Eni drillship EoI notice angers ONGC and GAIL

Vol 13, PW 14 (17 Dec 09) Exploration & Production

Italian explorer and operator Eni has angered its Andaman block partners ONGC and GAIL by approaching the market for an ultra deepwater drilling rig.

Earlier this year Eni (40%) agreed with ONGC (45%) and GAIL (15%) to hire Eni-subsidiary Saipem deepwater drillship Saipem 10000 to drill one firm and two optional wells at their 13,110 sq-km deepwater block AN-DWN-2003/2. But on December 14, Eni published a notice in The Times of India inviting EoIs from drilling contractors for a new rig to begin drilling at the NELP-V block in May 2010.

“We don't know what made Eni publish the notice,â€‌ says an irritated source. “It never consulted us about this.

â€‌ He adds it was Eni’s idea to hire Saipem 10000 over a fresh tender to save costs and that ONGC and GAIL had agreed. “We don’t know why they’re backtracking now!â€‌ we hear.

Consortium partners complain Eni sent a letter informing them of its decision on December 14 - the same date of the notice. “We are going to talk to them,â€‌ adds a source.

“The operating committee of the block has already approved the decision to hire Saipem 10000.â€‌ In 2006, Eni signed a three-year contract with subsidiary Saipem to hire Saipem 10000 for $390m or around $360,000/day.

Under the contract beginning end-2009, Eni could use Saipem 10000 to drill at any of its oil and gas blocks in the world. “That $360,000/day rate,â€‌ says an industry source, “is much cheaper than today's prevailing rates of around $500,000/day.

â€‌ In our November 5 issue, we reported that Saipem 10000 was unlikely to reach AN-DWN-2003/2 before August next year (2010). This could explain Saipem’s decision to issue a fresh rig tender, because the Phase-I exploration period expired two weeks ago on December 4 this year, forcing Eni to request the DGH for a six-month extension.

“The DGH is yet to reply,â€‌ we hear. “Even if it agrees Eni would need a further six month extension to fit with Saipem 10000’s schedule.