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ONGC to Hire a Dozen Jack-Up Rigs Amidst Tight Supply and Soaring Rates

India’s offshore oil drilling rig market is set for a huge turnaround after many years of depressed rates as a tightening global rig market helps fleet owners quote day rates that are some 40-45 percent higher than the current contract prices on a tender issued by Oil and Natural Gas Corporation Ltd (ONGC) to hire a dozen jack up rigs for three years.

 

The 12 jack-up oil drilling rig tender – the largest floated by India’s biggest oil explorer in recent years – fetched offers for ten rigs, an indication of the shrinking supply of rigs in the market as crude prices remain at a level that makes it profitable to drill. Globally, crude oil is trading at about $88 a barrel.

 

The State-run oil firm’s 12 rig tender was split into three categories based on rig design and usage for drilling new wells and work on existing fields. In the first category for six rigs, Greatship (India) Ltd, the offshore unit of the Great Eastern Shipping Co Ltd, was the lowest bidder, quoting a day rate of about $79,000.

 

Dubai-based Shelf Drilling Ltd emerged the lowest bidder in the second category for four rigs with an offer of $66,000 a day while ADES International Holding plc was the lowest in the third category for two rigs at $72,000 a day, multiple sources briefed on the tender results, said.

 

ADES International Holding, 32.5 percent owned by the Public Investment Fund – the sovereign wealth fund of Saudi Arabia – is the world’s largest jack-up rig operator with 48 rigs.

 

Shelf Drilling offered three rigs on the tender, while ADES International Holding and Foresight Offshore Drilling Ltd S.A submitted offer for two rigs each. Greatship (India), Jindal Drilling & Industries Ltd and Aban Offshore Ltd offered one rig each.

 

Some of ONGC’s last rig hiring contracts were priced at about $45,000 a day, which was higher than the day rate of mid $20,000 finalized almost two years ago.

 

Shipping industry sources said that the “rock bottom” rig chartering rates that prevailed globally in the last 2-3 years led rig owners in the Middle East to buy many old rigs available in the market for employment in that region.

 

“They mopped up all the rigs that were available in the market; so, supply has vanished. Besides, no newly constructed rigs have entered the market in the last 3-4 years. As a result, supply has really shrunk,” an industry source said.

 

The offshore rig market has turned around in the Middle East in early 2022 with day rates soaring from about $40,000-$50,000 to $105,000-$110,000 for three-year contracts. “In India, the offshore rig market is going to turn around very soon,” the industry source said.

 

“ONGC floated a tender to charter 12 jack-up rigs but got offers for only 10 rigs. Because there are no rigs available in the market. That sums up the current market scenario on jack-up rigs”, the industry source added.

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