India’s largest commercial shipbuilder, Cochin Shipyard Ltd, is in talks with Oil and Natural Gas Corporation (ONGC) for a $550 million contract. A proposed deal will see two offshore jack-up oil drilling rigs constructed to replace some old rigs ONGC is currently employing. The two parties will greatly help in the country’s offshore energy sector, adding strength to the drilling capacities of the nation.
Strengthening the Deal: Cochin Shipyard’s MoU with Seatrium Letourneau
Consolidation in the Deal Cochin Shipyard has strengthened the bid by way of signing up for a MoU with the USA-based outfit, Seatrium Letourneau USA, Inc. For the purpose, it is roping in crucial equipment and special skills for construction of the jacking rigs through such a partnership bringing to the fray, the crème de la crème from Letourneau design and know-how.
Seatrium Letourneau is a subsidiary of Seatrium Ltd, which is an energy solutions company established in Singapore in the year 2023 following Sembcorp Marine’s acquisition of Keppel Offshore & Marine. Seatrium has allied with Cochin Shipyard for strategic reasons, in an effort to respond to growing demand in the Indian market for Mobile Offshore Drilling Units.
ONGC’s Requirement for New Jack-Up Rigs
ONGC intends to upgrade its ageing offshore drilling fleet, with some rigs running more than four decades. Most of these ageing rigs will be phased out within the next couple of years, and the company will look for new ones that are efficient, reliable, and of the latest technology. This is a $550 million order in the comprehensive plan to develop offshore drilling in India while gradually phasing out the dependence on imported manufacturers.
The built rigs will be constructed in indigenous shipyards. Therefore, Indian shipbuilding institutions would learn and gain experience about the construction of complex offshore structures. This will also fit the ambitions of the Indian government’s “Make in India” program, urging domestic manufacturing and promoting local industries.
The Product Portfolio of Cochin Shipyard
It has a name for producing various product lines. Its products include cargo ships, passenger ships, dredgers, hybrid tugs, and even defence vessels that are aircraft carriers and Anti-Submarine Warfare Corvettes. Offshore jack-up rigs are going to further add to this shipyard’s capabilities in its specialized shipbuilding. This will also give it the benefit of standing in a line in this growth-oriented off-shore energy sector.
Cochin Shipyard relied on its experience of ship building and engineering skill with the technical capabilities of Seatrium in offshore drilling rigs. It would be a fantastic opportunity to capitalise through leaders in Indian Offshore Energy sector and shipbuilding, which would meet the country’s growing energy needs.
Domestic Shipbuilders Financial Incentives
The most prominent reason for such cooperation is the shipbuilding financial assistance scheme initiated by the government for the development of local shipyards. The objective of this scheme has been to compensate for the cost disadvantage faced by Indian shipbuilders, which lies between 20% and 35% against foreign shipbuilders.
In the program, state support on orders placed until March 2025 for Indian shipyards will be available up to a ceiling of 14%. Thence it is reduced to 11% in the terminal year of the program. There are no ceilings applicable for vessels requiring specialized facilities such as MODUs or jack-up rigs; this would seem to make for an interesting pitch for Cochin Shipyard, among others, of course.
India’s Offshore Energy Future
In the general context of furthering the development of India’s offshore energy sector, the Cochin Shipyard-Seatrium Letourneau USA alliance in and of itself will play a significant role in the country’s effort to achieve energy security in the aftermath of the effort that has been supported by the Government of India in developing an offshore oil and gas field.
Further, the new shipbuilding policy that the Ministry of Ports, Shipping, and Waterways is framing will help push the sector even further. It will offer subsidies up to 30% for building green vessels and ships with futuristic technology and long-term visibility to the shipyards. As the scheme is functional till March 2034 and possibly till 2047, it is going to be a boon for the shipbuilders in terms of acquiring high-value orders and investments in high-end technologies.
Conclusion
The two offshore jack-up oil drilling rigs order valued at $550 million is a big deal for Cochin Shipyard and ONGC. With new designs by Seatrium Letourneau USA and India’s financial aid program to boost Indian shipbuilding, Cochin Shipyard has excellent prospects in addition to contributing to the India’s offshore energy sector as part of a broader portfolio of offerings. There has been an increase in Indian offshore energy growth, and with this partnership that has emerged and is now actually an example that domestic shipyards can play a pivotal role in meeting energy needs for this country.
Source:
Economic Times, Link to article