Reliance rig offer to ONGC better than the competition

Vol 12, PW 24 (07 May 09) Exploration & Production

Early this week ONGC carried out a highly unusual bid price comparison exercise for a deepwater rig that can drill in 10,000-ft waters.

Unusual because this sort of price comparison is done first by ONGC’s tendering committee, then by its Executive Purchase Committee - and not by a full board of directors. But that’s exactly what happened when the board of directors last met on May 5.

PETROWATCH learns ONGC executive director drilling services MD Joshi was asked to fly to Delhi from Mumbai so that he could personally present the bids submitted on April 15 by Transocean for Deepwater Frontier, on hire to Reliance till August 2011, and Great Offshore for under-construction rig Pacific Bora, owned by Pacific Drilling. ONGC’s aim was clear: to see how the bids from Transocean and Great Offshore compared to a final offer from Reliance – received early last month but outside the tender procedure – for Transocean new-build Dhirubhai Deepwater KG1 from July this year.

See below: New deepwater rig offers for ONGC Company Rig Name Operating Day Rate Effective Day Rate Transocean Deepwater Frontier $535,200 $552,364 Great Offshore Pacific Bora $599,000 $634,325 Reliance Dhirubhai Deepwater KG1 $528,820 $565,497 Already hired by ONGC Sevan Marine Sevan Driller-II* $524,900 $580,977 Vantage Energy Platinum Explorer** $585,000 $642,285 *Mobilisation in December 2010 for three years **Mobilisation in December 2010 for five years If you go by the Effective Day Rate (EDR) Transocean is clearly the winner, even if Indian driller Great Offshore benefits from a 10% price preference to encourage local companies. But compare these prices with Reliance.

If you go by the Operating Day Rate (ODR), Reliance is the winner. Reliance’s EDR might be higher by $8000/day but according to one influential source, “this is most likely a clerical error.

â€‌ In normal circumstances ONGC should declare Reliance the winner, but these are not normal times. Directors discussed the prices threadbare, but frustratingly for Reliance, took no decision – again! Some believe ONGC won’t take a decision until a new government is in place by June 2.