Mumbai: Offshore services firm Essar Oilfield Services Ltd will account for at least a fourth of Essar Shipping Ports and Logistics Ltd’s annual revenue, after the two entities are integrated by the end of this month, an official at the shipping firm said.
About 25% of Essar Shipping’s annual revenue would come from Essar Oilfield over the next couple of years, V. Ashok, director and chief financial officer of the shipping company, said on Tuesday after a visit by reporters to Essar Oilfield’s deep-water rig in Rajahmundry, Andhra Pradesh.
Essar Wildcat, the offshore services firm’s only deep-water rig, and other offshore assets will fetch about $30-50 million (Rs154-256 crore) in gross revenue for Essar Shipping for the fourth quarter ending 31 March, he said, adding that revenue contributed by Wildcat will reflect in Essar Shipping’s books from the fourth quarter. Essar Shipping reported net revenue of Rs241.46 crore for the December quarter. Essar Oilfield has a fleet of 14 rigs.
Valuable asset: Essar Wildcat, the sole deep-water rig is expected to fetch, along with other offshore assets, up to $50 mn in revenue in Q4.
Essar Shipping has earmarked $1 billion for capital expenditure in the next two years. The firm plans to expand its fleet of marine assets to cater to the oil exploration and production market, and is looking at drilling opportunities in Norway, Latin Amercia, West Asia and Africa, Ashok said.
“We are in the process of procuring two jack-up rigs at a cost of $440 million, which are expected to join our fleet within the next 24 months. As we move on, we will decide on procuring other assets as well,” he added.
A jack-up rig is deployed in shallow water at depths of up to 300 ft. Wildcat is a self-propelling, semi-submersible rig suitable for deployment at sea at depths of 1,350 ft, and can be upgraded for deeper waters. The rig has started drilling for Gujarat State Petroleum Corp. Ltd off Kakinada from 31 December.
A Mumbai-based oil drilling expert, however, said drilling rates are declining. “The global meltdown had its toll on rig rates too. The rates for jack-up rigs and semi-submersible rigs are coming down by 10-20%,” he said by phone on Wednesday. This person did not want to be identified as he is an adviser to other offshore companies.
In addition to state-run firms such as Oil and Natural Gas Corp. Ltd, UK’s BP Plc., BG Group Plc., Reliance Industries Ltd and GVK Group have all stepped up exploration and production. Though oil prices have declined from record highs last year, projects continue and are in need of rigs.
Last week, Mercator Lines Ltd’s Singapore subsidiary Mercator Offshore Ltd paid a $625,000 bonus to Singapore shipyard Keppel FELS Ltd for delivering a new offshore rig 20 days ahead of schedule. Mercator is India’s second largest private shipping company.
Essar’s Ashok said daily charter rates for jack-up rigs are beginning to rise, commanding between $120,000 and $150,000 a day. Essar Shipping shares rose 3% on the Bombay Stock Exchange on Wednesday to close at Rs27.25.