Why India’s oil and gas exploration architecture confronts a shortage of offshore rigs

As India looks to ramp up oil and gas production in the aftermath of the supply shock because of the war in West Asia, it confronts a major hurdle, the availability of rigs.

In this backdrop, the recent decision of the Oil and Natural Gas Corporation (ONGC), the largest player in the country, to cancel tenders for hiring 15 jack-up rigs has soured the mood for rig operators.

According to reports, ONGC has cancelled four tenders, after receiving the pricing bids and one before submission. The latest cancellation came last month and is making companies that lease rigs consider withdrawing from the Indian market.   

ONGC had issued a $20 billion tender in February for hiring rigs for five years as part of the government’s Samudra Manthan Mission. The tender set an 80-day mobilisation timeline, an indication of the urgency to scale exploration.

The cancellation of this tender comes as a blow because rig shelf operators have previously complained that Indian PSUs either hire rigs for short-term contracts of up to two years, leading to shortages when demand increases, or change their policy all of a sudden.

This complicates matters for India since exploration activity has jumped globally since the war between Russia and Ukraine as countries look to shield themselves from volatility in supplies. The war in West Asia has only heightened this demand.

Indian explorers are compelled to source rigs, especially jack-up rigs, because the ones with ONGC and Oil India are ageing.

ADES-Shelf Drilling, the Saudi Arabia-headquartered player, is the world’s largest jack-up rig operator and has several rigs operating in India. The company is now looking to pull out of India due to repeated cancellations of tenders.        

The West Asia conflict has brought to the fore the need to follow an ecosystem approach to ensure energy security. The current worries relate to not just delayed crude oil and gas supplies but also the availability of strategic reserves, infrastructure, Indian tankers, and marine insurance.