Sevan relaxed about threat from Odfjell and Maersk

Vol 12, PW 19 (26 Feb 09) Exploration & Production

Despite uncertainty over its agreement with ONGC, drilling contractor Sevan Marine is relaxed.

Well-placed sources close to the Norwegian company offer three reasons why the Odfjell and Maersk rigs pose no threat. First is a claim that the Maersk rig can drill only in water depths of 9843-ft, which although only 157-ft short of 10,000-ft, still falls below ONGC’s minimum bid requirement for this category that all rigs in this category in 10,000-ft water depths.

Second concerns the Odfjell rig, which although technically suitable, was earlier rejected by ONGC when it bid along with Sevan for the original contract because Odfjell management wanted radical exceptions to the tender terms. “Odfjell and Maersk are uncomfortable with ONGC’s unique contracts terms and see them significantly increasing their risk exposure,â€‌ we hear.

“If they agree their liabilities would be huge but ONGC does not tolerate exceptions.â€‌ Third centres on the enviable day rate ONGC won from Sevan.

“Sevan Driller-II was hired at $525,000/day for three years including ROV (Remotely Operated Vehicle) charges, the cementing unit and other services,â€‌ we hear. “If Maersk and Odfjell bid they would not quote anything less than $580,000/day just for the rig plus extra for the services ONGC wants along with the contract.

â€‌ These services, we are told, would cost an extra $60,000/day. What will Maersk quote “That’s still up in the air,â€‌ Maersk tells us.

“There’s not much out there in terms of reference rates. The market is very shaken by the financial meltdown.

â€‌ Not so, retorts Sevan, which points to ONGC’s Letter of Intent to Vantage Energy in December 2008 as a benchmark. In the letter, ONGC offered to hire Platinum Explorer at $585,000/day for five years including the ROV, cementing unit and some services.

“Analysts in Norway say these services cost $85,000/day and hire charges for just the floater are $500,000/day,â€‌ we hear. “Availability of deepwater floaters has not improved since December so the rate will be definitely higher.