Norway spearheading low-emission rig adoption, says Westwood
While emission-reducing modifications for offshore rigs are gaining ground amid efforts to enable the energy transition to low-carbon sources, Westwood Global Energy, an energy market research and consultancy firm, has found that Norway leads the way in the adoption of these new technologies while the rest of the world is slower to react.
Westwood’s new research reveals that the availability of emission-lowering upgrades for offshore rigs has been on the rise but adoption of these new technologies is slow outside of Norway and the U.S. Gulf of Mexico due to limited regulatory and financial incentives.
Teresa Wilkie, RigLogix Director, Westwood, commented: “Drilling contractors, and the industry as a whole, are starting to realise that oil and gas will be imperative to energy security over the coming years. But that doesn’t need to come at the detriment of the energy transition.
“Rig operators have ambitious scope 1 reduction targets, and eco-friendly rig technology is keeping pace. The next step is for regulators to work with the industry to ensure that the framework is there to facilitate adoption of these new technologies in a financially sustainable way.”
In a new report on Tuesday, which profiles 13 international offshore drilling rig managers, the firm outlined that the biggest users of rigs fitted with emission reduction technology are those with “ambitious emission goals of their own,” driven largely by Equinor’s operations in Norway and Brazil.
The energy market research player pointed out that Equinor’s contracted days of low-emission upgraded rigs is 33,618 (92 rig years) between 2020 and 2032, compared to the combined number of days for all other operators, which is 43,600 rig days (119 rig years).
“Norway is dominating as the biggest user of low-emission rigs, driven by the country’s carbon taxation regulations as well as incentivisation. Pair this with Equinor’s ambitious emission reduction targets and you have a ripe environment for low-emission rig adoption,” highlighted Wilkie.
Furthermore, newbuild rig orders have almost come to a halt since the downturn in 2014 due to a lack of demand, a mass oversupply of rigs and a resulting stack of newbuilds left abandoned in shipyards with no work, according to Westwood.
“Some drilling contractors are at the beginning of their emissions-reduction journeys, while others have been working on emission-reducing technologies, projects, and studies for several years. By amalgamating the industry’s different and increasing efforts regarding this complex topic, we can better understand the trajectory of the industry, highlight new technologies and identify the areas of opportunity,” added Wilkie.
The company underscored that there is still “a lack of appetite to invest in costly newbuilds,” thus, a deluge of “green” newbuild rig orders is “unlikely.” As a result, Westwood believes that we will continue to see more fleets being retrofitted for lower emission operations.