(Bloomberg) — Offshore oil company Borr Drilling Ltd. expects nearly a third of the world’s shallow-water drilling rigs to be retired in the coming years due to age, leading to higher daily leasing rates.

Drilling close to shore in waters less than 120 metres deep requires a special drilling rig that extends its legs to the shore and keeps the drilling platform above water. And 30 per cent of the market for these so-called jack-up rigs is over 35 years old, said Patrick Schorn, CEO of Borr, in an interview.

Of the roughly 102 million barrels of oil produced worldwide each day, about 20 percent comes from shallow water drilling, according to Schorn. This market is often overlooked compared to deepwater drilling, which generates higher day rates and takes much longer to produce. Borr is one of the world’s largest suppliers of modern shallow water drilling equipment, with its fleet of two dozen rigs. Its rigs are on average seven years old, Schorn said.

“The real problem in this business is going to be the high day rates,” said Schorn, who began his career at SLB in 1991 before taking over from Borr in 2020. “We can argue about whether it happens this year or next year, but at some point these very old units are going to go down the drain, and that’s going to create a lot of problems.”

After years of being one of the worst-performing sectors in the global oil market, offshore drilling is enjoying a renaissance as higher crude prices drive producers back offshore. Borr, which reported earnings that were below expectations on Wednesday, expects higher day rates for its rigs next year, which will lead to higher cash flow.