State-run Oil and Natural Gas Corp (ONGC) has hired an ultra deep-sea drill rig from Reliance Industries for four years at close to Rs 3,915 crore.

ONGC has hired the rig Dhirubhai Deepwater KG-1 (earlier christened Deepwater Pacific-1) on an assignment basis for USD 495,000 to USD 510,000 a day for four years.

“We received the drillship about 7-10 days back. It is currently under inspection at Kakinada and will be deployed for drilling next month,” a senior company official said.

After inspection and loading, the rig would move to its first drill location off the west coast. “We will use the rig to drill an exploration well in a deep-sea block in Kerala-Konkan basin,” he said.

After this, the rig would go to east coast where it will do an appraisal well on the KG basin UD-1 gas find of 2007.

“In all, we plan to drill 20 wells using the rig during the four-year period. It will also be used at Mahanadi and Andaman deep sea,” the official said.

ONGC will pay a dayrate of USD 495,000 to RIL for first 180 days and USD 510,000 from 181 days onwards. RIL had hired the rig at the same rate from Transocean of US.

The state-run firm, which currently operates 37 deep water and ultra deep water acreages, wanted three ultra deep water rigs each capable of drilling up to water depth of 10,000 ft, 12,000 ft and 7500 ft. As the search for rigs were on, RIL came up with an offer to share its rig.

ONGC had been in talks with RIL for several months for hiring the rig and its board finally gave go-ahead on June 6 after the Brazilian national oil firm Petrobras also envinced interest in taking the rig on assignment basis from RIL.

Independent directors on company board had been blocking the deal but were prevailed upon at the June 6 meeting after it became clear that alternate rigs were available at atleast 10 per cent higher price than RIL rates, the official said.

Petrobras had offered USD 550,000 to 560,000 per day for the rig. Besides Petrobras, Eni of Italy and Cnooc of China too were interested in the rig that is capable of drilling in water depths of up to 10,000 feet but RIL chose the Indian flagship firm.

The official said ONGC had invited international offers to discover competitive rates but the earliest rig available was in December 2010 and was costlier than RIL offer.

Transocean Inc of US offered Deepwater Frontier at an operating day rate of USD 535,200 while Great Offshore offered Pacific Bora for USD 599,000 per day.

RIL rates are lower than the rigs ONGC has already hired – Sevan Driller-II from Sevan Marine for USD 524,900 per day for three years from December 2010 and Platinum Explorer from Vantage Energy for five years from December 2010 for USD 585,000 per day.

The official said the company will pay USD 764.53 million or Rs 3,914.39 crore for DDKG-1 for four years beginning July.