cis_banner_final_en.png
India a bright spot in the gloomy global energy industry: Jon Fredrick Muller

02/02/2016


India a bright spot in the gloomy global energy industry: Jon Fredrick Muller

SINGAPORE: India is a bright spot in the gloomy global energy industry with oil giant ONGCBSE -0.55 % taking a lead in upstream activities amidst the depressed oil price environment which has forced others to cut costs and review or shelve projects.


As a market, the Indian energy demand growth is driven by the strong economic performances and the increasing middle class spending while state-run Oil and Natural Gas Corporation (ONGC) has taken a lead in calling tenders for  chartering of offshore drilling rigs and support vessels of upstream projects, noted Jon Fredrick Muller, senior project manager at the Oslo-based Rystad Energy AS. 
"This makes India a bright spot for the industry," he told PTI at the Singapore Offshore Finance Forum, organized by MarineMoneyOffshore and ABN AMRO yesterday. 

Delegates at the one-day forum noted the significant increase in ONGC's latest budget while national oil companies in other countries have announced cuts in upstream spending and are reviewing field developments, albeit putting some on hold. 

ONGC has budgeted Rs 362,490 million for 2015-16, up from Rs 299,975 million in 2014-15. 

"ONGC has not cut down Exploration & Production spending like most other national oil companies have done so. They have kept their demand up, they have needs for their deep-water drilling equipment -- floaters and jack-ups for shallow water, as well as Offshore Support Vessels," said Geir Sjurseth, managing director, global head for offshore finance at DVB Bank SE. 

"They (ONGC) are issuing tenders which have attracted both national and international companies that would like to supply their equipment, as longer term employment opportunities in other markets are difficult," he said. 

The above means that ONGC are enjoying very attractive rates because rates have come down significantly because of the many international bidders of these tenders for rigs and services for exploration and production activities," said Sjurseth. 

He estimates rates for chartering and leasing rigs have dropped by 30-40 per cent over the past year and close to 50 per cent over the past 18 months. 

"ONGC have charter/hired offshore rigs and vessels at 30-40 per cent lower rates than previous contracts," said Manav Kumar, president and director of Singapore-based Dynamic Drilling Holdco Pte Ltd. 

With cost of services, rigs, oil field material, platforms and new constructions being very low, ONGC must utilize this opportunity to boost capital expenditure activities to raise production and reserve appreciation in the future, the delegates pointed out. 

Currently, ONGC is negotiating a number of contracts to charter or hire jack-up rigs for shallow waters and heavy-duty drilling rigs for deep water basins, industry sources said. 

Chartering rate for a jack-up to drill in 300-ft water depth, rated as shallow, has dropped to USD 81,000 per day these days from USD 120,000 per day some 18 months ago, they said. 

Likewise, the building cost of a new jack-up of same capacity for shallow water drilling has dropped to USD100 million from USD 150,000 in 2014, industry sources said. 

ONGC, the only one seen tendering for rigs in Asia, has a strong position to bargain for chartering rates and "lock-in assets on long-term contracts", said the delegates, pointing out that there were close to 100 jack-up rigs lying idle and some new ones being built without formal chartering contracts. 

Barely 22 per cent of the country's sedimentary basins have been explored, and a series of large deep-water blocks remain essentially untouched, they noted. 

The Indian government is emphasising the ONGC-led industry to cut import dependence by 10 per cent in next seven years to 68 per cent, the industry sources said. 

In accordance, India's upstream oil and gas companies have retained their focus on domestic exploration and development projects despite low oil prices, industry sources said. 

India's upstream operators are also focused on increasing production from existing fields by using Enhanced Oil Recovery schemes with huge investments, they said. 

"Overall, India represents a huge opportunity for upstream sector because of the large exploration activities and field redevelopment plans of the Indian companies," said one delegate. 

"ONGC's should to do more and more drilling, exploration and production to take advantage of current downturn and benefit when the price of crude will go up," one industry observer pointed out. 
ONGC is also seen staying "very active" in its overseas ventures. 

In Myanmar, ONGC and the Reliance Group are conducting environment impact assessment studies as part of completing formalities on offshore acreages signed last year. 
The two companies, with two blocks each, will be shooting seismic studies from later this year and opt to drill exploration wells in the Gulf of Martaban blocks from 2018 onwards. 

Cost wise, it would be prudence for the two companies to share a rig to drill a well each in the four blocks on a back-to-back drilling schedule as per their exploration commitment with the Myanmar upstream authority, said the industry observers. 

This will be the advantage of the ONGC-led Indian upstream sector, given the global upstream industry is not expected to recover till 2018 unless oil prices show a stronger recovery trend in 2017, they said. 
(indiatimes.com)

Leave your comment