ONGC defers decision on hiring drilling rig from RIL

State-run Oil and Natural Gas Corporation (ONGC) has deferred a decision on hiring a drilling rig from Reliance Industries (RIL), even as Chinese and European firms have emerged as suitors for the ultra deepsea drillship.

The board of ONGC last week deferred a decision to hire rig from RIL on an assignment basis, a company executive said.

ONGC had been talking to RIL for the past few months for hiring DD-KG-1 ultra deepsea drillship for four years at $5,10,000 per day, the same rate at which RIL had taken the rigs from Transocean Inc on a five-year lease.

"We have been desperately seeking a rig to probe oil and gas leads like the ultra deepsea UD-1 discovery for the past two years," he said.

But in the meanwhile, CNOOC of China and ENI of Italy too approached RIL offering between $5,60,000 and $5,70,000 per day for the same rig.

"They (Reliance) have given us in writing that they have offers much higher than our offer price," an ONGC executive said.

The ONGC board agreed that DD-KG-1 was the cheapest ultra deepsea drillship available at the earliest but on objection of one independent director, deferred the hiring of the rig. "The transaction on merit is very good but timing (because of ongoing elections) is bad. We have sought more time from RIL to decide," he said.

On prodding from the government and the oil regulator DGH for participating in the 'rig sharing' programme where operators share resources for optimal utilisation, RIL had agreed to give the DD-KG-1 rig to ONGC.

The ONGC executive said no ultra deepsea drill rig was available before end-2010 and DD-KG-1, capable of drilling 10,000 meters below seabed, would be available in July this year.

"Alternate offer (with Reliance) can't wait longer than a week," he said. ONGC, which needs three ultra deepsea rigs, recently hired a rig from Vantage for $5,85,000 per day but the rig will arrive in December 2010.

Another rig it had contracted from Sevan is stuck because bankers financing the rig construction at Korean docks want a five-year contract instead of three years offered by ONGC and it will not be available before end-2011. The third rig it had tendered for is available for a minimum $5,35,000 dayrate and is available between mid-2010 and end- 2010.

"(The) Reliance rig is our best bet," the ONGC executive said. Under ONGC tender conditions, the company pays $100 bonus if the rig operator is able to deliver the rig a day before the appointed date.

So, if Vantage is to somehow manage to deliver the rig in July this year instead of the scheduled December 2010, it will earn a bonus of $55,000 per day, raising the dayrates to $6,40,000.

The executive said RIL has so far not responded to its request for more time to decide on hiring the rig. An RIL spokesperson could not be immediately reached for comments.