Aging Rig Fleet, Slowdown in Drilling Sharpen Oil Peak

HOUSTON – Slowing the decline after peak oil will be a delicate balancing act, indicated Matthew Simmons, chairman of Simmons and Company International, at the Offshore Technology Conference in Houston today. Key issues are the aging of the offshore rig fleet and the need for accelerated exploration drilling.

Simmons said that information from the US Energy Information Administration and US Department of Energy show that worldwide production peaked in May 2005 and that since then decline rates have been increasing. Since 1980, most hydrocarbon development growth has been offshore. Mitigating these declines will require accelerating drilling efforts, he admitted. At the same time, without growth in the drilling rig fleet, this acceleration will not be possible.


In 1977, when it became clear that speeding offshore drilling would require many rigs, there were 307. The boom in building offshore rigs began, and in 1987 there were 561. Simmons said this expansion bankrupted the drilling industry–most of those companies disappeared with the collapse of oil prices. Now the drilling industry is prosperous–in 1990 utilization was at 98%–but the fleet is getting old. There are 51 rigs that are 18 years old, and 34 are 10 years old. Most are older. And as always, deepwater rigs are just a fraction of the fleet, despite the industry’s move into deeper and deeper waters.

Simmons asked these questions: How long can we refurbish the existing fleet? How long would it take to replace the fleet? If we do need a new fleet, how big should it be? The answer could be anywhere from 500 to 600 offshore rigs–but will the cost be too great to be supported by hydrocarbon prices?

Schlumberger