The Indonesian Petroleum Association (IPA) highlighted a number of problems with the scarcity and high rental costs of rigs for upstream oil and gas activities in Indonesia.
Rig shortage threatens oil and gas drilling
Such condition has the potential to threaten the achievement of this year’s drilling target for oil and gas wells. In 2023, the Special Task Force for Oil and Gas (SKK Migas) is targeted to drill 991 wells. However, only 864 wells have been drilled so far.
Meanwhile, to achieve 991 wells target, as many as 150 rigs is required. Out of the total 150 rigs, 111 rigs will be development well rigs and 39 rigs will be exploration well rigs.
However, until April 2023, only 89 development well rigs that are already in the contract process, while as many as 22 exploration well rigs are currently under the procurement process.
Ronald Gunawan Vice President of the IPA explained that there was a shortage of drills in the upstream oil and gas sector because oil and gas manufacturing companies reduced their activities during the Covid-19 pandemic. As a result, rig supply companies store their drill tools in storage.
High rental costs and delays
As the hunt for fossil energy intensifies, demand for oil rigs begin to increase, causing higher demand compared to rig availability, which triggers scarcity.
“Of course, due to global conditions, which have increased activity since last year, the availability of rigs in Indonesia is limited,” said Hudi Suryodipuro, Head of Program and Communication Division of SKK Migas.
Meanwhile, rigs that are stored in storage locations have aged and require additional maintenance costs before they can be utilized again. Such condition incurs extra costs for rejuvenation.
“When drilling starts to get busy, provision of rigs takes time, needs to be ordered again and it doesn’t come in one month, sometimes it can be three to four months. As a result there are supply and demand problems,” said Ronald, on July 20, 2023.
This condition occurs not only in Indonesia but in various upstream oil and gas areas in all parts of the world.
On the other hand, the price of using offshore rig services has increased considerably, especially in Saudi Arabia and the United Arab Emirates.
“Onshore rigs are the same, but the increase is not as high as that of sea rigs because the supply and demand are still okay. The costs are going up but not as bad as offshore rigs,” he said.
Hudi said that the short number of available rig facilities have caused an increase in rental fee, especially for offshore drilling rig activities.
Currently, SKK Migas is taking a number of steps to address the shortage of rigs, such as exploring opportunities for joint procurement with contractors to optimizing the use of rigs by changing the strategy for operational and drilling implementation.
