The global imbalance in demand-supply of offshore drilling rigs, especially jack-up rigs which operate in shallow water, has brought down day rates by as much as 15 per cent in the past six months.
There is over-supply of rigs in the market, with many remaining un-contracted. Industry experts foresee the BP oil spill in the Gulf of Mexico leading to pressure on rig demand and day rates, if rigs are forced to go idle as a result of US regulatory action.
Currently, the day rate for jack-up rigs in India is $63,000 per day against the day rate of around $74,000 in November 2009. “The day rates for deployment of rigs in India —particularly offshore — have seen a downward trend over the last six to nine months due to the global imbalance in demand-supply for these assets, affecting pricing trends in the Indian market,” says Dilip Khanna, Partner, Ernst & Young.
According to industry experts, the total estimated jack-up rigs deployed in the offshore space in India is 44 (including jack-ups, semi-subs & drill ships). Of these 34 are jack-ups, three are semi-submersibles and seven are drill ships.
Of the 34 jack-ups, 18 are Indian. The ownership break-up is ONGC, 8; Aban, 5; and one each of Great Offshore, Greatship India, Jagson, Jindal and Discovery Hydrocarbons. The rest are owned by foreign companies like Transocean, Noble Drilling and Pride International, etc. By industry estimates, most of the jack-ups rigs owned by Indian players are deployed.
On the other hand, the estimated land rig count in India is 200 (including work over rigs). Of the total, 97 are owned by ONGC and Oil India combined, and the balance by the private sector companies such as Shiv Vani, John Energy and Dewanchand, Punj Lloyd, Essar, etc. Most of the 103 privately owned rigs are estimated to be located in India.
The industry estimates that 80 land rigs of the private Indian companies are currently deployed under contracts.
State-run ONGC says it has around 80 rigs operating onshore and 30 offshore. “We drilled around 377 wells last fiscal and plan to drill around 400 wells this financial year. We are also planning to hire around 10 deep water rigs for offshore activities,” said an ONGC official.
According to ODS-Petrodata for May 2010, the Jackup Day Rate Index base rate for the Gulf of Mexico declined from 197 to 180, as the rise in fleet utilisation that had taken place since late last year leveled off.
In the wake of last month’s BP oil spill in the Gulf of Mexico, the US government announced a freeze on offshore drilling projects for six months and suspension of exploration underway near Alaska, Virginia and in 33 sites in the Gulf. “Rig demand and day rates may come under pressure if rigs are forced to go idle as a result of regulatory actions taken in the wake of the Deepwater Horizon spill,” said the report.
Rig rates in India, however, should stabilise. “With global oil prices now in a more stable band of $70-80, and an upward revision in the price of domestic gas, rates in India should stabilize move upwards from these levels,” adds Khanna.
