Reliance cuts price and extends rig offer to ONGC

Vol 12, PW 23 (23 Apr 09) Exploration & Production

Reliance has agreed to extend the validity of an offer to subcontract Transocean’s new build ultra deepwater rig Dhirubhai Deepwater KG1 to ONGC until the end of April - and lower the price.

PETROWATCH learns Reliance has cut the Operating Day Rate (ODR) to ONGC for Dhirubhai Deepwater KG1 to around $528,000 from $564,603. This earlier figure of $564,603 included â€کhandling’ charges of $12,000/day and $50,000/day hire charges for tools and equipment.

During initial negotiations, ONGC protested unsuccessfully about “highâ€‌ handling charges. To its credit, Reliance has now completely waived the $12,000/day handling charges and told ONGC it can hire services, tools and equipment on its own, thereby cutting out the $50,000/day built into earlier quote.

Minus these charges, it now looks as if Dhirubhai Deepwater KG1 is more competitive than both Sevan Driller-II and Platinum Explorer, both hired by ONGC last year. Reliance originally set ONGC a deadline of March 23, but extended the period following a request by ONGC, whose board on April 2 postponed a decision following disagreement among directors.

We hear ONGC actually wanted the price validity extended to May 31, but Reliance refused. “We can’t wait till May 31,â€‌ says a Reliance source.

“Other companies who want this rig from us are not willing to wait that long.â€‌ China National Oil Company and Italy’s Eni are both believed to be strongly interested in Dhirubhai Deepwater KG1, which will be delivered to Reliance in July to begin a five-year contract.

It is not yet clear where CNOOC would deploy the rig, but Eni is learnt to have lined up locations in the Mediterranean Sea and offshore West Africa. Some analysts don’t think Reliance’s attractive new offer will make a difference.

“This deal is unlikely to move forward until national elections are over in May,â€‌ we are told. “During elections ONGC would hesitate doing such a major deal without tender.