GSPC unlikely to get Deep Driller-1 for KG block

Vol 10, PW 23 (22 Mar 07) Exploration & Production

Deep Driller-1 is unlikely to begin drilling for GSPC at KG-OSN-2001/3, as originally reported in our last issue.

GSPC wanted to share Deep Driller-1 with Reliance, which held the contract. But Reliance’s surprise decision to terminate the contract with Aban Loyd subsidiary Deep Drilling 1 Pte Ltd (DD1) has upset GSPC’s plans.

Reliance and GSPC were talking about standby and service charges for Deep Driller-1 until as recently as last week, but nothing was finalised. Says a GSPC source: “Reliance wanted us to pay entirely or share charges for the services they had mobilised from November 2006.

â€‌ GSPC agreed to pay the same day rate of $197,000/day. Still, expecting imminent agreement over service charges, GSPC obtained mandatory home ministry clearance for the rig and its personnel in advance.

But unknown to GSPC, Reliance had already decided to break its contract for Deep Driller-1 and in mid-February issued a termination notice. On 13th March, Aban Loyd notified the Bombay Stock Exchange about the Reliance termination notice, provoking a 2.9% drop in its share price.

GSPC heard about the termination notice the next day from newspaper reports. “Reliance did not tell us it wanted to terminate the contract,â€‌ adds GSPC.

“As far as we are concerned talks are still on.â€‌ Why did Reliance terminate Deep Driller-1’s contract “We don’t need it anymore,â€‌ says a source.

“We now have a rig that exceeds our requirements.â€‌ Deep Driller-1 can drill in 100 metres water depth, but Reliance’s new rig, C.

Kirk Rhein, can drill in 850 metres water depth. Reliance originally wanted Deep Driller-1 to drill from November at three or four shallow water locations at NEC-OSN-97/2 in the Bay of Bengal.

“Now we don’t have enough suitable locations to suit the depth rating of Deep Driller-1,â€‌ we learn. “It makes no sense to have the rig for just one or two wells.

â€‌ Reliance’s decision to terminate the contract was, we learn, “cooking for the last two months,â€‌ but the final decision was taken only in mid-February.