Despite the Olympics and the summer holidays in the northern hemisphere, there is still a stream of contract awards and tenders to engage the offshore drilling industry. Meanwhile, potentially radical scientific discoveries threaten to upend plans for commercial deepwater mining, pitting a company against sixteen scientists whose potentially important claim jeopardises its financial interests.
But first, good news for Borr Drilling and the wider drilling industry.
Last Friday, Borr issued a contracting update that reiterated its faith in the jackup drilling rig market, even though the world’s largest customer for the units, Saudi Aramco, has suspended the contracts on over twenty units, including one of Borr’s own rigs, Arabia 1.
Borr’s shares have fallen 18 per cent year on year and the company has been at pains to reassure investors that outside Saudi Arabia, demand remains strong. Borr had a near-death experience in the downturn, and remains heavily indebted, but is now benefiting from higher utilisation and much stronger rig rates for its fleet of 22 jackups in operation.
Two of its rigs, Arabia II and Arabia III, remain on charter to Saudi Aramco.
The latest update revealed a new contract award, covering a total of 1,779 days and US$332 million in revenue. This also includes mobilisation and demobilisation fees.
Importantly, Arabia I has secured a new long-term contract in Brazil with Petrobras for four years firm, plus four possible optional extension years, which will be priced by mutual agreement in 2028. Borr noted that the new, long-term award in Brazil had a day rate over 60 per cent higher than the rate Saudi Aramco was paying for the rig, but the company did not state the actual day rate figure.
Of course, costs, customs duties and taxes in Brazil are much higher than in Saudi Arabia, but winning a term contract with Petrobras for the rig eases uncertainty for investors, even if there will be six or more months of expensive downtime until the rig goes back on hire. This new Brazilian contract is scheduled to commence in the first quarter of 2025, and it was awarded in cooperation with an unnamed company that Borr described as an “experienced local partner for Petrobras.”
Curious, as Oslo-listed Ventura Offshore Holding did not put out a release of a contract award on Friday, which leads us to wonder whether it might be Constellation Oil Services or Foresea or Etesco Drilling, the three other local rig owners with long track records in Brazil.
Petrobras also announced a new tender for up to four high-specification deepwater drilling rigs last week, on top of the three deepwater rigs it has already tendered for development drilling at the Atapu and Sepia pre-salt fields in the Santos basin, and a tender for two deepwater rigs to revitalise Roncador field in the Campos basin, industry magazine Upstream reported.
Roncador has been in production since 1999 and currently produces approximately 170,000 barrels of oil equivalent (boe) a day and nearly 30,000 boe a day of associated gas. The field is believed to have more than ten billion boe of recoverable reserves in place, in water depths between 1,500 and 2,000 metres. Petrobras’ licence covering the field is valid until 2052.
These tenders for nine rigs mean that Petrobras will be contracting more additional rigs in 2025 than the three hottest stars of the drilling scene – Namibia, Guyana, and Suriname – combined.
As per Westwood Energy, there were already 32 offshore rigs drilling in Brazil at the start of the month, including those performing workovers and excluding platform rigs. Petrobras has ambitious plans to increase its operated production to 4.6 million barrels per day (bpd) by 2028 (from 3.9 million bpd today). The new tender is a reminder that Brazil remains the largest floating market in the world, and the largest floating production market in the world.
Petrobras’ 2024 to 2028 strategic plan is based on exploration and production capital spending of around US$73 billion over those five years, including the delivery of 14 new floating production storage and offloading vessels (FPSOs) in the period, 10 of which have already been contracted. Most of the field developments are in the deepwater pre-salt area and are already approved and in process, which means Petrobras’ demand for deepwater rigs will remain robust for the next five years, as it is locked in by the need to drill wells for the production facilities it has ordered.
It is not just Petrobras that is paying top dollar for high specification rigs for Brazil. Last week, Valaris announced that it has been awarded a multi-year contract with Equinor in Brazil for the drillship Valaris DS-17 on Project Raia. This is a twin field development in the pre-salt region at the southern part of Campos Basin, approximately 200 kilometres off the coast of Rio de Janeiro, which will come into production through a permanently moored FPSO in water depths of approximately 2,900 metres.
The Raia Project FPSO will be provided by MODEC with topsides designed to produce approximately 125,000 barrels of crude oil per day, as well as to produce and export approximately 565 million standard cubic feet (16 million cubic metres) of associated gas per day. The unit’s minimum storage capacity of crude oil will be two million barrels, MODEC says.
Valaris says that the estimated total contract value for the DS 17 with Equinor under the new award is approximately US$498 million, inclusive of managed pressure drilling services, additional services and fees for mobilisation, and minor rig upgrades. The contract has an estimated total duration of 852 days, and so this is the first long-term drillship fixture outside the Gulf of Mexico above the magical US$500,000 per day rate.
The contract includes a 672-day drilling program that is scheduled to commence in the first half of 2026. Crucially, the rig will be on paid standby for an estimated duration of 180 days between the end of its current program with Equinor and the beginning of the operating period for Raia. Valaris says that during the standby period, the rig may be available for work both inside and outside Brazil, which could lead to incremental revenue above the standby rate that Equinor is paying the company.
The return of paid standby time, along with the day rate being above US$500,000, means this is a landmark fixture in the deepwater drilling market's long and slow return to profitability.
In addition to the Petrobras award, Borr also announced that its jackup Gunnlod had received a binding letter of award from an unnamed operator in Malaysia for a firm scope of seven wells, with an anticipated duration of 210 days, expected to commence in November 2024. Gunnlod is already in Southeast Asia.
The company also announced a 109 days contract extension with BW Energy in Gabon for Norve, which will fill in the blank space until February 2025 when the rig has an onward job already confirmed with Marathon Oil in Equatorial Guinea.
Finally, Borr is moving another rig out of the Arabian Gulf – the epicentre of competition for all the rigs suspended by Saudi Aramco. It announced that Gerd would leave UAE upon completion of its current work there, and be transported by heavy lift vessel to Congo for a 180 days firm plus 180 days option commitment for ENI, commencing in October 2024. Again, there is no “white space” gap between the contracts, and, again, Borr is demonstrating the strength of its international marketing network, which state-owned rivals COSL, ADNOC Drilling, and ADES lack.
The biggest question for Borr is when the new building rig Vali (which will be delivered by Seatrium in October), and its sister rig Var (which will deliver in January 2025 in Singapore) will be chartered. If Borr can fix those rigs straight out of the yard, its rehabilitation will be complete.
It has been a year since we covered The Metals Company, the pioneering subsea mining company, which seeks to hoover up polymetallic nodules from the deep waters of the abyssal plain of the Clarion-Clipperton Zone in the Pacific Ocean, supported by the Government of Nauru. Both Nauru, as the sponsoring micro-state of the venture, and The Metals Company, a publicly listed company with a market capitalisation of around US$372 million, seek to profit from the smelting of the nickel, aluminium, cobalt, and manganese from the nodules.
Already The Metals Company and its minority shareholder and contractor Allseas have demonstrated that the robots and suction devices deployed from the converted deepwater drillship Hidden Gem can operate 4,500 metres down on the seabed and harvest tons and tons of the mineral-rich nuggets hourly, during an extensive test collection process and scientific study that ended last year.
Allseas said at the time that it was gearing up to be ready for the annual collection of 1.3 million tonnes of wet nodules, starting at the end of this year.
There’s just one problem – there is still no Mining Code agreed by the industry regulator to determine the rules and processes surrounding the collection of the nodules for commercial purposes, and how the potentially billions of dollars of royalties and fees generated from the activity should be paid or allocated.
When we last checked in on company CEO Gerard Barron and his band of merry mer-miners, they were waiting for approval to commence commercial extraction of the ore-rich pebbles from the International Seabed Authority (ISA). The ISA is the international organisation that has appointed itself as the sales organisation and legal guardian of the world’s seabed outside national territorial waters, and will issue and approve the international subsea Mining Code.
Seabed mining is intensely controversial and 27 nations, including 26 member states of the ISA, have called for a moratorium, precautionary pause, or ban on deep-sea mining, according to Scientific American.
Last month, the comedian John Oliver ran an extended monologue on the subsea mining industry in his Last Week Tonight show on HBO, criticising The Metals Company for planning to plunder a pristine and unexplored eco-system, and criticising the ISA for failing to protect the environment. The footage of a journalist at 13 minutes 30 seconds asking ISA Secretary General Michael Lodge how many seabed mining exploration licences his organisation has rejected is telling.
Zero, Lodge replies. Oliver joked that the body responsible for protecting the deep sea has lower standards than the University of Phoenix.
The ISA’s 29th conference and general assembly in Jamaica is currently underway and The Metals Company has been quick to highlight on social media that Mr Lodge has made public statements that the ISA “is on track to approve a 'regulatory roadmap' in 2025 for deep-sea mineral extraction.”
Of course it will.
Three years ago, we highlighted that the ecology of the deep ocean floor is not well understood and we applied our BS detector fact-checking skills to the statements that Mr Barron was making to potential investors at Swiss private bank Pictet. Pictet has unfortunately pulled the video interview from its website, but, fortuitously, we published copious notes to check the statements from Mr Barron in the interview.
"You have got to have your faith in science, you have got to let science provide the answers,” Mr Barron promised in the interview.
We observed that, “so far, the ecological impact of deepsea mining has not been properly assessed by science, so this statement is irrelevant.”
"We have this year, in fact today, a science expedition setting sail from San Diego," Mr Barron promised in the same interview. "It's the first of four that we will complete this year. It's a boat filled with scientists, because we've been studying the environmental potential impacts, you know, both baseline and through the water column, and so we know a lot about this part of the ocean."
Last week, the fruits of the work of that boat full of The Metals Company’s scientists were unveiled. The prestigious journal Nature Geoscience published research by Andrew Sweetman of The Scottish Association for Marine Science, in Oban in the UK, and 15 co-researchers entitled “Evidence of dark oxygen production at the abyssal seafloor.”
The researchers had taken part in The Metals Company’s scientific voyages to the Clarion Clipperton Zone and conducted, as per the abstract, “experiments at the polymetallic nodule-covered abyssal seafloor in the Pacific Ocean in which oxygen increased over two days to more than three times the background concentration, which from ex situ incubations we attribute to the polymetallic nodules. Given high voltage potentials (up to 0.95 V) on nodule surfaces, we hypothesise that seawater electrolysis may contribute to this dark oxygen production.”
If verified, this is a massive scientific discovery with major implications for subsea mining of the polymetallic nodes.
Mr Sweetman had earlier tried to measure how much oxygen was consumed by the organisms on the seafloor of the Clarion Clipperton Zone, but the tests kept showing oxygen levels there were rising rather than falling. Given that no photosynthesis is possible in the dark and cold waters 4,000 metres down, he suspected that the sensors were broken or faulty.
He went back again on The Metals Company’s expedition in 2021, and again conducted experiments, which found the same results – the oxygen levels in the water increased dramatically in the landers his team placed on the abyssal plain. His team checked for micro-organisms, and concluded that the oxygen was likely being generated by the polymetallic nodules, which Mr Barron himself has described as “batteries in a rock.”
Mr Sweetman and his co-researchers have hypothesised that the nodules act as natural geo-batteries, splitting the seawater into hydrogen and oxygen through a process called seawater electrolysis. Scientific American has helpfully highlighted that you can test seawater electrolysis at home simply by dropping a small battery into salted water and watching the hydrogen and oxygen gas bubble up, all while being careful to avoid naked flames in the vicinity.
He took some of the nodules gathered by the expedition to Franz Geiger, a physical chemist at Northwestern University. Professor Geiger measured the electrical charge and found that there was almost a volt on the surface of the nodules. This charge is something that other rocks on the planet do not have.
The discovery of this seawater electrolysis potentially creates powerful questions about the origin of life on earth and the complexity of the ecosystem that The Metals Company plans to damage/destroy/change with its commercial mining.
Having told Pictet that he would be guided by the science, you would think Mr Barron, Mr Lodge, the ISA, and The Metals Company would be calling for a pause in commercial mining operations to check whether Mr Sweetman and the other researchers’ findings are correct.
Obviously, this discovery of a deepwater oxygen generating ecosystem powered by the polymetallic nodules is valuable, fascinating, and important, if it is proved correct. If this was the source of life on earth, a generator of life-giving oxygen and home to hundreds of unique species, you might want to protect it, wouldn't you?
Umm, no. Rather than being guided by the science, The Metals Company has leapt into the fray to denigrate the peer-reviewed science and the sixteen researchers – researchers that the company had been working with.
The Metals Company immediately put out a statement calling into question the entire Sweetman study, and attacked the researchers and their findings. The statement says the paper was rejected by other journals, which is not uncommon; that Nature (probably the most influential journal in natural science) is biased against seabed mining (so what?); that other studies in the Korean sector of the Clarion Clipperton Zone show different results; and that Sweetman and the 15 other researchers used a “flawed methodology,” which is dismissed in half a paragraph.
Wow.
Mr Barron himself described in the Pictet video that the polymetallic nodules “are basically an electric vehicle battery in a rock.” The logical corollary of this is that maybe they can conduct seawater electrolysis, power an entire subsea ecosystem, and provide the planet with oxygen.
Now that researchers have found that this may be true, Mr Barron seems to want to ignore the findings.
“We were surprised to see such a flawed paper by Sweetman et al. published in Nature Geosciences," the company said via x.com. "The methodology and findings raise serious concerns about the validity of their data and conclusions."
I have never seen anything like this.
A company with a powerful commercial interest puts out a statement rebutting a research paper in a prestigious science journal. The Metals Company doesn’t say that more research is needed and that more study is necessary to validate the findings, which might be a valid observation – perhaps the study is flawed, perhaps it won’t be replicated. Who knows?
However, given its possible importance, we probably don’t want to start ripping up the ecosystem and the nodules until we find out. If Mr Sweetman and his colleagues are incorrect, then that is for other scientists to prove, and for the ISA to make a decision based on the best scientific evidence at hand today.
Instead, The Metals Company just says that the paper is wrong, that it can be disregarded, and that the ISA should give it permission to mine millions of tons of nodules from this complex, unique, and very fragile ecosystem. We can understand why the company would want that, but is not a good reason to take the company statement against the research presented by the scientists.
Now is the time for Mr Lodge and the ISA to stand up for science and ecology against vested interests. More research is clearly needed, and commercial mining in the Clarion Clipperton Zone should not be allowed to proceed until new research work is done.
Barron: "I can say with a very high degree of certainty, that based on all the scientific evidence [that] we and others are gathering, that this is absolutely the best planetary decision on where we should be getting these metals from…. We are dealing with an asset that is deemed the common heritage of mankind, right? Because we are in international waters, so it is kind of owned by everyone and should be developed for the good of everyone, especially developing nations. One of the benefits will be that we will pay very handsome royalties, billions of dollars of royalties, back to the regulator and those funds will then be distributed to developing countries."
Our fact check in 2021 still stands: “I can say with a very high degree of certainty that based on all the economic evidence, that Mr Barron and his colleagues at The Metals Company stand to make a fortune if they can successfully float their company through a SPAC and then offload their stock.”
That remains correct. If commercial mining gets the green light from the ISA, The Metals Company’s share price, which is languishing around US$1.16 on Friday, will be turbocharged. There’s a lot of ecology hanging on the ISA’s decision, and a lot of potential wealth for Mr Barron and his investors.
Background reading
Our 2024 Holiday Reading and Listening is here.
One song we missed is the Marsh Family parody about J.D. Vance, set to the tune of ABBA’s Dancing Queen. The lyrics “Lots of money behind that guy, pretty young and the beard is fly…. He’s a real chameleon, social media posts have gone,” seem equally to apply to Mr Barron as to Mr Vance.
Fortunately, Mr Barron is not yet “one big Mac from the nuclear key.”