Robust Strategies for Rig Procurement

10 Pages Posted: 4 Oct 2013

See all articles by Petter Osmundsen

Petter Osmundsen

University of Stavanger; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: October 2, 2013


Scarcity of rigs on the Norwegian continental shelf (NCS) has led to a number of interesting changes in the procurement of such units and in the relationship between oil companies and rig contractors. Small oil companies have joined forces to establish a rig consortium, examples can be seen of changes to risk sharing between oil companies and rig contractors, vertical integration has taken place with oil companies owning rigs and rig contractors applying for and securing production licences, and joint ventures are being discussed between oil companies and drilling contractors. The paper describes and analyses these trends from the perspective of an optimum procurement strategy for an oil company. Trade-offs in rig procurement are analysed. Robust provision of rig capacity is required to satisfy drilling commitments to governments and to drill time-critical production and injection wells. These requirements need to be offset against the temporary drop in accounting returns and credit ratings which might result from a potential oversupply or mismatch of rig capacity with a consequent decline in rates.

Suggested Citation

Osmundsen, Petter, Robust Strategies for Rig Procurement (October 2, 2013). USAEE Working Paper No. 13-145, Available at SSRN: or

Petter Osmundsen (Contact Author)

University of Stavanger ( email )

4036 Stavanger

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679

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