The joint venture between the country's largest oil producer and the largest shipping company Shipping Corporation of India [Get Quote] to build rigs has not taken off thanks to falling crude oil prices.

Falling oil rates have made rigs available for hire at a cheaper rate.

Oil and Natural Gas Corporation planned to foray into building rigs in June 2008 owing to its short supply as crude oil prices zoomed northwards.

The price of the benchmark Brent crude reached an all-time high of $145.6 a barrel in July last year. It has declined by nearly 68 per cent to $46.

SCI also decided to get into building ships last year as the booming global economy left the yards brimming with new orders. And that prompted the two public sector companies to come together for building rigs.

"The plan has not fructified at this point in time," said Umesh Grover, director, technical and offshore, SCI. "The scenario has changed and we will consider that in our next meeting," he added. The meeting is expected to take place in three to four weeks.

Rigs are primarily used for exploration. Once the oil is found, the field is developed for production. With crude oil prices declining, exploration activity is likely to get impacted, mainly in the deep sea fields where typically the cost of production is $40-50 a barrel.

"We are still interested in the plan," reiterated S Hajara, chairman and managing director, Shipping Corporation of India. 

An ONGC [Get Quote] official declined to comment on the issue. Indian oil [Get Quote] producers such as ONGC and Reliance Industries [Get Quote] are expecting to benefit from the 20 per cent downfall in daily operational rates for rigs, analysts said.

Indian companies have long-term contracts of about a year and they will reap the benefit once the contracts come for renewal. ONGC has around eight (the largest number) jack-up rigs operating in India. The company pays around $670,000 per day for deep water rigs.