Dearth of offshore rigs pumps up oil prices

Oil companies have run out of offshore exploration rigs for the first time in almost 20 years. Projects are having to be delayed or shelved because of the shortage of rigs, while hire costs have soared up to fivefold in two years.

The situation is helping to keep oil prices, which last week hit $78 per barrel, at record highs.

Mike Wagstaff, chief executive of the North Sea oil company Venture Production, said that by the autumn, companies would have to wait until 2009 at the earliest to hire rigs in the region. "There are a lot more wells to be drilled than available rigs."

It can now cost up to $500,000 (£270,000) per day to hire a large offshore exploration rig. Haydn Gardner, managing director of the oil services company Rheochem, said that in the past 18 months, around 600 mothballed rigs had been put back into service, even though many were 20 years old. He said that almost all suitable rigs had been recommissioned.

Paul McDade, chief operating officer of Tullow Oil, said that until recently, companies could start producing oil from a field within a year of its discovery. Now, because of the shortage of equipment, it can often take as long as two years.

In June, says research firm ODS Petrodata, all available offshore rigs were in use. Mr Wagstaff said this had not happened since the early 1980s.