Mumbai: Vijay Sheth’s Great Offshore Ltd is set to win a five-year $260 million (Rs1066 crore) deal from state-run Oil and Natural Gas Corp. Ltd (ONGC) for a newly-built jack-up rig used for deep-water oil drilling operations according to a person close to the development who did not wish to be identified. Vijay Sheth took over sole ownership of the company this week.
Jindal Drilling and Industries Ltd is also likely to win a similar five-year $260 million deal from ONGC for a second newly-built jack-up rig, according to the same person.
India’a largest oil exploration and production firm had invited bids from rig owners and operators to hire two newly-built, independent leg, cantilever-type off-shore jack-up rigs that can drill in water depths of 300-350 ft. The bids were for a five-year period starting 14 May 2009. The five-year contract is for a fixed price without an escalation clause and the rigs will be used to drill for oil on wells located off the east and west coasts of India.
Great Offshore, which had offered one new-built jack-up rig against the two required by ONGC, has quoted the lowest rate of $1,39,900 a day when the price bids were opened on Thursday (28 June), according to the person. Great Offshore is building an independent leg, cantilever-type jack-up rig at Bharati Shipyard Ltd.
Jindal Drilling had offered two new-built jack-up rigs to ONGC that are currently being constructed at Singapore’s Keppel FELS Ltd, the world’s top designer and builder of jack-up drilling rigs. Jindal has emerged the second lowest bidder by quoting a day rate of about $1,43,800 for one of the rigs, which is $4,000 more than the rate quoted by Great Offshore. For the second rig it offered, Jindal Drilling has quoted a higher price. In such deals, a bidder is allowed to quote different rates for each rig it is offering.
Mumbai-based Mercator Lines Ltd, India’s second largest private sector shipping company by fleet size, has quoted a day rate of about $1,44,429 for the lone rig it had offered to emerge the third lowest bidder. Mercator is also building a jack-up rig at Keppel FELS.
Since it requires two new built jack-up rigs, ONGC will now ask the second lowest bidder Jindal Drilling to match the lowest day rate quoted by Great Offshore to finalise the contract. In case Jindal Drilling declines to match the Great Offshore rate, the offer will be made to Mercator which is the third lowest bidder.
Intense competition between rig owners and operators to win the deal has driven down rates significantly to the advantage of ONGC.
At current market prices, a cantilevered jack-up rig fetches a day rate of about $200,000, far higher than what the three lowest bidders have quoted. In response to its global tender, ONGC received offers for 17 jack-up rigs from nine firms.
On Tuesday, Vijay Sheth acquired a 14.43% stake held by his cousins Bharat Sheth and Ravi Sheth and their father K.M. Sheth in Great Offshore in an all-cash deal worth Rs 75 crores that makes him the sole owner of Great Offshore.
The deal also gave Vijay Sheth management control of the firm that was demerged from Great Eastern Shipping in 2006.