The Hindu Business Line : Gremach acquiring 40 drilling rigs from Chinese co

Mumbai, Nov.1 Gremach Infrastructure Equipment & Projects Ltd will acquire 40 oil and gas drilling rigs from Chinese manufacturer Baoji Oilfield Machinery Company (BOMCO), at a cost of about $1 billion. BOMCO is owned by the China National Petroleum Corporation.

Gremach also has an option to buy 36 more rigs and a proposal for a joint venture between the two companies. Gremach has floated a Singapore-based special purpose vehicle Petrogrema Energy Pte. Ltd, which would be a rental company for supply of rigs.

Mr J.K. Sharan, CEO of Petrogrema Energy and Gremach (oil and gas) Division, said the project funding would be in the debt-equity ratio of 66:33 and that a couple of leading banks from Switzerland and Scotland had sent in their firm offers to the company.

Each of the onshore rigs would cost about $22.5 million. With a 36 per cent IRR (internal rate of return), as rentals are about $35,000 a day, the payback period would be between two-and-a-half and three years. The rigs, which have a terminal life of about 25 years, would realise one tenth of their value as scrap too.

Though similar rigs are sold by the US and Italy, their pricing is at least thrice that of BOMCO. Globally, major players such NABORS, which owns about 815 rigs, generate 25 per cent profit from revenues of $4 billion, he said.

The first rig is expected in the first quarter of 2008 and deliveries would be completed in 3-4 years.

Petrogrema Energy has obtained a firm commitment from the state-owned oil company of Saudi Arabia, Saudi Aramco, and a few other oil majors in the Gulf.

The rigs would be hi-tech — computerised with GPS, and could be operated from Mumbai as well. While the basic substructures are from the Chinese manufacturer, top drives, engines and other critical components are sourced mostly from the US.

Gremach Infrastructure is in the business of providing construction and earthmoving equipment on rent.