ONGC rejects Saipem request for flexible rig rates

Vol 12, PW 1 (29 May 08) Exploration & Production

Drilling contractor and Eni affiliate Saipem will have to try again when dealing with ONGC.

PETROWATCH learns ONGC has summarily rejected Saipem’s request for variable rig rates for â€کnew build’ jack-ups to be hired on five-year contracts. Saipem made the suggestion – normal industry practice but unusual to ONGC – on May 14 in Mumbai at a pre-bid meeting for two â€کnew build’ jack-ups for five years each from December 2009.

Saipem asked ONGC to accept a fixed day rate for the first year but a variable, market-driven rate after that, depending on “contemporary trends as reflected in widely accepted industry publications,â€‌ with a 5% margin for adjustment either way. ONGC officials were taken aback by this unusual proposal but Saipem’s competitors at the meeting were amused.

Why amused “Everybody was amused because ONGC has never and would never entertain such an idea,â€‌ we hear. “Saipem received no support.

â€‌ What was ONGC’s response ONGC bluntly told Saipem that since it was taking a big risk by offering a five-year contract at present market rates, contractors ought to reciprocate by accepting without conditions. On paper at least, ONGC has received a good response to this tender.

Fifteen companies bought the tender documents: Shiv Vani Oil & Gas, Jagson International, Steelfabs Offshore Drilling, Transocean, Saipem, Mercator Oil & Gas, Greatship India, Great Offshore, Vantage Drilling, Essar Oilfield Services, Rowan International, Jindal Drilling, Aban Offshore, Atlantic Oilfield Services and Jubilant Enpro. But sources tell us only five rigs will be left in the race: one from Mercator expected in March 2009; one from Greatship due in November 2009; one from Atlantic Oilfield expected by November or December 2009; and two from Scorpion Offshore, one in August 2009 and one in December 2009.

“Nobody else has â€کnew builds’ ready by December 2009,â€‌ we hear. “Or rigs that can drill to ONGC’s clear specification that the â€کspud can’ pressure should not be more than 39 tonnes/sq metre.

â€‌ Other than Saipem’s request for â€کvariable rates’ nobody else had any significant queries, says a participant. “The pre-bid started one hour late and finished 45 minutes earlier than scheduled,â€‌ we hear.

“So you can imagine the level of participation.â€‌