Jindal Drilling upset as ONGC invokes $700,000

Vol 8, PW 7 (30 Jun 04) Exploration & Production
     

Jindal Drilling is upset at ONGCs decision to invoke a $700,000 performance bank guarantee for the Perro Negro 3 rig on hire from Saipem of Italy.

On 13th June ONGC wrote to the State Bank of Mysore in Delhi invoking the guarantee with the following justification: The contractor (Jindal) has not completed its contractual obligations. An industry source reveals that Jindal is surprised at ONGCs move because on 5th November last year ONGC itself released the rig after it finished drilling offshore Mumbai.

More, ONGC allowed it to leave India. Behind ONGCs decision is a complex sequence of events dating back to 2001 when Perro Negro suffered an accident when moving location, just eight months after Jindal hired her to ONGC on behalf of Saipem.

After repairs in Dubai, Saipem diverted the rig to Iran to drill for sister company Agip instead of returning her to India. Furious, ONGC and Jindal moved the Bombay High Court where Saipem lost the case and agreed to bring the rig back to India.

Perro Negro 3 was out of India for a total 322 days and in court ONGC argued that the rig should work for an additional 275 days in India to compensate for the days it was in Iran. Saipem appealed to the Supreme Court but in October last year ONGC told the court the rig was on the last and final stage of drilling in the Mumbai Offshore and would no longer be needed.

Perro Negro 3 was finally released by ONGC on 5th November 2003 after she had spent an additional 300 days in Indian waters beyond the scheduled expiry of the contract between Jindal and ONGC. According to an industry source, this means the rig had fulfilled her contractual obligations in India and ONGC has no case for invoking the $700,000 Jindal bank guarantee.

More, Perro Negro 3 worked at the original contracted day rate of about $30,000 when the market was quoting double during the 300-day period in India. Its not clear how Jindal will respond to the ONGC move.

What is clear is that the Perro Negro 3 rig has a long history of creating problems between ONGC, Jindal and Saipem.