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THe Times: BP set to pay record price for drillship

BP set to pay record price for drillship

By Carl Mortished

BP HAS agreed to pay more than $500,000 a day to secure the continued use of a drillship in the Gulf of Mexico. The price, a record rate for an oceangoing rig, shows how rapidly oil exploration costs are rising as the search for new fields hots up.

From December next year, BP will pay a day rate of $520,000 (£297,000) to charter the Discoverer Enterprise, almost three times more than it pays at present for the use of the ship.

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The surge in price reflects a desperation among oil explorers to retain control of scarce resources, essential if the companies are to meet their own oil production targets. A shortage of drilling rigs is delaying exploration programmes in the North Sea while a surge in drilling activity in the Middle East is driving up the costs offshore of Texas and Louisiana as the newly rich state-owned oil companies of the Gulf compete with US multinationals for the latest technology.

Shortages in labour and equipment are causing concern that the scheduling of major projects will be affected and badly needed additions to global hydrocarbon output will be delayed, further increasing the upward pressure on oil and gas prices.

Cost escalation has already plagued two big Arctic liquefied natural gas projects: Shell’s Sakhalin II, where costs have doubled to $20 billion, and Snohvit, the Norwegian project managed by Statoil, where delays have wreaked havoc with budgets.

While the oil multinationals struggle to keep their projects to budget, oil service and contracting companies are making record profits out of the industry’s growing dependence on technology and equipment suppliers.

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