ONGC to award five-year contracts for all its rigs

Vol 12, PW 13 (13 Nov 08) Exploration & Production

ONGC is planning to introduce uniform five-year contracts for rigs from drilling companies to ensure stability in its busy drilling program and more competitive hire rates for jack-ups.

PETROWATCH learns that ONGC’s current rules for five-year contracts for new build jack-ups and deepwater drillships but three-year contracts for jack-ups already in service will be scrapped. “We will offer five-year contracts for all rigs from now on,â€‌ confirms an ONGC source.

ONGC’s decision for uniform contract tenure was made keeping an eye on its NELP commitments. “We have a lot of wells to drill in our NELP work programmes,â€‌ adds our source.

“There’s definitely a requirement for more rigs.â€‌ ONGC says drilling companies should applaud the move “especially since it is a secure contract from a national oil company.

â€‌ But ONGC expects a discount as well, we hear. “We will get good, competitive rates.

â€‌ ONGC is putting the finishing touches on a tender to re-hire five jack-ups now drilling in the western offshore. “Three-year contracts for these jack-ups end before the monsoon starts (in June) next year and the fresh contracts to be signed will run from 2009 to 2014,â€‌ says ONGC.

“The tender will be out in a month or so and we expect these rigs to be offered again in addition to more competition.â€‌ Offshore drilling rigs are mobilised on location well before the monsoon sets in so ONGC wants to finish the paperwork in advance.

“We want to finalise this tender well before the present contracts end.â€‌ ONGC decision for longer contracts is a response to persistent demands from contractors during vendor and pre-bid meetings.

“We examined the issue in detail and feel we also stand to gain,â€‌ says ONGC. Another factor in pursuing longer contracts, ONGC says, is the availability of rigs.

“Earlier, rig availability was much better and rates were fluctuating so much that often we could re-hire rigs (at the end of the three-year term) lower than the original rate,â€‌ ONGC says. “The situation is the opposite now and calls for a change in our response.