Oil Service Firms Jostle For India Orders Amid Global Spending Cuts
SINGAPORE/NEW DELHI July 9 (Reuters) - Oilfield services firms are scrambling for contracts from India, which has emerged as a rare bright spot for the sector hardest hit by a slump in global crude oil prices that has driven most countries to slash spending on exploration and production.
This fiscal year, state-run Oil and Natural Gas Corp (ONGC) plans to boost its capital spending by more than a fifth to 362.49 billion rupees ($5.7 billion), in stark contrast to analysts' forecasts for energy firms globally to cut spending by a fifth in 2015.
These prospects have attracted scores of bidders for Indian contracts as an increase in supply from U.S. shale oil producers and slower demand growth have halved crude prices since June 2014.
India's government has made boosting domestic energy a priority to end chronic current account deficits.
Winners of ONGC's recent oil services tenders include Transocean Ltd, one of the world's top offshore drilling companies, Southeast Asia's largest oilfield service firm SapuraKencana Petroleum, Indian conglomerate Larsen & Toubro and mid-sized Singapore-based offshore construction services company Swiber Holdings.
"We are getting better participation in our tenders both from Indian and overseas players due to current market conditions where exploration activity is low because of lower oil prices," said an ONGC official.
"We are getting offers for better vessels and rigs at lower rates," the official added, declining to be identified as he is not authorised to speak to the media.
The Indian contracts are especially attractive given the dearth of business from the majority of European and North American energy firms.
With prospects for a rebound in oil prices and overall spending by the industry slim for the next few years at least, competition for Indian business is fierce, hurting service firms' margins, but alternatives are few and far between.
Swire Pacific Offshore, part of Hong Kong-based conglomerate Swire Pacific Ltd, says the low rates in India are a challenge, but it is still bidding for projects there.
"Even though there might be relatively more activity in the Indian market, I think you'll find that that's no boom town," said Duncan Telfer, commercial director of Swire Pacific Offshore.
Discounts and Demand
State-owned ONGC's spending spree is part of efforts by Prime Minister Narendra Modi's government to reduce India's reliance on imports, which account for nearly 80 percent of its energy requirements.
Crude oil prices are critical to India's current account deficit, which just two years ago widened to a record high 4.8 percent of GDP as oil prices soared, triggering the worst currency crisis since 1991.
The low global crude prices have helped narrow the current account deficit to just 0.2 percent of GDP in the previous January-March quarter, but the government has said its reliance on imports is unsustainable in the long-term.
View Full Article
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
Operates 37 Offshore Rigs
Manages 8 Offshore Rigs
- Venezuela's PDVSA To Tap Oil Customers To Pay $449MM To ONGC (Nov 15)
- Sources: India ONGC Strikes 'Good' Offshore Oil, Gas Find (Sep 20)
- India To Acquire Seismic Data Of 48,000 Line kms To Boost Oil, Gas Output (Sep 12)
Company: Transocean Ltd. more info
Manages 46 Offshore Rigs
- Oil's Biggest Rigs Headed to Junkyard as Daily Losses Mount (Oct 18)
- Transocean To Buy Norwegian Rig Firm Songa Offshore For $1.1B (Aug 15)
- Borr Drilling Signs Deal With Transocean to Buy 15 Rigs (Mar 20)
Company: Swiber Holdings Limited more info
- Singapore Banks' Sour Loans In Focus As Oil Service Sector Stresses (Feb 10)
- Singapore's Marco Polo Marine Flags Doubt On Continuing As A Going Concern (Sep 22)
- Singapore's Marco Polo Marine Seeks To Delay Bond Payment (Sep 14)
Company: SapuraKencana Petroleum Bhd more info
- SapuraKencana: Short-Term Industry Outlook Uncertain (Dec 08)
- Malaysia's SapuraKencana Posts 7.1% Gain in 2Q FY17 PAT to $27M (Sep 29)
- SKTLO Bags $65.3M Contracts for Work Offshore Malaysia, Vietnam (Sep 01)