Deepwater drilling a costly business

Vol 4, PW 2 (01 Mar 00) Exploration & Production

Everyone knows ONGC is cash-rich, but even this company, flush with funds, will be finding the cost of drilling deepwater wells a prohibitively expensive business.

Indian drilling sources quote internationally accepted 'rule-of-thumb' figures, which put the cost of offshore drilling at: $500-600 per foot ($1,600-2,000 per metre). - (shallow) offshore wells $900-1200 per foot ($2,900-3,900 per metre) - "for semi-exploration wells" in deeper waters $1,500-1,800 per foot ($4,900-5,900 per metre) - for very deep wells in a complex geological situation.

By this benchmark the cost of ONGC's present well in the Kerala Konkan - where the geology is reportedly "complex" - will cost anything between $21-26m for the drilling alone. This does not include the cost of catering, choppers, contractor's fees, hiring vessels, materials, days lost etc - all of which are included in the widely reported figure of $28,000 per day, which ONGC pays Sedco Forex to spearhead its deepwater exploration programme.

It would thus be safe to assume that the total cost for the 120 days since the well was spudded in mid-November till the date it hits target depth sometime next month will be approximately $33.6m. Depressing, if you consider that until now, only limited success (G-1-9) has been reported from the four deepwater wells drilled so far: two in the Krishna Godavari, one in Cauvery and one in Kerala Konkan).

Is it any wonder Indian officials now baulk at the cost If Sagar Vijay is commissioned to drill a well in the Andamans, the cost will go up further, as an estimated extra $10-14m extra is required for the upgrade. Who will pay ONGC or the DGH On this contentious issue, the jury is still out.