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““Indian Offshore Indian Offshore Opportunities & Opportunities &

Contract Management”Contract Management”

Capt. K. DevadasSr. Vice President,

The Shipping Corporation of India LtdMay 2013

• Peninsular coastline – 7517 kms• Strategically positioned between

the east-west trade routes• 12 major & 187 non-major ports• Indian tonnage (as on 30.04.2013)

• 1172 vessels – 10.40 mn GT• 809 vessels on coastal trade- 1.06

mn GT

• Government of India targeting to enhance tonnage to keep pace with the trade growth.

• Concentrated focus on development of Port infrastructure and its connectivity.

Indian Shipping Indian Shipping

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Demand drivers in the Offshore sector

Shipping relies on derived demands, controlled by various factors

• Global markets Oil & gas prices …• Demand & supply equation of Offshore vessels.• Fresh Exploration & Production activities…• Need for modern and advanced technological

vessels.• Young fleet of vessels with reliable

maneuverability characteristics / dynamical positioning capabilities.

• Adequate capacity to carry cargo & passengers.

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Growth in Indian energy sectorGrowth in Indian energy sector

Year Domestic production

MT

Oil imports.MT

Total consumption-

MT

2000-01 32.4 mn 74.1 mn 106.5 mn

2005-06 32.2 mn 99.3 mn 131.5 mn

2010-11 37.7 mn 153.1 mn 190.8 mn

2012-13 41.1 mn 182.1 mn 223.2 mn

Trends in Crude Oil consumption in IndiaTrends in Crude Oil consumption in India

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Till date 124 onshore blocks have been awarded compared to a total of 144 blocks at sea (offshore + deepwater).

Out of the 144 blocks awarded for exploration at sea, a major chunk (77) blocks are with National Oil Companies (NOC) and State Oil companies.

By the end of NELP VIII / IX, 268 blocks have been awarded to various national and international players. The details of the blocks awarded and their types are as tabled below:

OperatorType of Blocks

TotalOnshore Offshore Deepwater

National & State Oil Companies

66 33 44 143

Indian Private firms

38 20 24 82

Foreign firms 20 10 13 43

Total 124 63 81 268

E & P activities in IndiaE & P activities in India

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NELP rounds I – VIII complete and NELP IX is continuing

DGH proposed OALP rounds which is giving more flexibility for E&P operators in block allocation, size & project financing.

Can scrutinize data pool and bid for any blocks.

Marginal blocks: - 165 blocks (Onshore + Offshore offered early this year) - 39 blocks in KG basin and 13 blocks in Western Offshore

Crude oil imports to India: - Year 2006: US$ 39 billion - Year 2012: US$ 93 billion

Increase in crude oil imports from 2000~2010 in India – 80%

Increase in crude oil imports from 2010~2012 in India – 8%

E & P activities in IndiaE & P activities in India

Changing definition of “Deep water”

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New definitionNew definition

Shallow Water / Conventional depth 200 M to 400 M

Deep Water 200 M-1000 M to 400 M-1500 M

Ultra deep water >1000 M to >1500 M

Deepwater basins on East / West Coast Deepwater basins on East / West Coast of Indiaof India

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• Bengal Basin• Mahanadi Basin• Krishna-Godavari Basin• Palar Basin• Cauvery Basin• Kutch-Saurashtra Basin• Mumbai Basin• Kerala-Konkan Basin• Andaman Basin

Operational ChallengesOperational Challenges• Technological & Engineering challenges

• Construction & installation of production facilities• Transportation of discovered products• High end vessels with more engine power say 8000 BHP & 120

Ton Bollard Pull• More redundancy (DP- 2 vessels)• More accommodation and deck space• Deep sea drilling and Deepwater anchoring capabilities• Younger and more dependable fleet

• Other technological challenges• Met-Ocean conditions• ROV operations• Subsea environment

Economic issues such as indemnity, taxation policies, custom duties …etc

Experienced Manpower for deep water operations9

Requirement of PSVs and Higher Requirement of PSVs and Higher Bollard Pull AHTSVsBollard Pull AHTSVs

• PSVs play an important role for providing logistics support to deepwater installations

• The power required to position and move oil & gas drilling and production platforms comes from AHTSVs

• AHTSVs equipped with powerful engines and winches can tow rigs from one location to another, position and lift anchors

• For deep water activities, the AHTSV itself needs to be larger with heavier anchor chains and chains requiring adequate stability and more installed power.

• In deep water, mostly Semi-submersible and Drill ships are used. High bollard pull offshore vessel is used for shifting and for movement of Semi submersible rigs in oil fields

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Types of Offshore ContractsTypes of Offshore Contracts

☻ Supply time, 2005

☻ Towing Contract, 2008

☻ Tow Hire Contract, 2008

☻ Specific contracts to E&P Operators

☻ O&M Contracts

☻ Sub-contracts (specialised)

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• Indemnity Clause (Knock for Knock): Generally E&P operator has several contracts and sub-contracts. With each contractor, E&P signs indemnity clause. Hence any damages while working are shared by individual

without any liability to other parties.

• Cabotage law: Each country has its own law to safeguard coastal employment

for its own flagged vessels. Hence foreign flag vessel entry is restricted.

Custom import duties on foreign flag vessels Local manning requirements for ships Right of First Refusal Price preference for local bidders

Contracts ManagementContracts Management

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• Safety and security issues during passage and at area of operation

• MOD/NSC special security passes

• Mob-demob cost

• Payment currencies and local regulations regarding foreign exchange

• Arbitration Clause:- General charters- English Law

• Base port and logistic support at base for operation of the vessel

• On-hire surveys- time limit. At times surveying company carries out extensive Marine Warranty Service (MWS)

Contracts ManagementContracts Management

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Future thoughts-Tapping Offshore wind energy.

o Renewable source of energyo Clean energyo Climate change concerns kept outo Almost no environmental objectiono Opportunities for large industry

scale development

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THANK YOU

“OIL & MARITIME” AND

“THE ESTEEMED AUDIENCE”

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