Blame credit crunch for Sevan Driller-II India delay

Vol 12, PW 15 (18 Dec 08) Exploration & Production

ONGC will have to rework its deepwater drilling programme for charter hired drillship Sevan Driller-II now being built in China and which it was hoping to receive straight from the shipyard in December 2010.

Blame this on the inevitable late delivery of the drillship caused by the global economic slump and tighter credit for capital-intensive projects. Sevan Driller-II is under construction at the Cosco shipyard in China; ONGC issued a Letter of Intent in June to owner Sevan Marine for this circular-hull drillship for mobilisation by December 2010 to drill in water depths of 10,000-feet.

This deadline will be missed, says a source. “Sevan Driller-II is now expected to be delivered to ONGC in the first quarter of 2011 (January to March).

â€‌ Even though a LoI has been issued, ONGC has not signed a contract. “Nothing should be read into this,â€‌ says a source.

“This is normal practice when dealing with ONGC.â€‌ But this lack of a formal contract seems to have come to Sevan Marine’s rescue: this month (December) we hear Sevan Marine wrote to ONGC asking for a new clause in the proposed contract to ensure that the assignment will not be scrapped even if delivery of Sevan Driller-II is delayed till end-2011.

So far ONGC has not responded. An industry source adds that Sevan’s move is in response to banks “putting up conditions before actually handing out money for the project.

â€‌ We are told, “banks (lending to Sevan) want to be sure that ONGC will accept the drillship even if there’s a delay.â€‌ He adds: “In these difficult times, Sevan has no choice but to listen carefully and address the banks’ concern.

â€‌ Another source insists that Sevan was lucky to have tied up funds for Sevan Driller-II before the financial crisis. “Sevan has term sheets with its lenders,â€‌ he says.

“They are a mix of Norwegian and French banks and they want to be doubly sure of everything now.â€‌