Jackup barge demand spreads in Persian Gulf as oil nears $100/b

Jackup barges used to develop oil and natural gas fields are getting more expensive as Persian Gulf nations look to increase their production capacities with oil prices near $100/b.

The average day rate for jackup barges in the Middle East region is $32,000 this year, up 16% since the end of 2022, according to Petrodata ConstructionVesselBase published by S&P Global Commodity Insights. The rates exclude full crew, catering and fuel.

Iraq is the latest country to get jackup barges as ADNOC Logistics & Services agreed to use one of eight jackup barges delivered this month to serve the Iraqi market. It has operated in Saudi Arabia and Qatar through its ZMI Holdings acquired last year. Jackup barges are used for oil and gas field development, after discovery but before rigs are brought in for drilling. They are also increasingly used to set up and maintain offshore wind projects.

High demand and utilization of jackup barges in the Middle East are expected until at least 2027 as operators Saudi Aramco, ADNOC, and QatarEnergy LNG meet their production capacity targets, and once contractors complete field development projects, that should increase production capacity, according to Mirzi Moralde, senior specialist, technical research at S&P Global's Petrodata.

It's getting more attractive to find fossil fuels with the Platts-assessed Dated Brent benchmark at $95.73/b as of Sept. 20, according to S&P Global Commodity Insights data. The last time it exceeded $100/b was in November 2022.

Jackup barges are the predominate type of accommodation units used by operators in the shallow water Middle East region for support services for long-term maintenance of existing and producing fields, Moralde said. They are also used by engineering, procurement, construction, and installation contractors for construction support during offshore installation work for field development projects. Several field maintenance and field development projects are currently underway, also supporting demand and day rates, she said.

The addition of eight self-propelled jackup barges expanded ADNOC L&S's fleet to 39 of the platforms. Charter rates for jackup barges are "robust due to high demand for offshore services," it said earlier this month when it announced the expansion. It declined to say how much rates have gone up or how high they are.

Jackup barges have been in a growth business, with ZMI's revenue for the first 10 months last year at $348 million vs $264.1 million in the same period of 2021, according to the ADNOC L&S initial share offering prospectus dated May 2023.

"We believe that the increasing offshore energy exploration in North Africa and the GCC region, including in Morocco, Egypt, Sudan, Jordan, Saudi Arabia and Qatar, and demand for jackup barges and offshore marine and other services in those and other regions, including in China and the Far East, present potential opportunities for our geographic expansion in the future," ADNOC L&S said in the prospectus.

Like several major oil exporters, the UAE is facing pressure to monetize its vast petroleum resources and prevent them from becoming stranded assets as the global energy transition gathers pace. ADNOC is targeting oil production capacity of 5 million b/d by 2027, up from about 4.6 million b/d as of August. To help meet its 2027 target, ADNOC is spending $150 billion over 2023-2027.

QatarEnergy is also increasing its LNG production capacity, from 77 million mt/year currently to 126 million mt/year by 2027.

Jackup barges are required across all stages from development to decommissioning of a field, including dredging and construction of artificial islands, according to ADNOC L&S.

In June, ADNOC Offshore awarded a $975 million contract to ADNOC L&S for the construction of artificial island "G." The award is part of Lower Zakum's long-term development plan, ADNOC L&S said at the time.

In August last year, ADNOC awarded a $1.17 billion contract to hire 13 self-propelled jackup barges from ADNOC L&S over five years.