be eligible for a 15% performance bonus, which implies a potential rig rate of $609,500.

Rates of $500,000 per day or higher for ultra deepwater units were only discussed as a market possibility as recently as September 2011.

Meanwhile, Barclays noted the offshore supply vessel market hit an inflection point with marketed utilization reaching 88% globally despite the addition of more than 212 newbuild vessels in 2011. While more newbuilds are on the way, those vessels will be needed as offshore spending activity rises in Saudi Arabia and Africa in 2012 and offshore drillers add another 135 offshore drilling rigs between now and 2014.

That’s not to say it’s all peaches and cream out there. Transocean’s Deepwater Expedition received a termination notice for non-performance over BOP issues. The rig was to earn $640,000 per day on contract with BHP-Billiton through January 2014 for exploration work in the Palawan Basin off the Philippines. The rig’s BOP failed to meet specs during testing.

On the other hand Transocean was awarded a three-year contract with Saudi Aramco to re-activate the cold-stacked GSF High Island IX. The unit, which is rated to 250-ft water depths, will earn $117,000 when it begins work in August 2012, following the re-activation process.

Contact the author, Richard Mason, at rmason@hartenergy.com.