Singh’s inaction forces rig tender cancellation
Expect ONGC to reissue a tender for three jack-ups after dragging out negotiations with Jagson International until the deal fell through.
"ONGC held 16 rounds of negotiations with Jagson," says an industry source. He adds that ONGC subsequently cancelled the tender to hire three jack-ups to drill HP/HT wells off India's west coast for three years.
"ONGC chairman (Arun Singh’s) office did not approve the final rate for the contract," he adds. "Singh is a marketing person; he thought delaying approval after negotiations would compel the drilling contractor (Jagson) to lower the rates further; but Jagson refused."
When ONGC opened price bids on January 11 (2024), Jagson quoted an Operating Day Rate (ODR) of $96,331 and an Effective Day Rate (EDR) of $94,999 for the 1975-built Deepsea Treasure. After negotiations, Jagson agreed to lower the EDR from $94,999 to $79,306.
"That is a more than 15% discount," adds the source. "What more does ONGC expect? ONGC believes it can hire rigs at the same rates as those going off-contract; but how is that possible? Market rates have increased."
He stresses that ONGC seeks rigs complying with the updated MODU 1989 guidelines in its latest tenders. Upgrading a rig from MODU 1979 to MODU 1989 standards costs $5-10m.
"When drillers are spending such huge amounts of money on upgrading rigs, they will certainly seek better rates," we hear. Jagson refused to extend its bid validity, which ended on April 30 (2024), leaving ONGC no other option but to cancel the tender, which it will likely soon reissue.
"If ONGC carries on with this attitude, it will find it hard to hire rigs," we hear. Greatship was the second-ranked bidder, quoting an ODR of $122,826 and an EDR of $118,908 for Greatdrill Chetna; Aban Offshore subsidiary Deep Drilling quoted an ODR of $123,300 and an EDR of $124,912 for 1982-built Enterprise 351, presently in the Gulf of Mexico; in last place was Shelf Drilling with the 375-ft jack-up Baltic at an ODR of $150,000 and an EDR of $150,577.
ONGC is similarly dragging out negotiations in a separate tender to hire three Baker Marine Class (BMC) or Marathon Le Tourneau (MLT) jack-ups in Category-I and one Friede & Goldman rig in Category-II. "Even in this tender, there have been six rounds of negotiations," we learn.