Natural-gas firm Gujarat State Petroleum Corporation Ltd’s (GSPC) exploration plans have been hit by a global shortage of rigs, and the situation is unlikely to get better before 2009.
“The lack of availability of off-shore jack-up rigs has affected our exploration programme,” said a GSPC official, who did not wish to be identified. Jack-up rigs, are used in relatively low depths, anchor themselves by deploying legs extending to the sea-bed.
The company, which is developing gas fields in the Krishna-Godavari (KG) basin off the coast of Andhra Pradesh, had expected to start production in the first quarter of 2009. The shortage of rigs would push back that date, said the official.
The GSPC find in the basin, with estimated reserves of 20 trillion cubic feet (tcf) of gas, is India’s largest, and is valued at $50 billion (Rs2.15 lakh crore). Over the nest two years, GSPC plans to spend Rs2,500 crore to develop the field; but it can’t find any rigs.
Reliance Industries Ltd, which also has a find in the KG basin, had earlier written to the government saying its own plans would be delayed because of the shortage of rigs.
GSPC requires a combination of jack-up rigs and semi-submersible drill ships to develop the shallow-water blocks. It is currently exploring the fields with two jack-up rigs, hired from Italian firm Saipem SPA and US off-shore drilling company Atwood Oceanics Inc. “We have recently hired a third rig—a semi-submersible drill ship—that will arrive in June. We need one more jack-up rig to pursue our exploration programme but are finding it difficult to locate one,” the official said.
All companies that find hydrocarbons sign a contract with the government, with details of the time-frame for commencement of production. The government is aware of the problem, but Union minister for petroleum and natural gas Murli Deora had said some companies from the US had expressed their willingness to re-route their rigs being used elsewhere to India, given the exploration and production (E&P) activity in India.
The country currently produces 95 million metric standard cubic metres per day (mmscmd) of gas; this number is expected to double to 190 mmscmd by 2009 when gas discoveries announced by GSPC, Reliance, and the Oil and Natural Gas Corp. in the KG basin come on stream. India, Asia’s third-largest oil consumer, is banking on the availability of domestic gas to cut its huge oil import bill.
Those companies that manage to hire rigs still have to wait several months to get possession. And the cost of rigs has shot up.
“In 2004 , a jack-up rig could have been hired at one-third of the current rates,” said an official with Mumbai-based shipping firm Mercator Lines Ltd, who did not wish to be identified. Depending on the type of rig and the period for which it is hired, the day rates vary from $150,000 for a jack-up rig to $350,000 for a semi-submersible one. For modern fifth- and sixth-generation semi-submersible drills, the day rate is as high as $550,000.
“E&P programme depends not only on the availability of rigs but also on the ability of oil and gas companies to pay the rates for these rigs,” said an official with Chennai-based offshore vessel owner Aban Offshore Ltd, who did not wish to be identified.
The supply situation is not likely to improve in the near future as new rigs being built are expected to be delivered only in 2009-10. Singapore’s Keppel FELS, the world’s top oil-rig builder, is constructing 8-10 jack-up rigs, four of them for Indian owners such as Jindal Drilling, Mercator Lines Ltd and a wholly-owned off-shore subsidiary of Mumbai-based Great Eastern Shipping Co. Ltd. Each jack-up rig costs $180 million.