The International Association of Drilling Contractors (IADC) is said to be resisting any form of regulatory purview of India’s offshore drilling industry even if it concerns matters of offshore safety, which is non-negotiable, according to an industry source.
Foreign offshore oil drilling contractors operating in Indian waters are lobbying the country’s maritime regulator to reverse new rules framed in October last year mandating mobile offshore drilling units or MODUs certified under the 1979 MODU Code to upgrade to the 1989 Code within two years or by October 2024.
The Directorate General of Shipping’s 20 October 2022 order on certification of offshore vessels and accommodation barges operating in Indian exclusive economic zone, was issued to bolster offshore safety after the May 2021 mishap at Mumbai High oil fields caused by Cyclone Tauktae, left more than 70 dead.
The Code for the Construction and Equipment of Mobile Offshore Drilling Units adopted by the International Maritime Organisation (IMO) provides an international standard for MODUs, which are covered under three Codes (1979, 1989 and 2009), depending on the date of construction.
Some 26 jack-up drilling rigs currently operating in Indian waters, including six owned by State-run Oil and Natural Gas Corporation Ltd (ONGC Ltd), are certified under the MODU Code of 1979. Of these, 20 are registered in overseas jurisdictions (foreign flag).
The average age of old jack-up rigs working for ONGC is 42.33 years, while that of the six rigs owned by India’s biggest oil and gas explorer is 38 years.
“ONGC operates one of the oldest rig fleets in the world; old rigs are less efficient, impacting production,” said an industry source, while noting that ONGC is being pushed by the government to raise output.
To be sure, currently, there is no age limit for offshore drilling rigs operating in Indian waters.
Besides, the Directorate General of Shipping has excluded drilling/production units certified under MODU/SPS Code from the ambit of the age norms prescribed by it for various ship categories calling at Indian ports for carrying cargo or providing services in Indian Exclusive Economic Zone/offshore area, in an order issued on 24 February.
But the October 2022 order of the Directorate General of Shipping makes it mandatory for Indian and foreign flagged mobile offshore drilling units certified under the 1979 MODU Code to upgrade to the 1989 Code within two years.
“Any mobile offshore drilling unit (propelled/non-propelled) participating in a tender after the issuance of this Order (Indian or foreign) shall comply with the requirements of MODU Code 1989 or 2009, depending on the year of construction/modification,” the regulator wrote in the 20 October 2022 order that was finalised after extensive consultations with stakeholders.
The upgrade to the 1989 MODU Code will cost rig owners a few million dollars.
Five months after the order was issued by the maritime regulator, none of the fleet owners operating rigs for ONGC under the 1979 MODU Code are said to be keen to upgrade to the 1989 MODU Code.
The International Association of Drilling Contractors (IADC), the Houston, Texas-based lobby group, have cited “technical limitations” to undertake the structural modifications and comply with the upgrade order issued by India’s maritime regulator.
“IADC has grown concerned that new requirements contained within this order create a circumstance under which MODUs currently subject to, and in full compliance with, the 1979 MODU Code, may be compelled to undergo major modifications to meet 1989 or 2009 MODU Code provisions,” IADC’s Senior Vice President- International Development, Mike DuBose, wrote in a 21 February letter to the Directorate General of Shipping. ET Infra has reviewed a copy of the letter.
While the administration of the order pertaining to MODUs is well-intentioned, it does not take into account the physical limitations when even attempting to re-design and modify, inter alia, specifically a MODU’s existing structural arrangements, loading characteristics, and hazardous zones – along with the innumerable elements requiring major electrical and mechanical upgrades, IADC said.
“Enacting new requirements, as per this marine order, that would compel MODU’s to retrofit existing structural arrangements and materially change a unit’s design would, in effect, require exceedingly substantial shipyard period(s) akin to major modifications,” the IADC said, noting that the costs associated with such wholesale retrofit “would most likely exceed the presumed benefits”.
The mandated upgrades will likely result in “marked delays and substantial cost overruns in the development and production of future offshore projects, which will not be in the best interest of a country like India, presently relying on imported hydrocarbons”, IADC’s DuBose warned in the letter.
However, IADC’s stand, according to industry sources, goes against its stated objective of promoting safety of life and environment in the offshore oil drilling sector.
“It is baffling that IADC sitting out of Houston, is resisting any form of regulation pertaining to MODUs operating in India while its home country, the United States of America, heavily regulates its coasting trade and the operation of MODUs through a complex web of stringent requirements and conditions under the Jones Act,” said an industry source.
“India’s energy sector is sufficiently mature to withstand a migration to better and safe offshore assets. Experienced drilling contractors in conjunction with exploration and production companies can plan upgrades in an orderly manner with minimal operational disruption to the drilling programmes. The international drilling contractors operating rigs in India can always deploy their modern assets presently marketed in other global markets instead of the antiquated rigs they have earmarked for the Indian market,” he said.
Emphasising India’s prerogative to decide the type and form of regulations it wishes to promulgate for the Indian offshore drilling industry, he continued: “India has the right to control the quality of assets operating in Indian waters and the safety standards that should apply to them.”
“IADC is resisting any form of regulatory purview of India’s offshore drilling industry even if it concerns matters of offshore safety, which is non-negotiable. IADC which prides itself in promoting offshore safety elsewhere, seems vehemently opposed to India’s efforts to promote safety in its offshore drilling sector,” the source added.
