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Drilling Charter

Definition

Drilling charter refers to the decision of an operator to lease or hire the drilling rigs instead of using its own ones.

The service company renting its drilling rig to an operator is called the charterer.

Comments

In the past each operating company used to have their own drilling rig for oil and gas onshore and offshore fields.

The main reason was that this ownership of the drilling rig was giving the guaranty to the operating company to perform drilling campaign at any time.

But the development of the exploration in more and more demanding environment such as deep or ultra deep offshore, complex reservoirs, arctic or harsh environment, have required drilling rigs to increase in size, operating capabilities and therefore in costs.

In addition the drilling technologies have evolved to meet new safety and environmental requirements and use more and more sophisticated equipment calling for dedicated well trained and skilled crews.

Then the costs have escalated together with the risks meaning that a field will request numerous drilling and testing operations before confirming the proven reserves of the oil or gas reservoir.

Even if the exploration goes fine according to plan, the drilling operations will take a limited period of time, normally measured in months while the production phase will be calculated on years basis or even decades.

In practice it means that the drilling rigs become more and more specialized to well pre-defined operating conditions which can be profitable if used in most optimized conditions fitting with the drilling rigs performances.

In this context it appeared year after year more and more difficult for the major companies to own and operate their own drilling rigs which may represent a large asset in their balance sheet with poor return on capital employed (ROCE).

For all these reasons, service companies or charterers have taken the risks to build and operate these drilling rigs to hire them to the operating companies

This contractual agreement between the operating companies and the services companies is called drilling charter contract.

The operating company commits to lease the drilling rig during a minimum period of time regardless of the results of the drilling operations 

The service company or charterers commits to provide the operator on time and at the requested location with a drilling rig which has the capabilities to drill in required conditions.

Then it is up to the service company to decide to build a new drilling rig unit (new-built) or to convert an existing vessel or platform into a drilling rig (converted rig).

The drilling charter contract is signed on a daily rate basis to be payed by the operating company to the charterer.

This daily rate is also used to establish additional compensation to be paid by one of the party to the other in case of earlier termination or extension of the drilling charter contract and potential penalties or consequential damages if any.

Depending on the size and the local operating conditions this drilling charter contract daily rate may fluctuate broadly between $130,000 to $800,000 per day.

These drilling charters apply in the same way regardless if the drilling rig is a drillship, a semi-submersible platform or a jack-up

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1 Comment to “Drilling Charter”

  1. Compliments,

    My client is in need of an Oil Rig for Charter.

    If you do have one can you contact me ASAP.

    Olufemi David Adesina

    Bold Support Services

    Phone: +234 808 370 5508
    Email: info@boldsupportservices.com

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