DEPARTMENTS • OIL & GAS MARKETS
Latin America’s natural gas
deficit forecast to grow, lead
to need for more imports
With rigs continuing to leave, utilization in the Asia Pacifi c region has risen. Drill-
ships are fully utilized, and the jackup segment is close to selling out, at 97%.
Westwood analysis show rig supply is shrinking
in Asia Pacific while dayrates continue to rise
Offshore rigs continue to leave the Asia
Pacific (APAC) for other markets , accord-
ing to recent analysis by Westwood
Energy’s Senior Rig Analyst Paul Ezekiel.
A total of 14 units have left the region in
the past year, although there is one more
semi in APAC now compared with the
same period last year. In Singapore, only
six jackups remain , but they’re all bound
for the Persian Gulf.
At the same time, Mr Ezekiel pointed
out that utilization and dayrates have
increased significantly even though
Brent prices dropped by approximately
25% between May 2022 and May 2023.
The lower supply, especially in the
jackup and drillship segments, has aided
utilization recovery across most rig types
over the year. The jackup segment is now
close to sold out at 97%, while drillships
are fully utilized. Tender-assist utiliza-
tion dropped by 5% year-on-year, while
increased supply and lower demand
in the semi segment has resulted in
decreased utilization of around 22 % com-
pared with a year earlier.
Dayrates are trending upwards, with
rigs typically being secured at higher
rates than their previous commitments .
Jackups have been fixed at as much
as $67,000/day more than their previ-
ous or current deals, while one drillship
was fixed at $240,000/day more than its
12 previous contract. Semis have also wit-
nessed the same trend, with new fixtures
being secured at up to $113,000/day more
than prior deals.
Meanwhile, between May 2022 and May
2023, Westwood recorded a 10% increase
in average rolling jackup dayrates, 28%
increase in drillship dayrates and a 7%
increase in tender-assist rig dayrates.
Another indicator that market dynam-
ics have changed is reduced contract
award activity. Between January 2022
and May 2022, there were 34 contract
awards in the APAC region for all rig
types . For the same period in 2023, there
were only 13 awards. This reduced pace
naturally occurs when there is less avail-
ability and operators want to lock in rigs
on longer deals before prices rise further.
Westwood’s RigLogix currently holds
21 requirements in Southeast Asia or
Australia already at a tender stage, total-
ling over 14 years of potential demand.
Of this total, 73% is for jackup campaigns
and the remaining tenders are for semis.
Westwood expects current utilization
levels to hold steady or rise further in the
next 12 months. Dayrates have not pla-
teaued yet, according to Mr Ezekiel, but
the pushback on rates from operators will
continue. In this environment, operators
will be considering further rig-sharing
campaigns and more direct negotiations.
Wood Mackenzie is forecasting that the
gas supply in Latin America will be unable
to keep up with demand in the next decade
due to challenges with gas development.
This will drive the need for expanded
imports .
Over the next 10 years, natural gas
demand in the region is expected to rise
by an average of 1.4% per year , stabiliz-
ing at approximately 25 billion cu ft/day .
Within the same time frame, gas supply is
expected to decline at a rate of 5.6% .
“There are significant challenges with
infrastructure restrictions and unfavor-
able exploration incentives. The likely
result will be a steady increase of imports
in the region,” said Adrian Lara, Principal
Research Analyst, Latin America Upstream
Oil and Gas for Wood Mackenzie.
Imports could range between 7 to 12
bcfd by 2035 to meet demand. In 2022,
net imports were 4.9 billion cu ft/day, and
Wood Mackenzie’s 2023 forecast projects
5.2 billion cu ft/day.
Countries in the mid-continent will be
most challenged with gas integration,
while countries like Argentina, with its
strong reserves, may find opportunities to
supply neighboring countries.
“Colombia’s gas production needs to off-
set declines of at least 300 million cubic
feet per day by 2030, or else it will require
a higher level of gas imports,” Mr Lara said.
“Venezuela has a significant amount of
undeveloped gas resources in the Mariscal
Sucre offshore assets, estimated at 13.6
trillion cu ft, and some of which could
be jointly developed with Trinidad and
Tobago. Peru also has discovered unde-
veloped resources in the Camisea region,
accounting for approximately 3.7 trillion
cu ft. The question remains which of these
resources can become more attractive to
operators and whether the infrastructure
and market restrictions can be overcome
in a timely manner.”
“As many countries shift away from
oil and coal in favor of gas to support the
energy transition, demand will continue
to grow in the next decade,” Mr Lara said.
“For Latin America countries, the chal-
lenge will be meeting this demand while
their own production declines.”
J U LY/AU G U ST 2023 • D R I L L I N G C O N T R AC T O R