Sources: India's ONGC Aims For New Drilling Contracts In Cost-Saving Drive

MUMBAI, Feb 11 (Reuters) - India's Oil and Natural Gas Corp hopes to agree new cheaper drilling contracts for its western offshore fields, two sources involved in the matter said, in its biggest ever cost-saving drive in response to lower crude prices.

The state-owned explorer wants to end existing expensive contracts for drilling rigs signed in the 2014-15 fiscal year when crude prices averaged $85 a barrel and to sign new ones at a lower price.

That could help the company save 5-10 billion rupees ($74-$148 million) a year, analysts said.

Brent crude has fallen to just over $30 a barrel. This, along with a sharp drop in commodity prices, has led to a fall in the cost of equipment used for drilling for oil and gas.

ONGC's plan to slash costs, a final decision on which is still to be taken, would come about a year and half after crude prices first started to decline, and underscore the challenges Prime Minister Narendra Modi faces in trying to turn around large but slow-moving public sector giants.

The company is likely to post flat December quarter profit compared to the year-ago period on Thursday. Its shares fell by a third last year.

ONGC's plan comes against the backdrop of overseas explorers lowering spending and scaling back drilling, forcing rig contractors to idle or even scrap rigs, due to the prolonged slump in oil prices.