Oil-drilling plan has one big catch: not enough ships

As President Bush calls for repealing a ban on drilling off most of the U.S. coast, a shortage of ships used for deep-water offshore drilling promises to impede any rapid turnaround in oil exploration and supply.

In recent years, this global shortage of drill ships has created a bottleneck, frustrating energy-company executives and constraining their ability to exploit known reserves or find new ones. Slow growth in oil supplies, at a time of soaring demand, has been a major factor in the spike of oil and gasoline prices.

Bush called on Congress on Wednesday to end a long-standing federal ban on offshore drilling and open the Arctic National Wildlife Refuge in Alaska for oil exploration, saying the steps were needed to lower gasoline prices that have topped $4 a gallon and to bolster national security.

But as oil trades at more than $135 a barrel — up from $68 a year ago — the world's existing drill ships are booked solid for the next five years. Some oil companies have been forced to postpone exploration while waiting for a drilling rig, executives and analysts said.

Demand is so high that shipbuilders, the biggest of whom are in Asia, have raised prices since last year by up to $100 million a vessel to about $500 million.

"The crunch on rigs is everywhere," said Alberto Guimarães, a senior executive at Petrobrás, a Brazilian oil company that has discovered some of the most promising offshore oil but has been unable to get at it.

"Almost 100 percent of the oil companies are constrained in their investment program because there is no rig available," he said.

As a result, drilling costs for some of the newest deep-water rigs in the Gulf of Mexico — the nation's top source of domestic oil and natural-gas supplies — have reached about $600,000 a day, compared with $150,000 a day in 2002.

Working overtime

Sixteen drill ships are scheduled to be delivered to oil companies this year, more than double the number delivered in the past six years combined. Indeed, 75 ultra-deep-water rigs are expected to be delivered from 2008 to 2011, according to ODS-Petrodata, a firm that tracks drilling rigs.

Shipyards from South Korea to Norway are working overtime to meet a huge influx of orders.

Robert Long, chief executive office of Transocean, the world's largest drilling company, said he has nine deep-water rigs under construction, eight of which are under contract for four to seven years once they leave the shipyards.

Transocean officials think the deep-water market will continue to be constrained until at least 2012. More than three-quarters of the drill ships under construction have been contracted to oil companies eager to benefit from triple-digit oil prices, Long said.

Brazil stunned the oil world when it announced the discovery of a vast oil field 200 miles south of Rio de Janeiro last November. Energy experts said the field could turn out to be just a small part of the largest oil discovery in 30 years.

But seven months later, the problem is how to retrieve it. Petrobras has only three rigs capable of drilling in waters that exceed 6,500 feet, like the site of the new field.

Drilling constraints are not the only problem facing international oil companies. They have also had to contend with a doubling of development costs across the industry in the past five years, more acute competition for energy resources, shortages in steel, engineering and manufacturing capacity and pressures posed by an aging work force.

Also, gaining access to countries that hold oil reserves is becoming tougher: Many oil-rich governments see fewer incentives to raise production as they reap the benefits of higher prices.

As a result, explorers are scouring increasingly remote areas of the globe. That quest has found petroleum reserves off Africa and Brazil, and opened up promising exploration regions in the South China Sea, off the shore of India and around the coast of Australia. But those sites will remain largely off-limits until the new drill ships arrive.

Most new orders for drill ships have gone to Asian shipyards. Companies in Singapore and China have benefited, but South Korea's big three shipbuilders — Samsung Heavy Industries, Daewoo Shipbuilding and Marine Engineering and Hyundai Heavy Industries — have gotten the bulk of orders for the most complex and expensive types of vessels.

A big challenge in deep-sea drilling is to stay over the same spot on the seafloor as the vessel is buffeted by winds, currents and waves. Because water depths can reach up to 10,000 feet, far too deep for traditional rigs that are moored to the seafloor, deep-sea drill ships rely on high-speed computers that use GPS satellites to control six swiveling propellers on the hull's bottom.

Last month, Samsung said it had received a $942 million contract to build a drill ship made for Arctic conditions. The vessel, ordered by Stena Offshore, a Swedish company, will have a hull strong enough to break through ice, withstand 50-foot waves and insulate the people and machinery inside from outside temperatures as low as 40 degrees below zero.

Samsung's sales of all types of offshore drilling vessels jumped to $7.8 billion last year, up from $1.5 billion in 2005.