ONGC Still on the Prowl for Deepwater Rigs

NEW DELHI Dec 19, 2007 (Dow Jones Newswires)

Indian state-run explorer Oil and Natural Gas Corp (500312.BY) is inviting offers from global contract drillers for hiring deepwater rigs, as negotiations with Norway's Ocean Rig (OCR.OS) failed over dayrates, a senior ONGC executive said.

"The talks with Ocean Rig have gone sour over the dayrates... way above $600,000 (per day)," said the executive who did not wish to be named.

High global crude oil prices are encouraging oil companies worldwide to increase exploration efforts, leading to a shortage of drilling rigs - especially those capable of drilling in deepwater - and an increase in their dayrates.

ONGC was in talks with Ocean Rig to hire one or both of its deepwater rigs for five years, according to media reports.

"Now we are looking at other drillers, we have already floated a tender...may be Transocean or Seadrill may have some rigs free next year or newbuilds," the executive told Dow Jones Newswires earlier this week.

"We need the rigs urgently...We expect to get at least one by 2009 end."

Ocean Rig, however, declined to confirm that it has held talks with ONGC.

"I can't comment, for policy reasons, on whether we have been or still are in talks with ONGC," Ocean Rig Chief Financial Officer Jan Rune Steinsland said in response to queries from Dow Jones Newswires.

"We have two rigs, one available from August 2008 which is currently on contract to Exxon, and another which is free from September 2009."

Possible Drilling Moratorium

For ONGC, it might help that the Indian government may provide exploration companies a "drilling holiday" due to shortage of rigs.

In its latest and seventh round of auction of oil and gas blocks launched last week, India offered fewer-than-expected blocks due to a global shortage of drilling rigs.

The government is now considering providing a moratorium to oil companies for blocks awarded in the first three rounds of auctions, Petroleum Secretary M.S. Srinivasan said at the launch.

"We can't drill without a rig... let's see if the government gives us the moratorium," the ONGC executive said.

This could give the company more time to complete its drilling commitments under the minimum work program.

India, which imports almost three-quarters of the crude oil it requires, opened 57 oil and gas blocks for bidding including 19 in deepwater, nine in shallow water and 29 onshore.

The country is trying to boost domestic production of oil and gas to reduce dependence on costly imports.

(Elizabeth Cowley in Oslo contributed to this report)

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