By OGJ editors
HOUSTON, May 6 -- Reliance Industries Ltd., India's largest private sector conglomerate, signed a 5-year drilling contract with Transocean Inc. for a newbuild enhanced Enterprise-class design drillship.
A Transocean subsidiary executed a shipyard contract with Daewoo Shipbuilding and Marine Engineering Co. Ltd. for construction of the dynamically positioned, double-hull drillship in Okpo, South Korea, where four of Transocean's previously announced enhanced Enterprise-class drillships are being built. Total capital costs for the drillship are estimated at $730 million, excluding capitalized interest.
The 5-year drilling contract is expected to commence during fourth quarter 2010, following shipyard construction, sea trials, mobilization, and customer acceptance. The term of the contract may be extended to 7-10 years at the client's election up to 1 week after mobilization. The 5-year contract provides for day rates of $537,000 for the first 6 months, escalating to $557,000/day for the next 4½ years. The 7 and 10 year contract terms would be $1.35 billion and $1.85 billion, respectively if Reliance Industries elects to keep the operating day rate fixed for the full 10 years and does not terminate the contract early.
If Reliance Industries extends the contract to 10 years, then it may have the operating day rate for the second 5 years fluctuate based on crude prices. The operating day rate for the second 5 years would not be adjusted if crude is priced at $75/bbl but would be raised on a straightline basis if crude is then priced between $75-100/bbl, with a maximum 10% increase if crude is at or above $100/bbl. It would be lowered on a straightline basis if crude is selling at $50-75/bbl, with a maximum 10% reduction if crude is priced below $50/bbl at that time.
Reliance Industries retains the right to terminate the contract for convenience. But the termination mechanism is designed to keep Transocean economically whole for the remaining term of the contract.
The proposed rig will feature Transocean's patented dual-activity drilling technology, allowing for parallel drilling operations designed to save time and money in deepwater well construction. It will have a variable deckload of 20,000 metric tons, and the capability of drilling in 10,000 ft of water depth, up to a water depth of 12,000 ft, and a total drilling depth of 40,000 ft with additional equipment.