India's Oil and Natural Gas Corp. (ONGC) may relax the eligibility criteria for hiring drilling rigs, according to a local media.
India's state-owned Oil and Natural Gas Corp. Ltd. (ONGC) might relax the eligibility criteria for chartering offshore rigs despite the current supply glut in the drilling market caused by low utilization in the two-year long industry downturn, a local media said earlier this week.
Global rig demand has weakened since the second half of 2014 as oil and gas companies responded to lower crude oil prices by cutting back on capital expenditures, leading to an oversupply that weighed on day rates.
According to Rigzone's RigLogix database, worldwide rig utilization on July 7 stood at around 54.5 percent, compared to 55.9 percent last month and 70 percent a year ago.
The Economic Times reported Monday that ONGC may relax the qualifying criteria for rigs in future drilling contracts. Firms that owned rigs which have been lying idle continuously for three years or more and previously barred from participating in such tenders due to safety concerns may be allowed to participate in future bidding exercise.
Should the proposed change proceed, drilling companies that owned such rigs could join in ONGC's bidding process if "they could produce (a) certificate proving their fitness," the report added.
"ONGC has received several representations for considering changes to the Bid Evaluation Criteria Clause with respect to rig idling. A committee is presently examining it ... a decision shall be taken considering the interests of the company, upholding transparent procurement procedures," ONGC told The Economic Times.
The Indian oil company is likely to discuss the proposal next week.
According to The Economic Times, market players were surprised at the timing of ONGC's decision as there is an oversupply of drilling rigs and the firm does not need to relax the eligibility criteria, particularly when safety is concerned.
The Indian daily added that industry executives believed that the move could "favor some specific service providers whose rigs haven't drilled a single well in more than three years," adding that recent tenders of international oil majors require that rigs have not been laid idle for more than 6-12 months.
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