CTU has been gaining importance in the oil industry. It is a multipurpose unit with one application being drilling. The major limitation of CTU was eliminated recently by inventing rotating coiled tubing which is yet to hit the commercial market. In this concept a conventional derrick based rig is modified to a Hybrid Drilling Rig. A coiled tubing unit is incorporated inside derrick structure itself at a height above the derrick floor which depends on type of derrick. The coiled tubing unit added is not the conventional one instead it is a unit that actually rotates the coiled tubing. This coiled tubing will be placed horizontally above the floor. It has a support structure passing through its center which is detachable. The use of this center structure is that it has straightening injector fixed in it and it supplies the torque to the CTU. Coiled tubing from the CTU will take a helical path around the support structure, pass through the injectors and become straight. The purpose of the paper is to discuss the advantages and limitations of this hybrid drilling rig technically and economically. Also some calculations are included which are used in the design of the rig used. This paper also outlines fatigue analysis and advantages and limitations of using rotating coiled tubing. Introduction CTU, after it was invented many decades ago has been experiencing increase in demand in the oil industry. Apart from its basic uses, it has recently gained importance for drilling. Hence with the advancement in coiled tubing drilling we can consider the CTU to be one of the most versatile equipment available to the industry that can be used for a wide range of jobs or tasks performed on the rig. The only problem with the coiled tubing was its inability to rotate which reduced its efficiency. Recently rotating coiled tubing was invented by John Van Way which was used on a workover rig as a model in Louisiana. This is the basis on which this concept, of using a CTU on a rig efficiently, may fetch us good results. This paper will give describe how a rotating coiled tubing can work on a rig. Now days whole vertical wells are drilled with coiled tubing especially in many parts of Canada but still it poses some problems when it comes to hard formations. Coiled tubing drilling is not a replacement of conventional drilling equipment for drilling conventional, directional, and horizontal wells. The real application will be on drilling projects requiring special consideration such as:Environmentally sensitive areas where noise abatement and well control must be assured.Underbalanced drilling in areas where special permission is required and may not be obtainable for conventional equipment. These projects may require oil based mud systems, or aerated or gasified mud systems.Offshore re-entry drilling where the platform cannot support a workover rig or workover rig does not exist and would be too costly to refit platform with a rig.Through tubing drilling where mobilizing a workover rig to pull the production tubing would increase project cost to the point that would be uneconomical.High pressure underbalanced drilling where conditions exceed normal equipment capabilities. So drilling with this hybrid rig requires use of the conventional rotary steerable drilling technique and reduce the costs by using coiled tubing simultaneously wherever possible, making it an overall economical drilling project. Besides coiled tubing will provide its conventional services like well unloading, cleanouts, acidizing/stimulation, velocity strings, fishing, tool conveyance, well logging (real time & memory), setting/retrieving plugs and fracturing onboard.