offshore oil rigs-- and the ability of markets to adjust

From Guy Chazan in the WSJ, an interesting story about a little niche in a big, important market...

As a buccaneering oil trader, John Fredriksen shipped crude from trouble spots like Iran and used hardball tactics to build up the world's biggest tanker fleet. The son of a welder, this modern-day Onassis is now Norway's richest man, worth at least $7 billion.

He is also one of a new breed of entrepreneurs reshaping the oil business.

Mr. Fredriksen has amassed an array of state-of-the-art oil rigs capable of drilling in the world's deepest oceans. With production declining in mature basins like Alaska, the deep waters of the Gulf of Mexico and offshore Brazil and West Africa are oil's hottest real estate. But the rigs that can drill there are in short supply. That means contractors like Mr. Fredriksen can charge huge premiums for their services.

His success is part of a broader power shift from Big Oil -- the Shells, Exxons and BPs of the world -- to the oil-field-services sector. As they venture into ever harsher and more remote environments, the majors are becoming more reliant on these outside contractors -- geologists, well testers, seismic data experts and offshore drillers -- to find and extract their crude. The service companies are the new rule-setters in an increasingly costly game....

Mr. Fredriksen made an early bet many thought was insane. Three years ago, his company, Seadrill Ltd., broke one of the cardinal rules of the rig business. It ordered two "ultradeep water" rigs, capable of drilling in waters at a depth of at least 7,500 feet, for nearly $900 million -- on spec. It didn't have a single contract from an oil company to guarantee them.

"We didn't feel it was a risk," said Mr. Fredriksen, a 63-year-old with piercing blue eyes, elegantly attired in a blazer and cravat on a recent afternoon in his London office. "We knew there was a boom coming on."

There's no telling how long that boom will last. But Mr. Fredriksen sees years of strong demand ahead. The amount of oil pumped from deep-water fields will nearly double between 2005 and 2010 to about 11 million barrels a day, according to the U.S. Energy Information Administration....