Economy

Markets

Industries

Insights

Reports

Events

COSCO's drilling rig wins praise

By Fu Jing (China Daily)
Updated: 2009-07-06 07:57

People gather at a launching ceremony of a COSCO-built deepwater drilling rig in its Nantong factory, Jiangsu province. [File photo]

A fast-growing shipyard in China has built the world's first "round" deepwater drilling rig, which can pump out oil even from freezing seawaters.

The $600-million rig was delivered last week to Norwegian oilfield services group Sevan Marine, which has contracted the rig to Petrobras, Brazil's state-owned oil company.

A shipyard company of China Ocean Shipping (Group) Co, or COSCO, built the hi-tech rig at its Nantong factory in Jiangsu province.

COSCO Shipyard called the project's success "a milestone for the company" because of the cutting-edge technologies used to build the unit.

COSCO Shipyard just started building offshore rigs in 2007, and industry insiders said the shipyard's early success would pave the way for more foreign and domestic orders.

According to technical reports, the new rig, named the Sevan Driller, can sink wells 12,500 meters deep and can store 150,000 barrels of crude oil.

With a diameter of 84 meters, the rig can accommodate 150 workers and technicians and work even when temperatures dip 20 degrees Celsius below zero.

"Such indicators have shown our competitiveness. The rig is round and can stand steady, even when strong sea waves and storms hit," said Wang Xingru, general manager of COSCO Shipyard, during an exclusive interview with China Business Weekly.

"As far as I know, this rig performs better than any others in the world regarding the depth of drilling," Wang added.

Although COSCO Shipyard currently produces most of its rigs for balmier Brazil, the fact that the newest rig can weather freezing waters could create new customers among oil-rich countries in colder, high-latitude regions.

China earlier this year agreed to lend $10 billion to Brazil's state-owned Petrobras in exchange for guaranteed oil supplies for the next decade.

Petrobras and Sinopec, China's largest refiner, agreed that the former would supply 150,000 barrels of crude oil a day to China this year and 200,000 barrels per day for nine years beginning in 2010.

The two oil companies also signed a formal memorandum of understanding on oil exploration that will allow China to explore for oil in two regions of Brazil.

Meanwhile, Petrobras has discovered massive oil reserves deep beneath the ocean floor off Brazil's southern coast.

"All these bilateral agreements have brought opportunities for our company because oil-rich Brazil depends on deep-sea oil exploration," Wang said.

He added that more orders are expected to soon arrive from the South American country.

Singapore and South Korea are leading countries building offshore rigs, but China, a relative newcomer, already is winning accolades.

Norway's Det Norske Veritas, or DNV, one of the world's leading risk management certification companies, praised COSCO Shipyard for making a "technological breakthrough" in the industry with its latest deepwater rig.

"The company completed the demanding task within two years, and it proves that the shipyard can compete with global competitors," said Joerg Beiler, DNV's area chair and regional maritime manager for Greater China.

Wang said a domestic oil company already has shown interest in buying a COSCO Shipyard offshore rig.

Fu Chengyu, president of CNOOC, attended the delivery ceremony for the COSCO Shipyard-made round rig at the end of June at the Nantong shipyard's factory in Jiangsu province. CNOOC, China's third-largest oil producer, specializes in offshore oil exploration.

"We organized fruitful negotiations with CNOOC, and they have shown great interest," Wang said.

Earlier media reports said that CNOOC would invest 200 billion yuan ($29.26 billion) in oil and gas exploration in the South China Sea during the next 10 to 20 years.

Related readings:  China COSCO plans to cut, delay ship orders  BOC grants 20b yuan in loans to shipping firm  COSCO expects lower Q1 earnings  COSCO Pacific granted operating rights at Greek port

The goal is to build up a production capacity with an annual output of 50 million tons, equivalent to that of China's biggest oil field, the Daqing Oil Field.

"That means a huge market opportunity for us," COSCO Shipyard's Wang said.

Currently, only two or three shipyards in China have invested in rig building.

Before moving to rig and shipbuilding, COSCO Shipyard was the country's leader in ship conversion and maintenance.

Wang said he was relieved the company diversified into shipbuilding and rigs before the financial crisis hit the world's markets this year.

"We have enough orders on hand, and we should work at full sail at least until 2012," Wang said.

With many companies also shedding workers in this economic recession, Wang's shipyard is the exception, he said.

"We hired more than 1,000 graduates this year," Wang said. "We need more qualified hands to deliver those orders."