Bangalore: Family feuds can make friends out of foes. Staunch business rivals Great Eastern Shipping Co. Ltd, India’s biggest private shipping firm by fleet size and revenue, and Mercator Lines Ltd, the country’s second biggest private ocean carrier by capacity, are a case in point.
Bharat Sheth, deputy chairman and managing director of Great Eastern, is taking help from Mercator’s chairman H.K. Mittal to compete with cousin Vijay Sheth, managing director of Great Offshore Ltd.
“Singapore-based Greatship Global Energy Services Pte. Ltd has hired a new rig from Mercator for a minimum of three years and a maximum of five years,” said Anjali Kumar, a spokesperson for Great Eastern Shipping. She did not disclose the financial terms.
Greatship Global is the rig-owning, oil-drilling subsidiary of Great Eastern Shipping.
The lucrative offshore services business was at the centre of a tussle between the Sheth cousins a few years ago. Great Offshore was eventually spun off from Great Eastern in 2006, and is now India’s biggest integrated offshore service provider with 39 offshore ships and two rigs.
The rig Greatship has hired is being built by Singapore’s Keppel FELS Ltd, the world’s biggest builder of offshore oil drilling rigs by capacity, and will be delivered by 15 April 2009. Keppel is also building a similar rig, due for delivery in September 2009, that Greatship will own.
G. Shivakumar, chief financial officer at Greatship, said the company decided to hire a rig from Mercator due to availability and cost issues. “Building a new rig is quite expensive in today’s market. Besides, it is not possible to get an early delivery as rig builders are fully booked for the next few years,” he said. “It is a way of increasing our capacity without putting in capital.”
Greatship will look at more such strategic alliances to become a substantive player in drilling services, he said. “Greatship will market the new rig, which will fetch a day rate from about $150,000 (around Rs64 lakh) to over $200,000,” Shivakumar said.
A shortage of rigs has delayed drilling in many oil blocks the Centre has awarded to exploration firms. The rates for hiring rigs have soared due to excessive demand.
To boost capacity and meet demand for rigs, Great Offshore is in the final stages of due diligence for buying Cayman Islands-based SeaDragon Offshore Ltd, which is building two deepwater rigs for $600-700 million apiece.
The first rig, due for delivery in the fourth quarter of 2009, will be rented by Petroleos Mexicanos, the world’s third biggest crude oil producer, on a five-year, $958 million contract. The second rig, slated for delivery in September 2010, is scouting for employment.
In addition to these, Great Offshore is building a new rig at India’s Bharati Shipyard Ltd. Sate-run Oil and Natural Gas Corp. Ltd has hired this rig for a five-year, $260 million contract beginning 14 May 2009.
Greatship, meanwhile, has spent close to Rs3,100 crore in less than two years, since hiving off its offshore business, to buy offshore assets to meet increasing demand from oil explorers and producers.
“This is more than our shipping capital expenditure and shows our belief in the potential of the offshore sector,” said Kumar of Great Eastern.
In addition to three platform supply vessels and two anchor handling tug-cum-supply vessels that it owns and operates, Greatship has ordered 18 new vessels at various global yards.