The Ministry of Industry and Trade Proposed a State Program for Drilling Rigs

Source: www.gulfoilandgas.com 8/4/2021, Location: Asia

The authorities want to extend the mechanism that is designed to protect Russian rig manufacturers from Chinese expansion in this market and to stimulate the production of rigs in the Russian Federation. The Ministry of Industry and Trade proposed to subsidize 20-25% of the cost of purchasing new drilling rigs through the trade-in mechanism. According to the ministry, this will stimulate companies to upgrade their fleet, rather than buying Chinese components for the modernization of old installations. Based on the need to replace 20% of the obsolete fleet, the amount of necessary state support is estimated at 27 billion rubles. in five years.

The Ministry of Industry and Trade wants to reduce the oil and gas industry's dependence on Chinese drilling services. The ministry proposes to subsidize up to 20% of the cost of new Russian-made equipment (up to 25% when using innovative solutions) through the trade-in mechanism in order to equalize prices between domestic and foreign installations. The corresponding draft resolution is posted on regulation.gov.ru . For one installation, the subsidy will amount to 50–150 million rubles. depending on the type of equipment purchased, the total volume is not indicated.

The Ministry of Industry and Trade told Kommersant that the concept was not provided with funding, but the ministry is seeking it from its own funds and is asking the government to allocate new ones.

According to the Ministry of Industry and Trade, 45% of the drilling rig market is accounted for by domestic manufacturers, 25-30% - by Chinese.

Structures Honghua, Sinopec, Haihua and Kerui offer prices, as a rule, 15-20% lower than the prices of Russian producers, as well as deferred payment for a period of one to three years, the explanatory note says. According to the Ministry of Industry and Trade, such prices are explained by "the lower cost of attracting financing, measures to support exports by the state and lower requirements for quality and safety standards." The main Russian manufacturer of drilling equipment is Uralmash NGO Holding. The company told Kommersant that they are familiar with the initiative. It includes the stationary and cluster drilling rigs they produce with a lifting capacity of 320 and 400 tons (BU 5000/320 BMCh, BU 5000/320 EK-BMCh, BU 6000/400 EK-BMCh), and “in the future, the list will increase,” noted in companies. They did not name the cost of their drilling rigs there.

The subsidies are expected to stimulate drilling companies to buy new rigs instead of upgrading old ones, during which they buy foreign components.

Now, according to the Ministry of Industry and Trade, modernization is 20-25% cheaper than a new rig, that is, the estimated amount of subsidies. The current drilling fleet is estimated by the department at 1,360 units, 270 of them (about 20%) last longer than the designated service life of 20 years. The Ministry of Industry and Trade expects to replace obsolete installations in five years. The interest in subsidies, the ministry writes, was confirmed by Rosneft's structures RN-Burenie, Surgutneftegaz, Gazprom Burenie, Eurasia Drilling Company and others. Eriell's chief financial officer Artem Chernikov told Kommersant that the company also took part in the discussion, but its installations “have not worked out their useful life”. “The subsidy will allow drilling companies to prioritize Russian rigs over foreign ones. Environmental responsibility will increase.

Based on the figures announced by the Ministry of Industry and Trade, the total subsidy for the renewal of the drilling fleet in the next five years should amount to about 27 billion rubles. A similar support measure has already been in effect in 2020 since November, then only six installations were updated, the subsidy amounted to 600 million rubles. At the same time, in May, the Ministry of Industry and Trade asked to allocate a very modest amount from the budget for updating drilling rigs - 0.8 billion rubles each. in 2021-2024. In addition, the Ministry of Industry and Trade offered to subsidize up to 20% of the cost of new domestic mining excavators. The amount of subsidies in 2022–2024 was estimated at 1 billion rubles.

Dmitry Babanskiy from SBS Consulting notes that the cost of a mobile drilling rig with a carrying capacity of 225 tons is about 90 million rubles, a stationary drilling capacity of 320 tons is 700-800 million rubles. The main Russian players in the segment, according to the analyst, are Uralmash NGO (about 70% of the Russian market for heavy drilling) and the Ural-Siberian Industrial Company.





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