World Energy Outlook 2006

increasing by as much as 100% for a North Sea jack-up rig to over 400%
for a rig in the Gulf of Mexico. The main reason is a surge in demand for
rigs which has driven effective utilisation rates up to 100% in most regions
(Figure 12.9). 4 Increases in equipment prices range from 20% for mechanical
pumps to up to 50% for special fabrications of oil and gas production
equipment. Construction labour now costs 25% more than in 2002, while at
the top end of the labour market, rates for specialised expertise such as project
management consultancy have increased by up to 80%. 5 Rising oil prices have
encouraged the oil and gas service industry to invest in new equipment and
technology at a rate not seen since the late 1970s. In particular, the number of
offshore rigs under construction has increased dramatically, holding out the
prospect of lower rates in the future. Although nominal upstream investment
has doubled between 2000 and 2005, we estimate that much of this increase
has been absorbed by cost inflation (Figure 12.10). In 2005, upstream
spending in cost inflation-adjusted terms was only about a fifth higher than in
2000. On the assumption that costs level off in 2006-2007, real spending is
expected to rise by around a quarter between 2005 and 2010.
average number of rigs
in use per month
Figure 12.9: Active Drilling Rigs and Offshore Drilling Rigs
under Construction, 1997-2006
4 000
3 000
2 000
1 000
0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006*
United States
International
Offshore rigs under construction
* To July.
Sources: Baker Hughes rig count (available at www.bakerhughes.com); ODS Petrodata.
4. See ODS Petrodata website (www.ods-petrodata.com).
5. Information obtained in communications with oil and gas industry.
Canada
average number of rigs under
construction per month
328 World Energy Outlook 2006 - FOCUS ON KEY TOPICS
100
80
60
40
20
0
© OECD/IEA, 2007