ONGC had in July 2009 hired the rig Dhirubhai Deepwater KG-1 (earlier christened Deepwater Pacific-1) for four years at close to Rs 3,915 crore.
Sources said the rig was hired on assignment basis from RIL for drilling in 10,000 feet water depth but is capable of being upgraded to 12,000 feet.
Since ONGC wanted to drill three wells in water depth ranging from 10,170 to 11,318 feet, it decided to upgrade the rig at its own cost.
The upgradation cost USD 551,150, they said adding ONGC will turn back the upgraded rig to RIL on July 30 after completion of the four year period.
ONGC reasoned upgrading the rig at its own cost on the ground that it would had to pay liquidated damages if these were were not drilled on time and there was no available rig to carry out the drilling commitment it made when it won the blocks KG-DWN-2004/1, KG-DWN-2004/6, CY-PR-2004/1 and CY-DWN-2004/3 in New Exploration Licensing Policy (NELP) rounds.
This is one of the rare occasions that ONGC had decided to take the cost of the upgrade on itself.
Sources said company has also argued that it does not need to hire a drilling rig with a higher capacity.
Last year, the Comptroller and Auditor General of India (CAG) had pulled up ONGC for hiring the rig from RIL without calling for competitive bids.
In May 2009, ONGC had hired the DDKG-1 rig for four years ending July 2013 at operating rates of USD 495,000 a day for first 180 days, and USD 510,000 from the 181st day.
ONGC had yesterday stated that it has drilled a well in record water depths using a rig it had hired from RIL.
"ONGC's chartered-hired ultradeep water drillship DDKG-1 has set a world record for drilling well in deepest water depth by an offshore drilling rig," it said in a statement.
The rig DDKG-1 spud the well NA7-1 in exploratory block KG-DWN-2004/1 in east coast India at a water depth of 3165 metres (10,385 feet) on January 23.
The rig surpassed its own prior record of 10,194 feet of water depth, set in 2011 by working for RIL on the east coast.