Modelling and Forecasting Rig Rates on the Norwegian Continental Shelf

43 Pages Posted: 16 Feb 2017

See all articles by Terje Skjerpen

Terje Skjerpen

Statistics Norway

Halvor Briseid Storrosten

Statistics Norway

Knut Einar Rosendahl

Norwegian University of Life Sciences; Statistics Norway - Research Department

Petter Osmundsen

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

Multiple version iconThere are 2 versions of this paper

Date Written: February 15, 2017

Abstract

In this paper we analyse rig rate formation of floaters operating on the Norwegian Continental Shelf. We first develop a simple bargaining model for rig markets. Then we examine empirically the most important drivers for rig rate formation in the period 1991q4 to 2013q4. We use reduced form time series models and report conditional point and interval forecasts for rig rates in a reference case based on futures oil prices and with constant capacity utilization. According to our results, rig rates are fairly stable in this reference case. We also consider alternative simulations, e.g., featuring a higher crude oil price gradually increasing to 100 USD per barrel in 2019q4. In this case, the rig rates become about 27 percent higher in 2019q4 than in the reference case. If in addition the capacity utilization increases towards a more conventional level along with the higher oil prices, the rig rate is 57 percent higher. In another alternative simulation we explore the effects of opening new Arctic areas for petroleum activity. This will have a small, but positive effect on rig rates.

Keywords: Rig rates; Capacity utilization; Oil price; Forecasting

JEL Classification: C32; C51; C53; L71; Q47

Suggested Citation

Skjerpen, Terje and Storrosten, Halvor Briseid and Rosendahl, Knut Einar and Osmundsen, Petter, Modelling and Forecasting Rig Rates on the Norwegian Continental Shelf (February 15, 2017). USAEE Working Paper No. 17-292. Available at SSRN: https://ssrn.com/abstract=2917782 or http://dx.doi.org/10.2139/ssrn.2917782

Terje Skjerpen

Statistics Norway ( email )

N-0033 Oslo
Norway

Halvor Briseid Storrosten

Statistics Norway ( email )

N-0033 Oslo
Norway

Knut Einar Rosendahl (Contact Author)

Norwegian University of Life Sciences ( email )

PO Box 5033
NO-1432 Aas
Norway
+47 64966117 (Phone)

Statistics Norway - Research Department ( email )

Kongens Gt. 6
PO Box 8131 Dep
N-0033 Oslo
Norway
+47 21094954 (Phone)
+47 21094963 (Fax)

Petter Osmundsen

University of Stavanger ( email )

4036 Stavanger
Norway

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

Poschinger Str. 5
Munich, DE-81679
Germany

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