India has put off by five months an auction of oil exploration rights due to a shortage of rigs. The shortage has delayed drilling in existing fields and slowed a quest to cut the country’s dependence on imports.
The nation’s seventh annual offer for oil and gas fields has been delayed until August from March, director general of hydrocarbons V. K. Sibal said on Monday.
Explorers led by Oil and Natural Gas Corp. (ONGC) have drilled less than a tenth of the 880 wells agreed under exploration licences awarded by the government since 2000, according to data from his office.
Oil companies, including Reliance Industries Ltd and Italy’s Eni SpA, can’t keep pace as India offers a record number of areas for prospecting.
The government has asked operators to share equipment to hasten discoveries that would reduce dependence on oil imports. India’s oil purchases last year made up about 29% of imports, contributing to a record $57 billion (Rs2.28 trillion) trade deficit in the year ended March 2007.
“India would be among the countries having the biggest number of outstanding drilling commitments,” Tor Gunnar Gloppen, chief operating officer of Rig Management Norway AS, said on telephone from Oslo on 23 May.
India is helping explorers tackle the rig shortage by extending drilling deadlines in licence agreements.
“We are in talks with the petroleum ministry on extending exploration agreements from the third and fourth rounds of auctions,” Sibal said in an interview. “We don’t plan to suspend any contracts.”
Reliance and ONGC, India’s biggest companies, and Eni, Italy’s biggest oil company, have agreed to share drilling equipment and will advertise to jointly hire rigs and seismic equipment for projects on the east coast, according to Sibal.
Canada’s Canoro Resources Ltd, Premier Oil Plc. and Oil India Ltd are cooperating in the northeast region while a group, including ONGC and Reliance, is being formed for projects on the west coast, Sibal said. Indian operators and the regulator funded a $100,000 study by Rig Management on sharing exploration services.
“We are trying to arrange rigs which will move from one operator to another and this may be cheaper,” D.K. Pandey, exploration director, ONGC, said in an interview on 17 May. “We have to sort out scheduling for individual operators.”
Sharing resources will enable companies to reduce costs. The cost of renting rigs has tripled since 2005 for contracts extending to 2012.
Transocean Inc., the world’s largest offshore oil and gas driller, said surging demand for rigs had enabled the company to build an order book worth $21.4 billion at the end of March for projects extending as far out as 2015.
“The market is very bullish, both on the onshore and the offshore sectors,” V.K. Agarwal, who heads Essar group’s rig business, said on 17 May. “People are not getting rigs.”
The company, which owns 14 rigs, leased a deepwater rig to Gujarat State Petroleum Corp. last month for about $340,000 a day.
Reliance is paying $320,000 a day until August 2008 to rent the Deepwater Frontier, more than twice the rate Transocean charged an earlier client, according to Transocean’s website. The tariff will rise to $477,000 a day, when Reliance extends the contract in 2008 for another three years.
Explorers in Norway, the North Sea, West Africa and the Gulf of Mexico have accelerated drilling plans and reduced costs at deep-sea ventures by sharing rigs, said Rig Management’s Gloppen.
“India is very fast in offering acreages,” said Ian Blakeley, a manager responsible for India at IHS Inc., an oil servicesprovider.
“The operators are slower in exploration,” Blakeley added.
Gujarat State Petroleum, which said in 2005 that it made India’s biggest gas discovery with estimated reserves of 20 trillion cubic feet, has not met half of its drilling commitments after two extensions, the company’s partner in the field, GeoGlobal Resources Inc., said in its annual report.
Shortage of offshore services may delay production to “later 2008” at Reliance Industries’ gas development in Krishna Godavari, US-based energy investment bank Tristone Capital Ltd said in a report in March about Canadian explorer Niko Resources Ltd, Reliance’s partner in the field.