New Delhi: State-owned Bharat Heavy Electricals Ltd (Bhel) is close to receiving an order for 50 onshore oil rigs from West Asia, expected to be worth around Rs5,000 crore and the firm’s first significant win in a business where it sees significant opportunity—oil exploration and production.
“Apart from securing orders for Oil and Natural Gas Corp. Ltd and Oil India Ltd, we are also looking at a huge order of 50 onshore oil rigs in West Asia. There is a huge opportunity there,” said K. Ravi Kumar, chairman and managing director, Bhel. He didn’t disclose any further details.
Logical move: An oil rig in the Urals, Russia. Bhel announced its re-entry in April 2007 into a business it exited 25 years ago
Industry analysts, who asked not to be named, said each rig would?cost?around?Rs100 crore.
Bhel isn’t new to the oil rig business. It used to make them till it exited the business 25 years ago. In April 2007, the firm announced its re-entry into the segment, and later, attracted by potential opportunities in the domestic and global markets, it decided to enter the offshore rigs segment as well.
However, the company hasn’t been able to find a technology partner for its offshore rig business as reported by Mint on 18 March. Consequently, it wants to focus on onshore rig manufacturing.
With crude oil trading at a little more than $135 (Rs5,792 crore today) a barrel, Bhel sees logic in expanding its energy equipment business.
Rigs are in short supply all over the world and that has delayed the exploration and production plans of several firms. In India, shortage of oil rigs had forced the government to delay the seventh round of the New Exploration Licensing Policy, under which it issues licences to firms wishing to prospect for energy resources.
Rohit Nagaraj, an analyst at Angel Broking Ltd, termed the order “positive” for Bhel. “Wh-oever wants to enter the rig manufacturing sector today, the prospects are very good as the outlook for both onshore and offshore are great.”
Attracted by the business opportunity, several firms plan to enter the business of manufacturing oil rigs. India’s largest engineering firm, Larsen and Toubro Ltd, plans to build the country’s first facility to manufacture deep-water rigs, as reported by Mint on 20 August.
Bhel has a cash reserve of around Rs4,000 crore and pos-ted a net profit of Rs2,815 crore on revenues of Rs21,608 crore in 2007-08. The company ended the year with orders of Rs50,265 crore. It expects to achieve a turnover of Rs45,000 crore by 2011-12.