Foreign offshore drilling companies are campaigning against the Indian Maritime Authority’s mandated drilling rig upgrade

According to an industry source, the International Association of Drilling Contractors (IADC) is said to oppose any form of regulatory interference in the Indian offshore drilling industry, even when it comes to non-negotiable offshore safety issues.

Foreign offshore oil drilling companies operating in Indian waters are lobbying the country’s Maritime Inspectorate to reverse new regulations enacted last October that require mobile offshore drilling units, or MODUs, to be registered under the 1979 MODU code are certified must be upgraded to the 1989 code within two years or by October 2024.

The 20 October 2022 Order of the Directorate-General of Shipping for the Certification of Offshore Vessels and Accommodation Vessels Operating in India’s Exclusive Economic Zone was issued to strengthen offshore safety following the mishap caused by Cyclone Tauktae in May 2021 killed more than 70 people in the Mumbai oilfields.

The Code for the Construction and Equipment of Mobile Offshore Drilling Units adopted by the International Maritime Organization (IMO) represents an international standard for MODUs, which fall under three codes (1979, 1989 and 2009) depending on the date of construction.

Some 26 jack-up rigs currently operating in Indian waters, including six owned by the state-owned Oil and Natural Gas Corporation Ltd (ONGC Ltd), are certified under the 1979 MODU Code. Of these, 20 are registered in foreign jurisdictions (foreign flag).

The average age of old jack-up rigs working for ONGC is 42.33 years, while that of the six rigs of India’s largest oil and gas explorer is 38 years.

“ONGC operates one of the oldest oil rig fleets in the world; old plants are less efficient and hampering production,” said an industry source, while noting that ONGC is under pressure from the government to increase production.

However, there is currently no age limit for offshore oil rigs operating in Indian waters.

Also, the General Directorate of Shipping has excluded MODU/SPS code certified drilling/production units from the scope of its mandated age norms for various categories of vessels calling at Indian ports for the transport of cargo or the provision of services in the Indian Exclusive Economic Zone/Offshore start up area, in an order dated February 24.

However, the October 2022 Order of the General Directorate of Shipping requires Indian and foreign flag mobile offshore drilling units certified to the 1979 MODU code to be upgraded to the 1989 code within two years.

“Any offshore mobile drilling unit (powered or non-powered) participating in a tender after the issuance of this Order (Indian or foreign) must comply with the requirements of MODU Code 1989 or 2009, depending on year/amendment,” the regulator wrote in the October 20, 2022 order, which was finalized after extensive consultation with stakeholders.

Upgrading to the 1989 MODU code will cost rig owners several million dollars.

Five months after the Maritime Authority issued the order, none of the fleet owners operating rigs for ONGC under the 1979 MODU code are said to be interested in switching to the 1989 MODU code.

The International Association of Drilling Contractors (IADC), the Houston, Texas-based lobby group, has cited “technical constraints” to make the structural changes and comply with the Indian Maritime Authority’s upgrade order.

“The IADC is concerned that new requirements contained in this order create a circumstance where MODUs that are currently subject to and fully compliant with the 1979 MODU Code could be forced to make major changes to address the to comply with provisions of the 1989 or 2009 MODU Code.” Mike DuBose, IADC Senior Vice President – ​​International Development, wrote a letter to the Directorate-General for Shipping on Feb. 21. ET Infra has reviewed a copy of the letter.

While management of layout is well-intentioned in relation to MODUs, it fails to take into account the physical limitations of even attempting to redesign and modify a MODU’s existing structural layouts, loading characteristics, and hazard zones, among other things, along with the myriad Items that require major electrical and mechanical upgrades, IADC said.

“The enactment of new requirements under this naval regulation that would force MODUs to retrofit existing structural arrangements and substantially alter a unit’s design would in fact require extraordinarily significant shipyard time(s) comparable to major modifications,” the IADC said that the costs associated with such a wholesale retrofit would “most likely exceed the anticipated benefits”.

The mandatory upgrades are likely to result in “significant delays and significant cost overruns in the development and production of future offshore projects, which is not in the best interest of a country like India, which currently relies on imported hydrocarbons,” IADC’s DuBose warned in the letter .

However, the IADC’s position contradicts its stated goal of promoting the protection of life and the environment in the offshore oil drilling sector, according to industry sources.

“It is amazing that the IADC, which is based in Houston, opposes any form of regulation affecting MODUs operating in India while their home country, the United States of America, controls their coastal traffic and operation of MODUs a complex web of strict regulations heavily regulated Jones Act requirements and conditions,” said an industry source.

“India’s energy sector is sufficiently mature to withstand a migration to better and safer offshore facilities. Experienced drilling contractors can work with exploration and production companies to plan upgrades in an orderly manner with minimal disruption to drilling programs. The international drilling companies operating rigs in India can always use their modern rigs currently being marketed in other global markets instead of the outdated rigs they intended for the Indian market,” he said.

Stressing India’s prerogative to decide the type and form of regulations it wishes to enact for the Indian offshore drilling industry, he continued, “India has the right to control the quality of installations operating in Indian waters and the safety standards that apply to them.” to control. ”

“The IADC opposes any form of regulatory interference in the Indian offshore drilling industry, even on non-negotiable offshore safety issues. The IADC, which prides itself on promoting offshore safety elsewhere, appears to vehemently oppose India’s efforts to promote safety in its offshore drilling sector,” the source added.