State-run Oil and Natural Gas Corporation (ONGC) has agreed to pay over Rs 3,914.39 crore for hiring an ultra deep-sea drill rig from Reliance Industries for four years, a top company official said.
ONGC needs a drillship to probe the KG basin UD-1 gas find of January 2007 and had been in talks with RIL for several months and its board finally gave its go-ahead on June 6 after Brazilian national oil firm Petrobras also envinced interest in taking the rig on assignment basis from RIL.
Independent directors on the board had been blocking the deal but were prevailed upon at the June 6 meeting after it became clear that alternate rigs were available for at least 10 per cent higher price than RIL rates, the official said.
When contacted, ONGC Chairman and Managing Director R S Sharma confirmed the board approval for hiring the rig Dhirubhai Deepwater KG-1 (earlier christened Deepwater Pacific-1) on an assignment basis for four years beginning end-July 2009 but refused to give details.
Petrobras had offered $5,50,000 to 5,60,000 per day for the rig against the day-rate of $4,95,000 that ONGC will be paying for first 180 days. ONGC will pay $510,000 a day from 181 days onwards.
Besides Petrobras, Eni of Italy and Cnooc of China too were interested in the rig that is capable of drilling in water depths of up to 10,000 feet but RIL chose the Indian flagship firm.
The official said ONGC had invited international offers to discover competitive rates but the earliest rig available was in December 2010 and was costlier than RIL offer.
Transocean Inc of US offered Deepwater Frontier at an operating day rate of $535,200 while Great Offshore offered Pacific Bora for $599,000 per day.
RIL rates are lower than the rigs ONGC has already hired - Sevan Driller-II from Sevan Marine for $524,900 per day for three years from December 2010 and Platinum Explorer from Vantage Energy for five years from December 2010 for $585,000 per day.
The official said the company will pay $764.53 million or Rs 3,914.39 crore for DDKG-1 for four years beginning end-July 2009.
The ONGC board agreed that DDKG-1 was the cheapest ultra deepsea drillship available at the earliest but on objection of one independent director had previously deferred the hiring of the rig.
The rig, which is under construction at a Samsung yard in South Korea, was originally hired by RIL from Deepwater Pacific Inc but has now decided to farm it out to ONGC.
The official said at one stage, the Board asked ONGC management to renegotiate the assignment period but RIL was unwilling to lower the hire period from four years to two years.
CNOOC of China along with another state exploration firm had approached RIL offering between $560,000 and 570,000 per day for the same rig.
ONGC, which currently operates 37 deep water and ultra deep water acreages, wants to hire three ultra deep water rigs each capable of drilling up to water depth of 10,000 ft, 12,000 ft and 7,500 ft. As the search for rigs were on, RIL came up with an offer share its rigs.
On prodding from the Government and the oil regulator DGH for participating in the ‘rig sharing’ programme where operators share resources for optimal utilisation, Reliance had agreed to give the DD-KG-1 rig to ONGC.
