Five Things to Consider When Transporting Rigs and Oilfield Equipment

As we wrote about recently, acquisitions involving US rigs and oilfield equipment are getting the attention of international buyers. There is little information, however, on what needs to be considered before transporting rigs and oilfield equipment. In EnergyFundz’s experience, here are five things to consider before transporting rigs and oilfield equipment across borders:

Purchasing and transporting rigs and oilfield equipment is cost-effective for buyers
Transporting rigs and oilfield equipment to international markets is cost-effective for buyers (Image: 123RF)

1. Port City Proximity: Of the 10 most oil-rich States in the US, only 4 have a coast-line in proximity to a major port. That too, in Texas, the distance from some basins to the coast is over 1,000 mi. Hence, buyers need to take into account the costs to transport this equipment to a major port location for export. While rail is the most cost-effective, it is not always practical. Hence, trucking wins out. For a recent onshore rig move from Midland, TX to the Port of Houston, quotes from trucking agents ranged between $65,000 - $100,000.

2. Vessels: Due to the current state of US imports vs. exports, shipping brokers will likely advise rates to transport cargo out of the US are much lower than into the US. This is certainly good news for US exports. Offshore rigs, however, require specialized heavy-lift vessels for a dry or wet-tow. This also comes at significant cost. EnergyFundz™ recently identified a cluster of ‘stranded’ scrap rigs, where the cost to transport one rig was 40% higher than to purchase the same rig. There are several companies who can reliably and safely wet-tow but falls to 3-4 for a trans-oceanic dry or wet-tow.

3. Insurance: Similar to insuring your car, it is best to estimate the value in today’s market to determine the coverage amounts. For context, we saw a premium to transfer a $14 million 2,000HP onshore rig to Latin America between $15,000 - $20,000. Keep in mind this included an all-risk freight policy and liability protection policy. Always make sure to work with a rated underwriter (e.g. Lloyds of London) and recommend approaching a broker to find competitive rates.

Rates to transport rigs or cargoes out of the US are much lower than into the US
Rates to transport cargoes out of the US are much lower than into the US (Image: 123RF)

4. Equipment surveys:  Insurance carriers will often stipulate a condition, load-out or warranty survey. This places a neutral third-party in the middle and verifies all stakeholders are aware of any defects prior to the shipment and how to resolve. For the 2,000HP rig referenced above, the surveyors cost ranged between $5,000 - $10,000 for a pre-loading and discharge survey. In the case of an offshore rig, a marine warranty surveyor will determine if a vessel will safely be able to undertake the voyage.

5. Regulatory: In this market, it is not uncommon to find equipment subject to a distressed sale, lawsuits, claims or bankruptcy proceedings - see here for an example. Buyers should thus verify there are no legal issues (e.g. liens, seizures, etc.) associated with transporting rigs or oilfield equipment. The last thing you want is the US Customs, Marshall Services or Coast Guard knocking on your door. Similarly, regulations in some countries may place restrictions or surcharges on certain imported equipment. A fitting example is where we found Customs charges for importing drill-pipe into a South Asian country where significantly lower if the pipe length was below 5ft.

Transporting Rigs and Equipment - Know Before you Commit

While not exhaustive, the above covers some of the large ticket items involved in transporting rigs and oilfield equipment. Indeed, buyers may be swayed by once-in-a-lifetime low prices, however, may not account for the logistics, planning and cost of transporting rigs. The silver-lining, however, is for items 1 through 4 above - rates can be competitive as providers seek to gain market-share. All things considered, we still believe now has never been a better time to access the US rigs and oilfield equipment market.

About EnergyFundz™

EnergyFundz mission is to find unique and lucrative deals in a challenging oil & gas market. We have an active buyer network interested in connecting with sellers of new or used rigs and oilfield equipment. EnergyFundz buyers are vetted and have strong reputations in their regional markets. In addition, EnergyFundz is committed to secure transactions via clear titles and funds transfer practices based on US law.

About Raya Guruswamy

Raya Guruswamy is EnergyFundz™ Founder and CEO. He has over 10 years of experience in the oil & gas industry in major construction projects and upstream exploration. Prior to EnergyFundz™, Raya worked in BP’s Rig Startup and Acquisition team and held roles in rig vetting, audit management, planning and commercial analysis. He holds a BS in Energy-Finance, MS in Systems Engineering and MBA.

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1 Comment on "Five Things to Consider When Transporting Rigs and Oilfield Equipment"

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Sam Li

I love what you said about using a liability protection policy in order to insure your oilfield equipment. When renting such equipment, it’s best to find a company that has the best equipment available. If I were to work in the oil industry, I would make sure to find the best supplier within my general area.