The Telegraph
Since 1st March, 1999
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Rise in oil hunt cost pinches ONGC

New Delhi, Oct. 14: The high cost of hiring drilling rigs coupled with their limited availability is giving Oil and Natural Gas Corporation (ONGC) a tough time.

According to senior ONGC officials, the cost of hiring drilling rigs has shot up from $70,000 a day to $210,000 for offshore operations, making oil exploration a far more costlier affair. There is also an acute shortage of rigs due to the rise in oil and gas exploration activity worldwide due to soaring international prices of these commodities.

A senior ONGC official said the company is also toying with the idea of buying a new deep sea rig which could cost Rs 1,200 crore to 1,500 crore. At present, ONGC has only one deep sea oil rig, Sagar Vijay, which can drill up to 1,800 metres.

ONGC has hired Discoverer Seven Seas, a deep sea drillship for exploration beyond 1,800 metres.

According to the new contract, which came into effect in April this year, the drillship from TransOcean comes at a higher price of $357,000 per day against the earlier contract of $125,000 per day. Owners of these high-tech deep sea rigs have jacked up the rates taking advantage of their limited availability.

Apart from this, another $300,000 per day has to be shelled out for support services and offshore supply vessels which form part of the logistics for the drilling operations.

It is this sharp escalation in exploration costs that has forced ONGC to go for the consortium approach in the current round of bidding for Nelp 6 blocks. ONGC has roped in downstream Indian companies BPCL, HPCL and gas major GAIL in its bids for the Nelp 6 exploration round in an effort to cut costs and spread risks.

British Gas has also been included as a partner for most of the blocks as it has experience in deep-sea exploration.

ONGC’s failure to make a major oil or gas strike over the last three years of deep sea exploration has prompted it to seek foreign technology.

Apart from BG, it is also consulting specialised companies like Schlumberger for interpreting seismic data on the exploration blocks.

The petroleum ministry had expressed its disappointment with ONGC's Sagar Samridhi deep sea exploration campaign between 2003-06, which has come a cropper. The oil major has been asked to seek foreign expertise in areas where it does not have the requisite knowledge.

However, to be fair to ONGC, the huge gas discoveries made by Reliance and later by Gujarat State Petroleum Corporation in the Krishna Godavari basin is largely due to the groundwork done by ONGC in collecting geological data and mapping the blocks.

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