ONGC to keep DD-KG1 despite CAG criticism

Vol 16, PW 8 (01 Nov 12) Exploration & Production

ONGC seems determined to ignore all the official criticism and extend a controversial four-year sub-let contract with Reliance for Transocean deepwater drillship Dhirubhai Deepwater KG-1 (DD-KG1).

In March India’s feared Comptroller and Auditor General (CAG) accused ONGC of favouring Reliance through the deal. Unfazed, ONGC is likely to begin talking to Reliance again to extend the contract beyond July 29, 2013.

“ONGC must drill six deepwater wells at its NELP-VI and VII blocks in 2013-2014,” says a source. “But it is unlikely to finalise drilling locations by July 2013 and will need to keep DD-KG1 longer.

” Reliance sub-let DD-KG1 to ONGC in May 2009 at an Operating Day Rate of $510,000 for four years. CAG alleges ONGC hired the rig only to help Reliance get out of a tricky situation with no wells to drill.

One wonders what CAG would make of ONGC’s decision taken two months ago to spend around $100m to upgrade DD-KG1 to drill in water depths of 12,000 feet instead of 10,000 feet ONGC says it would otherwise have been forced to pay more than $200m penalty to the DGH for unfinished work programmes. Besides, ONGC received no bids when it floated a tender for a 12,000-foot rig two months ago.

“ONGC might extend DD-KG1’s contract by six months,” speculates a driller, “and later extend it by another six months.” DD-KG1 is drilling appraisal well U-3 at KG basin block KG-DWN-98/2, near the UD-1 gas discovery, where ONGC plans to drill to 3750 metres TD in water depths of 1200 metres.