Home >Companies >Bhel in tie-up talks with overseas shipyards for rigs

State-owned power equipment maker Bharat Heavy Electricals Ltd (Bhel) is in talks with overseas shipyards to identify suitable infrastructure for building offshore rigs, even as it continues to explore technology tie-ups with firms offering offshore rig manufacturing technology.

“One needs a shipyard to manufacture such rigs," said a senior Bhel executive who did not wish to be identified. “Since we do not have one, we are exploring possibilities of joining a shipyard overseas. We are also exploring similar opportunities within the country. Though it is not easy, we are trying for tie-ups and are confident that we will get them." He declined to name the shipyards citing commercial considerations.

“We are presently evaluating opportunities and are looking for technical tie-ups for the same (offshore rig building)," A.K. Puri, chairman and managing director, Bhel, had said in an interview.

Good business: An oil rig under construction for Oil and Natural Gas Corp. Ltd at the Larsen and Toubro Ltd yard in Hajira. Rigs are in short supply all over the world and Bhel’s looking to cash in on it.

The company believes that with the crude oil prices touching $100 (Rs3,930) a barrel, manufacturing equipment, such as rigs for exploration and production sector, will emerge as a key profit centre.

“Our rig-building business will almost equal the other businesses that we have," the executive added. He declined to comment on the size of the investments required for the project.

“Money will never be a problem for us, as we are sitting on cash reserves of around Rs4,000 crore," he claimed. “If need be, we can raise further resources."

The company posted a net profit of Rs2,385 crore on revenue of Rs18,702 crore in 2006-07 and ended the year with an order book position of Rs35,633 crore.

Bhel is trying to expand its energy equipment business and tap growing demand for such rigs in both the international and domestic markets. Paucity of rigs has delayed the exploration and production plans of several companies, and also forced the Indian government to delay the seventh round of the new exploration licensing policy.

Rigs are in short supply all over the world. A deep-water rig commands a daily rental of around $300,000, while an ultra deep-water rig may command a daily rental of $400,000.

The business isn’t entirely new to Bhel, which was in the onshore oil rig-manufacturing business from which it exited 25 years ago, but announced its re-entry in April.

With yards in China, Singapore and the US operating at near-peak capacities, finding both a shipyard and technology partner will not be easy for Bhel, say analysts.

“Finding technology partners is not easy. Most of the major global rig manufacturers have the technology along with a shipyard to build them. In my opinion, the company that Bhel join hands for the shipyard will (also) be the company that provides it with the access to technology," Ajay Arora, partner, Ernst and Young, said.

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