RIL loses exploration rig to ONGC, faces project delays

NEW DELHI: It is one of those rare cases of a public sector company beating a private sector competitor to clinch a deal. State-run oil major ONGC has pipped Reliance Industries (RIL) to the post to contract a rig for exploration. This is significant considering that oil companies across the globe are facing a huge shortage of rigs. Rigs today come at huge premiums, escalating the costs of exploration projects.

RIL may have to pay a heavy cost for losing out on the deal. Sources said this may lead to delays in project implementation at the coal bed methane blocks in Rajasthan.

Consequently, RIL has requested the government for a six-month extension to exploration work in the CBM block, BS (I)-CBM-2003/II. In a letter to the government, RIL has said that drilling operations in the block could not take place in time due to delay in getting a rig. Drilling in the CBM block requires a special type of rig. ONGC snapped up the rig, while RIL was still negotiating for it.

Narrating the sequence, the letter said: “In view of deeper depths of coal/lignite occurrence in the block, the coring/drilling operations require oil & gas type of drilling rigs as opposed to general CBM drilling rigs. Considering this, RIL floated RFQ on December 1, 2005 for hiring an oil & gas drilling rig capable of drilling deeper depths.

As the drilling companies usually participate in enquiries by many operators at a given time, the short-listed bidder also participated in a PSU tender. During the course of our negotiations the PSU awarded the work to this bidder and the rig in the offer went to the PSU.”

RIL, re-floated the enquiry and recently signed a contract for a drilling rig service “with target spud as March 25, 2007”. RIL requested the government to extend the phase-I for a minimum six months from April 1, 2007. “We have been making all efforts for commissioning of a deep drilling rig to complete the phase I work in time. However, shortage of rigs has affected exploration in many parts of the world, especially in India,” the company informed the government.

Under the second round of bidding (CBM-II), RIL has been awarded the block, BS (I)-CBM-2003/II in Rajasthan. The contract was signed on February 6, 2004 and the petroleum exploration licence was issued with effect from April 1, 2005. RIL, which holds 100% participating interest in the block, started exploration work in the block in August 2005.