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ONGC hires 7 vessels, 5 from ABG Shipping

ONGC hires 7 vessels, 5 from ABG Shipping
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First Published: Wed, Mar 07 2007. 12 09 AM IST
Updated: Wed, Mar 07 2007. 12 09 AM IST
Even as the global boom in oil exploration and production has led to record hike in prices of drilling and shipping equipment, theOil and Natural Gas Corporation (ONGC) Ltd has successfully hired seven offshore support vessels (OSV).
Five of these OSVs have been hired from ABG Shipping Ltd for a five-year period at below market prices, which has allowed India’s largest oil and gas exploration company to limit the rise in cost of this infrastructure.
Analysts had feared that ONGC’s cost of exploration and production would rise dramatically as the contracts for rigs and associated equipment matured, and new ones were signed at significantly higher prices.
“Tight supply in global markets has spiralled the day rates of OSVs,” said Rajat Dutta, general manager (planning) at the Great Eastern Shipping Co. Ltd.
Great Eastern’s wholly-owned subsidiary, Greatship India Ltd, is investing $380 million (Rs1,679 crore) to buy 10 OSVs and one jack-up rig (a floating platform with legs that can be lifted high off the seafloor while the platform is towed to the drilling site).
“The demand for OSVs, platform supply vessels (PSVs) and rigs has increased significantly, but there is a shortage of supply,” says T.V. Shanbhag, advisor, Mumbai-based shipping firm Mercator Lines Ltd, which is building a new jack-up rig at Singapore’s Keppel Fels yard for $180 million.
The OSVs, now being hired for a fixed price contract without annual revision of charges, will help support its drilling and production activities on the East and West Coast. OSVs and PSVs provide offshore logistics such as supplies and cargo transport for deep-water offshore drilling.
ABG Shipping is a group company of Bombay stock exchange-listed ABG Shipyard Ltd, one of the largest private sector shipyards in the country. As per the deal to be signed shortly, ONGC will pay $6,300 (Rs2.78 lakh) per day to ABG Shipping for each of the three OSVs having dynamic positioning (DP) and fire-fighting capabilities with a pulling power of 60 tonnes. DP allows ships to anchor in deep water and maintain stability even in rough sea conditions.
ONGC will also pay $7,200 per day to ABG for each of the two OSVs having DP, fire-fighting capabilities and pulling power of 80 tonnes. In comparison, Norwegian firm Rolv Berg Drive has bagged a deal from ONGC for one OSV with DP, fire-fighting capabilities and pulling power of 120 tonnes, for which it’s charging $15,900 per day.
ONGC has also hired a 3,000 dead weight tonne PSV from Korea’s Samsung Marine for a day rate of $12,990. A unique feature of the contract to be signed is that the charter rates will remain unchanged throughout the five-year duration of the deal, officials said.
ONGC is negotiating with firms such as state-owned Shipping Corporation of India (SCI), Greatship India, TAG Sealogistics Ltd, Garware Offshore Services Ltd and Great Offshore Ltd to hire 23 more support vessels for five years.
India’s growing offshore oil industry is attracting shipowners to enter the sector as oil explorers such as ONGC, Reliance, British Gas, Cairn Energy, Hardy Oil, Gujarat State Petroleum Corp. and Transocean pump in millions of dollars to prospect for oil and gas under the ocean floor.
“Offshore is a growing sector for the next ten years and offers great potential,” says R.K. Ray, general manager, technical and offshore services at SCI. The company plans to buy five new OSVs for which it has invited offers from yards.
The Centre has awarded 97 offshore blocks for drilling under the fifth and sixth rounds of the New Exploration Licensing Policy (Nelp). “The Indian exploration and production space witnessed increased activity following declaration of Nelp VI and concern over energy security. This has resulted in higher utilizations and improved earnings for offshore supply boats,” said Great Eastern’s Dutta.
Only 30% of India’s OSV needs are supplied by Indian firms. Now more Indian firms are buying this equipment to increase their share of the pie. DP Jindal Drilling has also ordered two rigs from Keppel Fels. Offshore business provides revenue stability to companies compared with the normal shipping business.
“As against voyage contracts (where the ship is hired for a single journey) in normal shipping business, offshore sector has contracts ranging from three to five years. The revenue stability is the attraction” said Mercator’s Shanbhag.
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First Published: Wed, Mar 07 2007. 12 09 AM IST
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