ONGC bets on term contracts for rigs
Public sector oil major ONGC could save close to a billion dollars over the next three years on charter of offshore drilling rigs, if the market continues to tighten going forward.
By Amit Bhandari, TNN |
Public sector oil major ONGC could save close to a billion dollars over the next three years on charter of offshore drilling rigs, if the market continues to tighten going forward.
In the past few years, ONGC has made big savings on similar long-term contracts. It is betting that the market for drilling rigs will harden further.
ONGC chartered a deepwater rig - Discover Seven Seas from Transocean, the biggest rig operator globally, at a rate of $125,000/day for three years ending July ‘07. Private sector major Reliance has chartered a similar rig - Discoverer 534 from the same company at a rate of $245,000/day for three months ending October ‘06.
ONGC is currently operating a number of jack-up rigs, which are smaller than deepwater rigs, at rates of approximately $60,000/day, which is also well below current market rates. Unfortunately for the company, some of these contracts are expiring in ’06.
The renegotiated contracts for these rigs for an additional three years ending in ’09-10 are close to $140,000/day. These contracts had been finalised in Dec ‘05 and rates for these assets have moved up since. Even in the jack-up rig segment, ONGC has two rigs from Transocean working at a rate of $50,000/day. Three similar rigs from Indian company Aban Loyd are also working at similar rates. These contracts last till late ’07 or early ’08.
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“We have a total of 12 rigs tied up in contracts of varying durations at rates of $100-140,000/day. The current charter rates for these rigs could be around $200,000/day” says UN Bose, director, technical & field services, ONGC. ONGC is currently operating close to 30 offshore drilling rigs - about 8% of the global fleet, putting it amongst the largest operators. The global fleet for offshore drilling rigs is close to 550. Most of this is over 20 years of age - most of the offshore rigs were ordered during the oil shocks of 1970s and there was very little activity after crude oil prices tanked in the early 80s.
With oil price zooming in the past few years, companies have started putting money in exploration - pushing up the demand for rigs and there aren’t enough to go around. “The utilisation rate for offshore drilling rigs is close to 95% now, against 85-90% traditionally. The current situation could last till ’09-10, though a lot would depend upon the price of oil” says Mr Bose.
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