A multinational venture

Based in Norway, North Sea Rigs AS (NSRAS) manages the design and manufacture of cutting-edge, high quality oil rigs on speculation targeting the North Sea market, particularly the Norwegian sector.

Although NSRAS itself was officially incorporated during 2011, the roots of the company actually date back a decade earlier, when managing director Stephen Adshead was heavily involved in rig construction for the North Sea. “We started working with China ten years ago in building fit for purpose rigs for the North Sea, especially the Norwegian sector,” Stephen explains. “In 2005 we arranged the financing of, and signed a contract for four rigs with a company called OffRig ASA. Awilco Offshore ASA then bought that company, and Awilco then sold that company to COSL Drilling NSR 115 bEurope AS, which is a subsidiary of China Oilfield Services Limited (COSL). That set the scene of building Norwegian standard rigs in China at the RAFFLES shipyard, which is now the Yantai CIMC Raffles shipyard.”

Following the financial crisis in 2008 the market experienced a significant decline in demand for new rigs, however as per the cyclical nature of the oil and gas sector, by 2011 there was a recognised need for the replacement of old rigs and the introduction of a new fleet. As such NSRAS was formed in 2011 and began talks with the Yantai shipyard to discuss the appetitefor oil rigs built to Norwegian specification. During 2012 the company had agreed contracts with the shipyard and determined the necessary level of funding to build its first rig. The contract for the construction of the North Dragon was signed at the beginning of 2012, coming into effect at the end of the year, while the company’s second rig, Beacon Atlantic was commissioned during 2013. The North Dragon and Beacon Atlantic are each based on a model designed by Global Maritime, a company with which Stephen has worked with since 2005, when it provided the designs for the initial rigs that he and his team brought to market.

Today NSRAS has two rigs under construction and a contract in place with the Yantai CIMC Raffles yard for a third due to come into effect at the end of 2014. The company believes that during the coming years there will be an increasing demand for new offshore equipment within the North Sea sector and that NSRAS is well placed to provide a leading solution to the region’s operators. “I think that while there are a lot of older rigs becoming available to the market at present, many companies – particularly majors – require a higher grade fleet for their drilling operations,” Stephen elaborates. “Many of the rigs that are available are 30 to 40 years old, even though they have been refurbished they are seen as higher risk assets compared to modern designs. The rigs we build and the equipment on board are such that we use the very latest of equipment that is available. We work with several major suppliers including Global Maritime, Kongsberg, NOV, Siemens, Rolls Royce and CIMC Raffles. Over the years all of these companies have all being working to steadily improve the products that they supply to market with more efficient designs, and as such we have that built into the rigs.”

The relationship between NSRAS and many of its associated partners has lasted for a decade, resulting in a strong bond of excellent co-operation and continued development. Equally, the close relationship between its majority shareholders has also been vital in allowing NSRAS to finance and deliver its leading rig designs. Originally the company was established with three investors with a fourth investor, China International Marine Containers (CIMC), joining later to become the largest shareholder. CIMC (which has major shareholders such as China Ocean Shipping (Group) Company (COSCO) and China Merchant Group), contains seven listed companies and more than 300 subsidiaries globally. This has provided NSRAS with a strong base and reliable source of NSR 115 cfinance from which to operate. Furthermore, the ownership of Yantai CIMC Raffles Offshore Limited by CIMC Group, ensures close co-operation between NSRAS and the yard in securing financing and finalising projects.

Indeed the multi-national ownership of NSRAS and the strong base provided by CIMC is a key strength for the company and a necessary reflection of the current market, as Stephen observes: “I think that in today’s financial markets, Chinese financing is needed for these kinds of projects as it is not easy to build rigs on speculation. Therefore having access to the financial markets in China and additionally access to the other Far Eastern funds is a real advantage. For example, we have Hong Kong and Singapore investors that are involved in the building of these rigs, which gives us access to the kind of money that still isn’t available in London, Oslo and New York.”

Although the world’s demand for energy continues to increase unabated, the cyclical nature of the offshore oil and gas market often results in volatile and challenging trading conditions. Presently many operators are cutting back on their offshore operations, resulting in an increase in the number of rigs available for charter and worse, the low cost of oil continues to drive down the price of rig charter and sales. However, NSRAS is confident that the market will begin to improve and experience far greater activity over the coming years, resulting in a revitalised demand for modern rig designs. This will bolster the economies of Europe, Norway and China, because although the rigs are built in China, many of the company’s partners are based in Europe, meaning that 60 per cent of the value of the rigs can be termed as local content within its native Norway. “We see our future growth as fairly robust and we predict that the oil price will also recover in the future,” Stephen says. “As long as the price of oil  er barrel is in the range $80 to $100 then that will make the projects we are targeting viable. Within the Norwegian Continental Shelf something like 27 rigs have been used but analysts believe long-term demand in the future will exceed 35 units and we see ourselves as being very much a part of that.”

North Sea Rigs AS
Services:Offshore rig construction management