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How much would it cost to build an oil rig type platform, that floats like an oil rig, but doesn't have the functions of drilling oil and things like that? Basically what I'm trying to say is, how much would it cost to build a large, floating metal platform to put in the ocean?
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Steel is the main component of rigs, and material prices impact newbuild costs. On a proportional basis, jackup steel is usually a larger component of cost (10 to 20%) than in floaters (<10%). Steel prices are specified on a per ton basis and vary regionally with steel quality and shapes. Rigs are constructed using a variety of steel strengths, and no single steel price reflects costs for all rigs. However, the vast majority of rigs are built in Asia, and the Asian steel price index is a reasonable proxy for the rig construction market. Both rig prices and the steel index grew over the course of the decade at approximately the same rate, and are correlated. The steel price index explains 70% of the variation in average jackup rig prices. No significant relationship is observed between floater prices and steel prices.
Engines, cranes, generators, drilling equipment, and dynamic positioning systems are significant components of rig cost. These are all third-party materials purchased by the rig builder and assembled onsite or at another location. The drilling equipment package is the largest equipment expenditure, and typically costs $20 to $70 million for jackups and $100 to $200 million for floaters (or on the order of 10 to 30% of total costs). Non-drilling related equipment range over similar cost intervals; and together, drilling and other equipment typically range from 30 to 60% for jackups and floaters.
Drilling and equipment costs are influenced by steel prices to the extent that the majority of the equipment is made from steel, but more importantly, are influenced by demand from the oil and gas and commercial shipping industries. Labor cost is also a high component in equipment manufacturing costs.
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The oil and gas field machinery equipment index can be used to proxy the costs of the drilling equipment installed on MODUs; the finished goods index proxies the overall rate of inflation experienced by manufacturers. While both indices are based on US products, the oil equipment index is applicable to global MODU prices because much of the drilling equipment installed on MODUs is sourced from the US. Throughout the 1990s, the oil and gas index grew gradually and in line with the finished goods index, but in the mid-2000s the oil and gas index increased rapidly, outpacing the overall rate of inflation, suggesting that the increase in rig prices is due in part to an increase in the costs of drilling equipment.
The steel price index was a poor predictor of floater costs while the equipment index explained 82% of the variation in prices, suggesting that equipment costs are a larger factor in overall prices than steel costs for floaters. The equipment and steel indices are themselves strongly correlated, and are likely to be influenced by many of the same global factors. However, their influence on rig cost is largely independent, since each index impacts a separate shipyard budget category.
Contracts for rig construction are denominated in US dollars, but costs at international shipyards may be in US dollars, euros, Chinese yuan, South Korean won, or Singaporean dollars. For example, labor and steel costs at a South Korean shipyard may be in South Korean won while drilling equipment costs may be in US dollars. For the rig builder, as the value of the US dollar rises, the value of a contract increases. From the perspective of a rig buyer, a strong US dollar lowers newbuild costs at international shipyards. Thus, when the dollar declines relative to a local currency, an increase in costs is expected.
Labor costs and productivity are important drivers of shipyard costs. The costs of shipbuilding labor in the US and Korea are roughly similar, and about three times the labor costs of Singaporean yards. South Korea compensates for relatively high labor costs with advantages in productivity over Singaporean and US yards.
Over the past decade, both labor costs and productivity have increased in Singaporean and South Korean yards; the combination of these two factors will determine the contribution of labor to total costs. In the US, each dollar spent on labor generates approximately three dollars of revenue, consistent with labor costs accounting for approximately one third of total costs. In Singapore and South Korea, each dollar spent on labor generates approximately seven to ten dollars of revenue, suggesting labor costs make up on the order of 10 to 15% of total costs for rigs built internationally.
Newbuild jackup designs range from $159 to $530 million for water depths between 200 to 492 ft and variable deck load (VDL) capability of 3,750 to 7,000 tons. The KFELS B Class, Letourneau 116E, and F&G JU-2000E are the most common designs. In general, there is relatively little variation in cost between rigs of the same design, but some designs exhibit more variation in water depth capacity and price than others. The Letourneau Super 116E class is especially variable, because several rigs are being built for the Persian Gulf market where water depth capability is not at a premium.
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