Rigs Back in the Black as Oil Prices Rise
The recent steady rise in the global oil price has meant that drilling for oil offshore is, once again, becoming economically viable. This presents a risk for those companies whose rigs have been recently laid-up as a result of the declining oil price. It is also a risk for underwriters.
During redundant periods, rigs are often laid-up in safe locations. There is, however, concern that lack of expertise and experience in the industry may make reactivating a rig difficult, especially with the latest generation of very sophisticated rigs.
To help underwriters and operators understand this risk, the Joint Rig Committee (JRC), whose membership is drawn from both the LMA and the International Underwriting Association (IUA), is drafting new reactivation guidelines.
This work is intended to help both operators and underwriters by providing step-by-step guidelines for the main operations required for reactivating rigs. This document will be aligned with the Scopes of Work issued in December 2016 for upstream construction projects and rig moves.
Market underwriters have already been receiving requests for cover for rig reactivation and this guidance is intended to give them a toolkit to help understand the risks and processes involved. It will also provide an understanding of how operators are managing the reactivation of their rigs.
Currently Marine Warranty Surveyors (MWS) already act on behalf of underwriters as independent advisers for critical offshore marine operations but there is, generally, no requirement for MWS involvement during rig reactivation. It is the intention of the JRC, through this guidance, to encourage the employment of an MWS during this process.
With oil prices predicted to reach in excess of US $60 per barrel by the year’s end, there is some concern that reactivation may be hurried once a drilling contract has been agreed. The reactivation guidelines will help operators to redeploy their assets, safely and successfully, whilst assisting underwriters with management of their accounts.