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Our Bureau

Aban's arm disputes right to terminate the deal

Chennai March 13 Aban Offshore Ltd on Tuesday informed the stock exchanges that its subsidiary, Deep Drilling 1 Pte Ltd, had received a "notice of termination" from Reliance Industries Ltd relating to a drilling contract entered into for the deployment of the rig, Deep Driller 1. The rig, which is now working for Hardy Oil, was expected to start on the Reliance contract "within a few weeks."

Aban's subsidiary "disputes Reliance Industries' right to terminate the contract" says the company's notification to the stock exchange.

While the reasons for the termination or Aban's planned course of action could not be ascertained because the company's top officials are on travel, it is learnt that there is no risk of the rig lying idle.

Besides, usually in such contracts, there is a clause that requires a penalty to be paid in case the contract is prematurely terminated.

The notice of termination was received by Premium Drilling, a joint venture of Sinvest of Norway that Aban acquired recently. Premium Drilling is based out of New York. It is learnt that Reliance Industries has not given reasons for the termination. Industry experts are surprised over the development because only last month Reliance was in talks with ONGC for sharing a deep-water rig.

After the completion of work for Hardy Oil, Aban intends to take the rig to Singapore where it will be stationed till it gets another assignment. However, nobody expects the rig to be idle because the market for rigs, especially those that operate in deep waters, is very tight and the rigs are very much in demand.

A deep-water rig used to be hired for about $1,50,000 (Rs 67.5 lakh) a day in 2004. Today, the rates for the same rig have gone up to beyond $5,00,000 (Rs 2.25 crore) a day.

Industry sources say that there is a ready market for a deep-water rig in India itself as ONGC has tendered for one. The pre-bid conference for the rig has been scheduled for April 2.

More Stories on : Petroleum | Corporate Disputes | Reliance Industries Ltd

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