Rig Shortage Hinders Indian Oil Exploration

India has put off an auction of oil exploration rights by five months as a rig shortage delays drilling in existing fields and slows a quest to cut dependence on imports.

The nation's seventh annual offer for oil and gas fields has been delayed until August from March, the Indian director general of hydrocarbons, V. K. Sibal, said Monday. Explorers led by Oil & Natural Gas have drilled less than a tenth of the 880 wells agreed to under exploration licenses awarded since 2000, government data show.

Oil companies including Reliance Industries and Italy's Eni cannot keep pace as India offers a record number of areas for prospecting. The government has asked operators to share equipment to hasten discoveries that would reduce reliance on oil imports. India's oil purchases last year made up about 29 percent of imports, contributing to a record $57 billion trade deficit in the year that ended in March.

"India would be among the countries having the biggest number of outstanding drilling commitments," Tor Gunnar Gloppen, the chief operating officer of Rig Management Norway, said by telephone from Oslo on May 23.

India is helping explorers tackle the rig shortage by extending drilling deadlines in license agreements.

"We are in talks with the petroleum ministry on extending exploration agreements from the third and fourth rounds of auctions," Sibal said in an interview. "We don't plan to suspend any contracts."

Reliance and Oil & Natural Gas, India's biggest companies, and Eni, Italy's biggest oil company, have agreed to share drilling equipment and will advertise to jointly hire rigs and seismic equipment for projects on India's east coast, Sibal said.

Canoro Resources of Canada, Premier Oil and Oil India are cooperating in the northeast region while a group, including Oil & Natural Gas and Reliance, is being formed for projects on the west coast, Sibal said. Indian operators and the regulator funded a $100,000 study by Rig Management on sharing exploration services.

"We are trying to arrange rigs which will move from one operator to another and this may be cheaper," D.K. Pandey, the exploration director for Oil & Natural Gas, said in an interview in mid-May. "We have to sort out scheduling for individual operators."

Sharing resources will enable companies to reduce costs. The cost rig rental contracts extending to 2012 has tripled since 2005.

Transocean, the world's largest offshore oil and gas driller, said at the beginning of May that surging demand for rigs had enabled the company to build an order book worth $21.4 billion at the end of March for projects extending as far out as 2015.

"The market is very bullish, both on the onshore and the offshore sectors," V. K. Agarwal, who heads India's Essar group's rig business, said. "People are not getting rigs." The company, which owns 14 rigs, leased a deepwater rig to Gujarat State Petroleum last month for about $340,000 a day.

Reliance is paying $320,000 a day until August 2008 to rent the Deepwater Frontier rig, more than twice the rate Transocean charged an earlier client, according to Transocean's Web site. The tariff will rise to $477,000 a day, when Reliance extends the contract in 2008 for another three years.

Explorers in Norway, the North Sea, West Africa and the Gulf of Mexico have accelerated drilling plans and reduced costs at deep-sea ventures by sharing rigs, said Rig Management's Gloppen.

"India is very fast in offering acreages," said Ian Blakeley, a manager responsible for India at IHS, an oil services provider. "The operators are slower in exploration."

Gujarat State Petroleum, which said in 2005 that it made India's biggest gas discovery, with estimated reserves of 20 trillion cubic feet, has not met half of its drilling commitments after two extensions, the company's partner in the field, Geoglobal, said in its annual report.

The shortage of offshore services may delay production to "later 2008" at Reliance Industries' gas development in the Krishna-Godavari basin, Tristone Capital, an energy investment bank, said March 8 in a report about the Canadian explorer Niko Resources, Reliance's partner in the field.

(C) 2007 International Herald Tribune. via ProQuest Information and Learning Company; All Rights Reserved

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