Business OpportunitiesONGC hires drill rig from RIL for 4 yrs
State-run Oil and Natural Gas Corp (ONGC) has hired an ultra deep-sea drill rig from Reliance Industries (RIL) for four years at close to Rs 3,915 crore.
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ONGC has hired the rig Dhirubhai Deepwater KG-1 (earlier christened Deepwater Pacific-1) on an assignment basis for $495,000 to $510,000 a day for four years.
"We received the drillship about 7-10 days back. It is currently under inspection at Kakinada and will be deployed for drilling next month," a senior company official said.
After inspection and loading, the rig would move to its first drill location off the west coast. "We will use the rig to drill an exploration well in a deep-sea block in Kerala-Konkan basin," he said.
After this, the rig would go to east coast where it will do an appraisal well on the KG basin UD-1 gas find of 2007.
"In all, we plan to drill 20 wells using the rig during the four-year period. It will also be used at Mahanadi and Andaman deep sea," the official said.
ONGC will pay a dayrate of $495,000 to RIL for first 180 days and $510,000 from 181 days onwards. RIL had hired the rig at the same rate from Transocean of US.
The state-run firm, which currently operates 37 deep water and ultra deep water acreages, wanted three ultra deep water rigs each capable of drilling up to water depth of 10,000 ft, 12,000 ft and 7500 ft. As the search for rigs were on, RIL came up with an offer to share its rig. ONGC had been in talks with RIL for several months for hiring the rig and its board finally gave go-ahead on June 6 after the Brazilian national oil firm Petrobras also envinced interest in taking the rig on assignment basis from RIL.
Independent directors on company board had been blocking the deal but were prevailed upon at the June 6 meeting after it became clear that alternate rigs were available at atleast 10 per cent higher price than RIL rates, the official said.
Petrobras had offered $550,000 to $560,000 per day for the rig. Besides Petrobras, Eni of Italy and Cnooc of China too were interested in the rig that is capable of drilling in water depths of up to 10,000 feet but RIL chose the Indian flagship firm.
The official said ONGC had invited international offers to discover competitive rates but the earliest rig available was in December 2010 and was costlier than RIL offer.
Transocean Inc of US offered Deepwater Frontier at an operating day rate of $535,200 while Great Offshore offered Pacific Bora for $599,000 per day.
RIL rates are lower than the rigs ONGC has already hired - Sevan Driller-II from Sevan Marine for $524,900 per day for three years from December 2010 and Platinum Explorer from Vantage Energy for five years from December 2010 for $585,000 per day.
The official said the company will pay $764.53 million or Rs 3,914.39 crore for DDKG-1 for four years beginning July. The ONGC board agreed that DDKG-1 was the cheapest ultra deep-sea drillship available at the earliest but on objection of one independent director had previously deferred the hiring of the rig.
The rig, which is under construction at a Samsung yard in South Korea, was originally hired by RIL from Deepwater Pacific Inc but has now decided to farm it out to ONGC.
The official said at one stage, the Board asked ONGC management to renegotiate the assignment period but RIL was unwilling to lower the hire period from four years to two years.
CNOOC of China along with another state exploration firm had approached RIL offering between $560,000 and $570,000 per day for the same rig.
ONGC, which currently operates 37 deep water and ultra deep water acreages, wants to hire three ultra deep water rigs each capable of drilling up to water depth of 10,000 ft, 12,000 ft and 7500 ft. As the search for rigs were on, RIL came up with an offer share its rigs.
On prodding from the Government and the oil regulator DGH for participating in the "rig sharing" programme where operators share resources for optimal utilisation, Reliance had agreed to give the DD-KG-1 rig to ONGC.
The ONGC executive said no ultra deep-sea drill rig was available before end-2010 and DD-KG-1, capable of drilling 10,000 meters below seabed, would be available in July 2009.