GLOBAL demand for deep-water drilling rigs remains high despite an unprecedented $90 billion worth of orders being placed since 2011.

Macquarie Equities Research reported last Monday that oil and gas exploration and production will accelerate from 2014, driven by momentum in the ‘Deepwater Golden Triangle’ of Brazil, the United States Gulf of Mexico and West Africa.

There are also at least 139 undeveloped or underdeveloped discoveries in the Golden Triangle that will further fuel rig demand.

There are now 213 rigs under construction and expected to be delivered over the next three years, adding 26 per cent of extra capacity to the existing fleet of 804 rigs.

Rig orders since 2011 have exceeded the total amount recorded from 2004 to 2010.

But even these additional vessels are not expected to be enough to fulfil replacement demand, as 57 per cent of existing rigs are obsolete, the Macquarie report said.

“The proof is in the pudding,” said the report, noting that 48 per cent of the 213 rigs under construction have already found contracts.

The top five yards in South Korea and Singapore have won 68 per cent of the $90 billion worth of rig orders placed globally since 2011 — a result of their ‘focus on quality’.

“While Chinese yards have made inroads into the jack-up segment... most orders are still in-house and from low-tier contractors.”

The shares of Keppel Corp, Sembcorp Marine and South Korea’s Samsung Heavy are top picks in Asia, said the report.

Sembcorp Marine has won 12 per cent of global orders since 2011 and Keppel, 16 per cent.

About 40 per cent of revenue at Samsung Heavy — among the largest players in rig building in South Korea — comes from rigs. The firm is also the world’s No. 1 builder of drillships.

OSK Research analysts Jason Saw and Lee Yue Jer said the outlook is good for Singapore’s rig builders, despite concerns over rising competition and lower earnings.

They believe a rise in demand for ships might ease the competition for the Singapore players as traditional shipbuilders move back to their core products.

“We are of the view that the revival of shipbuilding orders will divert the attention of South Korean and Chinese mega yards towards seeking ship orders rather than offshore orders, thus bringing some relief to the intense competition in the offshore market.” — By arrangement with The Straits Times/ANN