Vijay Sheth-owned Great Offshore Ltd has spoilt the party in India for jack-up rig owners.
The world’s biggest offshore drilling company, Transocean Inc., and India’s largest offshore drilling contractor Aban Offshore Ltd, which are close to clinching a new deal, have been asked by ONGC Ltd to match the day rate quoted by Great Offshore, a smaller rival, in an earlier tender.
Both Aban and Transocean have indicated their willingness to lower rates to take up the contract, an ONGC official said.
The original day rates quoted by Aban and Transocean are close to the market rates for older rigs, but they are being asked to match the lower rate quoted by Great Offshore—and that, too, for a new rig, which fetches a higher rate in the international market.
“A new-build jack-up rig currently fetches a day rate of $190,000-$200,000 (Rs79-83 lakh) for one-year contracts. For longer contracts of three-five years, the day rate is lower,” said an offshore rig analyst at DnB NOR Markets, a unit of Norway’s biggest bank DnB NOR Bank ASA.
But Great Offshore, the erstwhile offshore division of India’s largest private shipping firm Great Eastern Shipping Co.Ltd which was demerged into a separate company following a family split late last year, had quoted a day rate of $139,900 in June for a newly built jack-up rig to win a five-year Rs1,000 crore ($250 million) deal from ONGC.
The rig is currently under construction at Bharati Shipyard Ltd and will enter the five-year contract beginning May 2009. ONGC had then invited bids for hiring two newly built jack-up rigs.
The second lowest bidder, Jindal Drilling and Industries Ltd, had quoted a day rate of $143,800. It had to match the lowest day rate quoted by Great Offshore to win the contract.
India’s state-owned oil exploration and production firm had also invited bids for hiring five jack-up rigs for a three-year period to replace an existing contract that will end between December and January 2008.
These five rigs (three rigs owned by Aban Offshore and two owned by Transocean) have been hired by ONGC since 2004 and are operating at day rates ranging between $45,200 and $57,600.
In the new three-year tender, Aban Offshore had offered the same three rigs for day rates of $167,500 each while Transocean had quoted day rates of $165,000 for each of the two rigs.
At this rate, the deal would have fetched Aban Rs2,200 crore ($550 million) and Transocean, $360 million, over a three-year period.
But, ONGC has now asked both Aban Offshore and Transocean to match the day rate of $139,900 quoted by Great Offshore for the five-year new-built jack-up rig tender that was finalized in July, said an official at Transocean who did not want to be named.
This will help ONGC reduce its operational expenses on rigs significantly since they are being hired for a fixed price, without an escalation clause.
Soaring international oil prices are attracting oil exploration firms to invest huge sums in prospecting for oil. This has boosted demand for jack-up drilling rigs.