ExxonMobil May Strike Deal for $1B Arctic Rig

Exxon Mobil Corp. is reportedly mulling over a deal with leading offshore rig contractor Transocean to construct a drilling rig capable of operating in extreme Arctic conditions for as much as $1 billion, according to Reuters.

Citing a person familiar with the matter, Reuters reported Friday that ExxonMobil may deploy the rig offshore Greenland, Iceland or Alaska at a dayrate close to record-level contracts in the $650,000 range, such as those signed for ultra-deepwater rigs by Seadrill and Transocean near the peak of the market in 2008.

In November, Transocean Chief Executive Bob Long stated that the company expected to unveil a new Arctic-class newbuild rig order, along with a contract, by the close of the year.

Chief Operating Officer Steven Newman, who will take the helm as Transocean's next chief executive in the first quarter of 2010, also commented during a recent conference call: "We have progressed [the rig's] design fairly far along [and] are in very developed discussions with a customer." Newman was hopeful that the contract would be finalized by the end of 2009, although Transocean had confirmed neither the contract nor the customer as 2009 drew to a close.

Only speculations pointing to ExxonMobil as the operator behind the contract have emerged out of major media outlets.

With plenty of oil majors still betting on deepwater drilling so long as higher oil prices justify the means, the largely untapped Arctic is becoming an attractive offshore drilling frontier with untold riches buried beneath its volatile surface.

Despite recently making a $30-billion acquisition of XTO Energy to tap its unconventional resources on land, ExxonMobil, the world's largest publicly traded international oil and gas company, is still comfortable opening its wallet to explore in high-risk offshore terrain. According to the oil heavyweight's website, the Company retains "a portfolio of significant Arctic opportunities, with ongoing studies spanning the range of exploration, project feasibility assessment and planning, and technology development."

Both companies declined to comment on the potential transaction when contacted by Reuters on Thursday.