Many Libyan onshore rigs have been more or less abandoned with little or no maintenance being done – and will probably have to be scrapped if neglected for much longer.

A Maltese company servicing the oil and gas industry, Bluhull, said that since one of the rigs had been attacked, the majority of the rest had been shut down as they were considered to be obvious targets.

“Rigs cannot be abandoned for any length of time,” Bluhull managing director Jonathan Borg said.

“It is not a matter of just flicking the ‘on’ button again. They will need a complete overhaul before they can start operations again. The owners of these rigs are asking us to go there but we prefer to heed the government’s advice to keep away for the time being.

“We would be able to do the maintenance if they could get the rigs to us, but the operators don’t have any transport of their own. So everything is at a standstill. Once Libya opens up again, there is a strong possibility that these rigs will end up being sold as scrap and replaced with new ones.”

This presents an opportunity for Bluhull, which represents a company that specialises in the building of new rigs from 750hp to 2,500hp, with a 3,000hp rig in R&D phase. They would be able to provide a new rig within just six to seven months.

Onshore rigs are considerably smaller as they do not require the massive platform to support the drill, the accommodation and the equipment, lying just a few metres above the ground. For example, a basic 750hp rig costs $10 million and $11,000 per day to operate. And unlike an offshore rig that needs to be towed to a facility or new location, onshore rigs are fairly easily dismantled and loaded on to a fleet of trucks.

We would be able to do the maintenance if they could get the rigs to us, but the operators don’t have any transport of their own

Libya may be going through tough times, but stability would mean massive spending to bring its 80 oil and gas fields back into production. In addition, Bayphase, an oil and gas consultant, estimates that $42-70 billion will be required over the next 15 years to unlock the country’s full production potential.

Fortunately for Bluhull, Libya is only a small part of its operations, which are mostly focused on the Middle East. However, it is not the only threat to the industry. Oil companies have been cutting back on planned expenditure in 2015 by as much as 15 per cent because of reduction in the price of oil, not only in drilling but also in exploration.

This could not have come at a worse time: more than 200 new rigs are already on order for delivery over the next six years.

“The majority of drilling rigs have been in service for the past 30 to 35 years, which are considered to be old,” Mr Borg said.

“Larger companies were selling off their old fleet to smaller oil companies and concentrating on newer state-of-the-art, more efficient rigs. Especially for companies working in deep seas, they can only be competitive if they have the latest rigs,” he explained.

However, although most oil companies only contract rigs for three to five years on average, others are bound by 10-year contracts, which gives them little leeway.

“These companies are hurting but they appreciate the cyclical nature of oil prices and have to believe that within that time frame the price of oil could recover,” he said.

“In the medium term, all rigs built before 2000 will be phased out or sold on. The rig owners will have to slash their day rates if they want to survive.

“Another consequence of this is that there will be a surge in rig scrapping, which is rarely carried out in Europe because of costs and environmental concerns,” he said, adding that industry experts have calculated that around 140 will have to be scrapped in the next six years, double the number in the previous six years.

The replacement of old rigs with new ones will have an impact on Bluhull’s operations, as – just like a new car – they require far less maintenance. They also do not need re-certification for the first five years.

Mr Borg is not overly concerned, convinced that the company’s track record will keep his clients loyal.

The replacement of old rigs with new ones will have an impact on Bluhull’s operations.

Bluhull managing director Jonathan Borg.

They are currently completing fabrication of equipment for a client in Singapore and will sign another contract in the next few months which will involve the recruitment and training of 25 crew members.

Another crew of 25 is currently on a rig being towed from the Ivory Coast to the Falklands, with maintenance under way as it is being moved. Bluhull also does maintenance and certification of rigs on site while drilling is under way, saving the operator huge amounts.

But although it has operations going on all over the world, Mr Borg would dearly like to see more work coming to Malta.

There is another factor which could prove decisive: flexibility with regard to third-party contractors

“What does an offshore rig require when it comes into a facility for maintenance or certification? It needs three things: sufficient seawater depth; a safe quay; and some hinterland.

“The decisive factor is draft as a rig would require at least nine to 11 metres all the way from open water to the quay. And the seabed must also be quite ‘clean’ and firm as the rig has to be stable.

“Another thing that is often overlooked is that the so-called departure draft could be a few metres more. This is because it makes sense to load the rig with as much equipment as possible before it leaves the facility, to save on the expense of shipping it out or of going somewhere else to load it...” he explained.

Hinterland is also important as the work can be done much more smoothly and thoroughly when the decks can be completely cleared, with all the equipment being put into safe storage.

There is another factor which could prove decisive: flexibility with regard to third-party contractors.

“We do not want workshops where I have to accept the prices of one operator. We are not interested in that. We want open access to three or more so that I can get the best price on behalf of my client,” he stressed.

Mr Borg believes that Palumbo ticks the right boxes, with Malta Freeport as another viable option. He is not as convinced about public support for more rig stops, though.

“Unfortunately, people see rigs very differently to ships. Admittedly, they are massive and not the most visually aesthetic equipment, but they are not an environmental threat. They are just floating piles of metal with no oil on board! They drill wells and the oil gets taken off straight away,” he said.