COSL to expand into onshore drilling sector
China Oilfield Services (COSL), the dominant provider of support services to oil and gas producers in offshore China, will enter the onshore drilling market for the first time this year as it puts five drilling rigs to use.
Built at a cost of just over 100 million yuan (HK$111.2 million) each, the rigs will be deployed in PetroChina's Changqing oilfield in Shaanxi province and Libya this year.
'Starting from last year, COSL has decided to put the onshore market as one of its business expansion focuses and one of the drivers for profit growth,' chief executive Yuan Guangyu said in an interview.
So far the company only has minor business in providing well services in Xinjiang autonomous region and coastal areas surrounding Bohai Bay in northern China off Tianjin.
It has signed a contract to provide drilling services to PetroChina's field for three years at a daily rate of between US$15,000 to US$20,000.
Last year, COSL won a US$100 million contract to supply an unspecified Libyan drilling company with four onshore rigs for three years starting last month.
They can drill down to between 5,000 metres and 7,000 metres underground.
In addition, it has signed a preliminary agreement to provide onshore drilling in Myanmar, although no details have been announced.
Mr Yuan said the company had plans to further expand the number of its onshore rigs.
Onshore rigs cost much less to build than offshore ones, and they also command much lower day rates.
For example, two jack-up offshore rigs built for COSL to be commissioned this year and next year cost 1.04 billion yuan to 1.2 billion yuan each.
The company's jack-up drilling day rate averaged US$78,337, up 41 per cent from 2006.
COSL's ambition in the onshore market was first shown in its failed attempt in August 2006 to buy Apexindo Pratama Dutaan, Indonesia's largest oilfield drilling contractor. It had five offshore drilling rigs and nine onshore rigs at the time.
The acquisition, which fell through after the seller backed off, could have allowed COSL to enter the onshore market much quicker than growing in the segment by itself.
Meanwhile, Mr Yuan said the company was in talks on other potential contracts to provide services to shallow water oil and gas project operators in the Gulf of Mexico.
The company spent 986 million yuan building four rigs for Mexico's state oil firm Pemex, which were deployed in the middle of last year in the Gulf of Mexico.