Oil firms struggle for rigs as crude spike sparks shortage
State-run exploration and production companies are finding it difficult to hire offshore rigs, with global and West Asian oil companies having tied up a large number of them. A similar shortage has also hit onshore rigs.
Indian oil firms are facing a massive shortage of rigs amid a global rush sparked by rising oil prices, potentially upsetting their upstream exploration plans.
State-run exploration and production companies are finding it difficult to hire offshore rigs, with global and West Asian oil companies having tied up a large number of them. A similar shortage has also hit onshore rigs.
The spike in global oil prices has prompted oil companies the world over to dig deeper in existing oil fields and try and locate new fields, which has caused the big demand for rigs.
However, the availability of rigs that are suited to India’s shallow waters are in the single digits. They are expensive too, with a 3,000 horse power rig costing around ₹350 crore apiece.
A good case in point is Oil India Ltd. With its latest tender for onshore rigs finding no takers, the company is planning to float a fresh tender for chartering new rigs and is also looking at purchasing rigs.
The company has also extended the contract period of some of its already- hired rigs by a year as it goes into a strong drive to grow the number of wells in the country and find new rigs. OIL is also engaged in contract renegotiation.
Ranjit Rath, chairman and managing director of Oil India, said that in the last financial year the exploration and production (E&P) major drilled 45 wells in the country. For this year and the next, the company is looking at drilling 70-75 wells each year.
“As far as rigs are concerned, yes, getting rig is a constraint. Right now, we are looking at two-three rigs—one for deep water and one for shallow water. The challenge is you must get enough participation as part of the bidding process,” he said.
Rath noted that with oil prices surging, exploration and production companies across the world are now looking at ultra-deep water and deep-water exploration. “The higher crude price creates an opportunity to delve deeper and to delve in more uncharted areas where you can undertake exploration,” Rath said.
Of the eight rigs owned by the company, five are to be refurbished. Orders have also been placed for two 2,000 horse power rigs. Apart from tendering for some 3,000 horse power rigs on contract, the company is also looking at purchasing a new 3,000 horse power rig, which is expected to cost around ₹350-400 crore. On 7 September, the Economic Times newspaper reported that earlier this year, state-run ONGC sought 12 rigs for its projects, but was able to get only 10.
In May, ONGC director (Technical & Field Services) Om Prakash Singh said in an interview that there is a major shortage of so-called jackup rigs that are used in shallow water.
“There are 544 jackup rigs globally. Out of that 401 are already contracted. Real availability as on today worldwide is only 36 rigs and out of them, there are only six rigs which can work in Indian conditions,” he had said.
This acute shortage of rigs comes at a time when crude oil prices are elevated and have again soared near $100 per barrel. Brent crude crossed the $97 per barrel mark last week. On Monday, the December contract of Brent on the Intercontinental Exchange was trading at $92.96 per barrel, higher by 0.82% from its previous close.
As of 28 September, the Indian basket of crude oil stood at $97.03 per barrel, compared to the average of $80.37 in June. This surge in prices has come against the backdrop of the Opec+ grouping announcing output cuts in a bid to raise prices.
Oil executives said the shortage of rigs has worsened in the past one year as the energy market witnessed massive volatility and oil prices soared to multi-year highs in the first half of last year after Russia invaded Ukraine.
Catch all the Business News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
MoreLess
First Published:2 Oct 2023, 10:08 PM IST
- Top Gainers
- Top Losers
- 52 Week High