GSPC terminates Perro Negro 3 contract with Saipem

Vol 13, PW 6 (27 Aug 09) Exploration & Production

GSPC has terminated its contract with Saipem for jack-up Perro Negro 3, hired five years ago to drill at discovery block KG-OSN-2001/3, site of the â€کDeen Dayal’ gasfield.

“We don’t need Perro Negro 3 any more and have released the rig,â€‌ confirms a GSPC source. PETROWATCH learns GSPC sent Saipem a letter last week giving the Italian driller 60 days notice of its intention to terminate the contract.

Hired in July 2004, Perro Negro 3 was the first rig contracted by GSPC to drill at the KG block and reached location on August 31 the same year. She was hired for a minimum 500 days work or to drill four â€کfirm’ wells followed by six plus two â€کoptional’ wells.

“We retained the rig on the block for more than 1200 days,â€‌ adds GSPC. Confirming the termination notice, a Saipem source says GSPC has activated the â€کearly termination’ clause in the contract.

“This is the prerogative of the operator,â€‌ we hear, “and they have exercised it.â€‌ Perro Negro 3 has already drilled the four firm wells and is now drilling the â€کoptional’ wells, currently well KG#21, her eighth on the block.

“This will be her last well as the (termination) notice has taken effect,â€‌ we hear. GSPC’s decision to release Perro Negro 3 comes amid arbitration proceedings launched by Saipem in the first quarter of 2008.

One dispute is over the day rate. “GSPC hired Perro Negro 3 at $52,000 but when rates shot up Saipem wanted more but was turned down,â€‌ says a source.

“Saipem wanted rates in line with Deep Driller-1 and Atwood Beacon and when GSPC refused it started taking up issues over well depth, type of well and so on.â€‌ GSPC hired Atwood Beacon in 2006 at $112,000/day and Deep Driller-1 in 2008 for one year at $195,000/day.

In Mumbai a three-member arbitration panel is currently examining arguments from both sides. Contacted by this report, Saipem declined comment.

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