Reliance Industries and Oil & Natural Gas Corp (ONGC), two of India’s biggest oil explorers, failed to benefit from record crude oil prices in the first six months of this year as the availability of rigs declined during the period. This, consequently, forced the companies to drill less.
India lost rigs to foreign countries and this affected nearly 62 per cent of the exploration and production activity in the country’s deep water oil fields. The number of offshore rigs deployed in the country declined by 14 per cent to 26 in the first half of 2008 as Latin America added 20 per cent more to its tally, taking the count to 89, according to the data released by Baker Hughes, the world’s third largest oil field services company.
| DEEP-SEA WOES |
Crude prices reached a record $147.27 a barrel on July 11, fuelling the demand to explore untapped reserves that mainly lie in deepwater offshore fields. This, in last three years, has led to near three-fold increase in the charter rates for offshore rigs to about $3,00,000-$5,00,000 a day.
“We had to reschedule some of the work because of an acute shortage of rigs in the international market,” said a spokesperson of Reliance Industries, India’s largest private oil producer.
According to data available on the website of Director General of Hydrocarbon (DGH), the unavailaility of rigs has impacted around 25 offshore fields awarded under the third and fourth round of NELP, where the first phase of exploration is complete and drilling is required.
A total of 190 production sharing contracts have been signed in six NELP rounds, out of which 106 projects are in operation. The government also offered 57 exploration blocks in the 7th round of NELP in December last year. Analysts fear that as oil companies complete the first phase of exploration involving the seismic study of the sea bed, drilling in more fields will be impacted.
RIL is facing a shortage of rigs and this is affecting work in 12 of the 22 deep fields awarded to it. The company has two deep water rigs and is planning to increase the number to five by 2010.
“The unavailability of rigs is delaying possible monetisation of new finds,” said Oil and Natural Gas Corporation, the country’s largest oil producer, in an email response to the newspaper’s query.
The rig shortage has even delayed the completion of minimum work programme for the exploration and development of fields awarded to the company under NELP.
The public sector upstream oil company requires five offshore rigs for exploration and production purposes. However, the company has only two rigs under operations. It owns one rig and hires the other. And the third rig for which an order was placed in June will be available only by December 2010.
“All international yards that build rigs are full for the next three years; even there is acute shortage of engineers who can build rigs,” said Ajit Motwani, analyst with Mumbai-based brokerage Emkay Share and Stock Brokers. “The rig shortage will continue for two to three years,” he added.
India imports 70 per cent of its oil requirements. The International Energy Agency has projected that China and India will account for 45 per cent of the increased demand for oil between now and 2030. There are 25 private sector companies in oil exploration and production working in the country.
Seeing the shortage of rigs, the government has allowed a three-years drilling holiday to the producers on a case-to-case basis. However, companies want the exception to be made applicable to all the fields.
