Rig shortage

Around 2012, activity on the Norwegian Continental Shelf was booming. This surge, especially after 2005, was driven by a combination of changes in exploration policy and a very high oil price. From 2006 onward, the government awarded an increasing number of licenses. In addition to the regular licensing rounds held every other year in unexplored areas, annual awards in predefined areas (APA/TFO) were introduced from 2004.[REMOVE]Fotnote: Meland, T., Ryggvik, Helge, & Norsk Oljemuseum. (2024). Norwegian oil rig history: through smooth and stormy waters (R. E. Gooderham, Tran.; English edition.). Wigestrand Norsk Oljemuseum.

At the same time – effective from 2005 – tax conditions were adjusted to encourage new operators to establish themselves on the shelf. The goal was to accelerate exploration drilling. With the help of rising oil prices, that’s exactly what happened.[REMOVE]Fotnote: Søbye, Espen. (2017. 21 februar). Borekostnadene på sokkelen: Knask eller knep? SSB.

With many new operators, expanding exploration areas, and strong expectations of continued high oil prices, more wells were planned than there were rigs available. And to drill wells, rigs were essential. The combination led to a shortage of rigs approved for the Norwegian shelf, and rig rental prices skyrocketed.

For many operators, short-term rental contracts were the norm – often just for one or two wells. Long-term contracts were seen as disadvantageous. Operators’ rig needs varied, and different types of rigs were required for different types of wells. Flexibility was key. Statoil, however, was in a different position. As the largest operator on the shelf—and following its 2007 merger with Hydro’s oil and gas division—Statoil accounted for 80 percent of all activity on the Norwegian Continental Shelf.

Several of Statoil’s major fields, such as Statfjord, Oseberg, and Gullfaks, were in late production phases and required many new wells, while older production and injection wells needed maintenance to extend the fields’ lifespans. The need for rigs would persist for many years.

To secure rig access, Statoil took an unusual step. Rig rates around 2012 were so high that new rigs intended for decades of operation could be paid off in just a few years. Statoil decided to build its own jack-up rigs, to be owned by the field licenses.

The rig design was developed in collaboration with several industry players, including hull designers, topside suppliers, shipyards, and drilling contractors. The Dutch marine engineering firm Gusto provided the design, and the topside technology and equipment came from Aker Solutions, National Oilwell Varco, and TTS. In 2012, two rigs were ordered from the South Korean shipyard Samsung Heavy Industries Co. Ltd.

The controversy surrounding the Cat J rigs wasn’t about the design, but about ownership: the rigs would not be owned by the drilling contractor, but by the licenses on Oseberg and Gullfaks. This was unprecedented – an oil license had never before owned a rig on the Norwegian shelf. The ownership model was new and unfamiliar in Norway, and the response from the rig industry was swift.[REMOVE]Fotnote: Osmundsen, Petter. (2015). Innovative og robuste strategier for rigganskaffelse. Praktisk økonomi & finans (trykt utg.), Årg. 31 [i.e. 32], nr. 1 (2015), 64–79.

The Norwegian Shipowners’ Association expressed skepticism, arguing that the model broke with the well-functioning division of labor that had made Norway’s offshore industry world leading. In their view, changing this division would weaken cooperation between oil companies and the rig industry, and thereby reduce competitiveness, innovation, and technological and environmental development on the shelf.[REMOVE]Fotnote: Meland, T., Ryggvik, Helge, & Norsk Oljemuseum. (2024). Norwegian oil rig history: through smooth and stormy waters (R. E. Gooderham, Tran.; English edition.). Wigestrand Norsk Oljemuseum.

Statoil, however, was convinced that the ownership model would significantly reduce drilling costs. “At today’s rate levels, it pays off for us to own rather than rent, if the period is longer than five to six years,” said Statoil’s procurement director Jon Arnt Jacobsen in an interview with Dagens Næringsliv in June 2013.[REMOVE]Fotnote: Osmundsen, Petter. (2015). Innovative og robuste strategier for rigganskaffelse. Praktisk økonomi & finans (trykt utg.), Årg. 31 [i.e. 32], nr. 1 (2015), 64–79.

The rigs were named Askeladden (Gullfaks) and Askepott (Oseberg). They were delivered in the summer of 2017. By then, the market had turned. Oil prices were low, and the demand for rigs had dropped. As the largest operator, Statoil had begun terminating several of its rig rental contracts. The British drilling contractor KCA Deutag Drilling Norge AS was awarded the contract to operate the two Cat J rigs. The contract covered an initial period of eight years, with options for four extensions of three years each.

The rigs were capable of operating in water depths between 70 and 150 meters and drilling wells down to 10,000 meters. Askeladden began operations on the Gullfaks field on March 26, 2018. Its sister rig Askepott had started drilling on Oseberg Vestflanken on February 25 the same year.

As of summer 2024, 33 wells had been drilled from Askeladden – all on Gullfaks Sør.