Mumbai: The Essar group's oilfield services business got the traction it wanted when its maiden foray with a semi-submersible rig began doing duty last week for a leading exploration major in the high seas of the KG Basin in the Bay of Bengal.
While Essar officials are not keen to divulge the operator who hired their semi-submersible vessel, it is learnt that it is a exploration major owned by a state government.
For the Ruias of Essar group, it is a triumphant return to a business it exited in 2003, after a financial crunch forced them to exit smaller business in favour of its much larger steel, shipping and refinery businesses.
The return to oilfield services was charted out as soon as a three-year lock-in clause signed with their erstwhile buyer, the Abu Dhabi-based Dalma Energy, expired.
Synergies with other group businesses and past experience encouraged the group to enter the field again.
The group has expertise in both onshore and offshore rigs. It operated land rigs for close to 10 years and had owned a drill ship for more than 10 years.
Moreover, N Ramesh who had to join the Middle-East headquartered firm that acquired Essar's oilfield services business, returned to Essar in 2006 as director and CEO of the Essar Oilfields Services.
Ever since the company has been on an overdrive placing orders for on-shore jack-up rigs and a single semi-submersible vessel.
Luckily, the firm got delivery and has deployed it in the KG basin for their client, that industry circles say is GSPL.
When DNA Money interviewed Ramesh, he declined to reveal the name of the client.
Industry circles estimate that the hiring charges for the semi-submersible would be in the region of 3,00,000 to 3,50,000 dollars, a day.
If everything goes as per plan, the group's payback period is pegged at 4-5 years. But one worry is that operating costs and manpower costs are surging too.
"Value-wise the semi-submersible (offshore) is much higher in terms of cost than the land rigs. Semis would be about $300million, while our entire land rigs business would be half than that at $150-160 million," Ramesh said.
Rentals in the last few years would have gone up. Semis started day rate, $350,000 with taxes, he says. For a semi-submersible, the rates are upward of $400,000 and for 6th generation deep water drill ships it would even be $550,000 a day, Ramesh says.
Essar Oilfield Services operates in an area where Aban Lloyd, Great Offshore and Jindal Drilling already have a sizeable presence in India, but the group has decided to have a global focus and has therefore headquartered the business in Dubai.
Ramesh remains unfazed by competiton. "There is so much opportunity that there is enough for every body. We are positioning ourselves an an international player. When we re-entered the business (in 2006), we set our hub in Dubai, which positions us as an international firm," he said.
Even then, it has diversified. "We have 12 land rigs, 1 semi submersible and has two orders for offshore vessels, the delivery is pegged at 30 and 36 months respectively.
Ramesh also doesn't rule out an acquisition to grow faster. The only problem in this strategy is that merger and acquisitions in this space is getting scarcer as the lease rentals have skyrocketed. "We are looking at some proposals, a 5-6 rig company is on the block with many vying for it. We looking at this European company," he said.
"These kind of deals keep coming from brokers, investment bankers, so since they are looking at our business, they will not only sending it to us, but to everyone, across the world," Ramesh said.
However the group is careful not to plunge in to any M&A activity. As Ramesh explains, "We have to be careful since the markets are high we do not buy at the top of the market. It has to be driven by economics."
While Essar officials are not keen to divulge the operator who hired their semi-submersible vessel, it is learnt that it is a exploration major owned by a state government.
For the Ruias of Essar group, it is a triumphant return to a business it exited in 2003, after a financial crunch forced them to exit smaller business in favour of its much larger steel, shipping and refinery businesses.
The return to oilfield services was charted out as soon as a three-year lock-in clause signed with their erstwhile buyer, the Abu Dhabi-based Dalma Energy, expired.
Synergies with other group businesses and past experience encouraged the group to enter the field again.
The group has expertise in both onshore and offshore rigs. It operated land rigs for close to 10 years and had owned a drill ship for more than 10 years.
Moreover, N Ramesh who had to join the Middle-East headquartered firm that acquired Essar's oilfield services business, returned to Essar in 2006 as director and CEO of the Essar Oilfields Services.
Ever since the company has been on an overdrive placing orders for on-shore jack-up rigs and a single semi-submersible vessel.
Luckily, the firm got delivery and has deployed it in the KG basin for their client, that industry circles say is GSPL.
When DNA Money interviewed Ramesh, he declined to reveal the name of the client.
Industry circles estimate that the hiring charges for the semi-submersible would be in the region of 3,00,000 to 3,50,000 dollars, a day.
If everything goes as per plan, the group's payback period is pegged at 4-5 years. But one worry is that operating costs and manpower costs are surging too.
"Value-wise the semi-submersible (offshore) is much higher in terms of cost than the land rigs. Semis would be about $300million, while our entire land rigs business would be half than that at $150-160 million," Ramesh said.
Rentals in the last few years would have gone up. Semis started day rate, $350,000 with taxes, he says. For a semi-submersible, the rates are upward of $400,000 and for 6th generation deep water drill ships it would even be $550,000 a day, Ramesh says.
Essar Oilfield Services operates in an area where Aban Lloyd, Great Offshore and Jindal Drilling already have a sizeable presence in India, but the group has decided to have a global focus and has therefore headquartered the business in Dubai.
Ramesh remains unfazed by competiton. "There is so much opportunity that there is enough for every body. We are positioning ourselves an an international player. When we re-entered the business (in 2006), we set our hub in Dubai, which positions us as an international firm," he said.
Even then, it has diversified. "We have 12 land rigs, 1 semi submersible and has two orders for offshore vessels, the delivery is pegged at 30 and 36 months respectively.
Ramesh also doesn't rule out an acquisition to grow faster. The only problem in this strategy is that merger and acquisitions in this space is getting scarcer as the lease rentals have skyrocketed. "We are looking at some proposals, a 5-6 rig company is on the block with many vying for it. We looking at this European company," he said.
"These kind of deals keep coming from brokers, investment bankers, so since they are looking at our business, they will not only sending it to us, but to everyone, across the world," Ramesh said.
However the group is careful not to plunge in to any M&A activity. As Ramesh explains, "We have to be careful since the markets are high we do not buy at the top of the market. It has to be driven by economics."
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