Chevron cuts rig deal loose

Chevron has made the most of the fallout of cyclone Olwyn to cut short a long-standing drill rig charter contract with Atwood Oceanics, likely to save the US oil and giant at least $US100 million ($129 million).

Chevron had originally signed up the Atwood Osprey semi-submersible rig until May 2017, at a day rate of $US455,000, to complete the production wells for the $US29 billion Wheatstone LNG development.

But termination rights triggered after Atwood lost control of the Osprey during cyclone Olwyn last month, when the rig snapped its mooring lines and drifted more than 5km from its location atop the Iago 1B well, meant Chevron had the right to terminate the long-term hire contract.

Instead, Chevron cut the deal to May next year, a sign of the company's comfort with the progress of Wheatstone's drilling campaign.

Although Wheatstone is not expected to produce first gas until the end of next year at the earliest, Chevron reiterated yesterday the LNG project's upstream construction was on track and "not on the (time) critical path".

Atwood announced the cut to Osprey's hire contract on Friday night but said the contractual rates would remain unchanged.

Chevron declined to provide details including the likely savings from ending the contract a year early.

"We don't comment on commercially confidential contract arrangements," a spokeswoman said.

"The change is not expected to have any impact on the drilling program for the Wheatstone project."

Atwood said repairs to the Osprey, which are being done in protected waters near Dampier, were expected to take until April 30 before the rig was towed about 180km out to sea to complete its Wheatstone work.

Atwood declared the Osprey incident as a force majeure, important for its insurance purposes. The extent of damage to the Osprey, other than the snapped mooring lines, remains unclear.

As it drifted during the cyclone, the rig's dragging anchors caused superficial damage to Wheatstone's trunkline as well as to the nearby gas flowlines for Woodside Petroleum's Pluto LNG project.

Atwood and Chevron initially signed up the Osprey from 2011 to drill production wells for the Gorgon project before the deal was extended by three years, to May 2017, for Wheatstone. SOUTH BOUND 225 The length, in kilometres, of the export trunkline that will deliver Wheatstone's gas to the LNG plant near Onslow