Financial Daily from THE HINDU group of publications
Sunday, Sep 11, 2005
Industry & Economy - Petroleum
ONGC tenders: Old contractors make a comeback
Mumbai , Sept. 10
ONGC feels that the return of some of its erstwhile EPC contractors from the 80s is like return of the prodigal.
Though the oil and gas major is not quite slaughtering the fattened lamb in celebration, it is happy that a lay-off of over two decades has not blunted the appetite of some global majors for ONGC contracts.
Nippon Steel Corporation of Japan, Saipem of Italy, and Daewoo and Samsung from South Korea, are among those vying for the five ONGC projects currently in the final stages of bidding.
The four companies played major roles in installing offshore platforms and laying submarine pipelines for ONGC till the mid-80s.
Mr S.C. Gupta, Executive Director, Chief Engineering Services, ONGC, told Business Line that the current round of bids have attracted as many as 10-12 bidders each.
The five bids, with an aggregate value of Rs 5,200 crore, would be finalised by November 2005, as the projects have to be completed by March 2008, he added.
The Vasai East development project, including process platform and well head, is worth Rs 2,000 crore; booster compressors for Bassein field is valued at Rs 1,200 crore; four well head platforms at Mumbai High will cost Rs 850 crore; another four well head platforms for Neelam, Bassein, Vasai East, and satellite field are worth Rs 800 crore; and the revamping of 26 well head platforms has a contract value of Rs 350 crore.
"Some of our old contractors are back, apparently attracted by the international practices we have embraced in the tendering process. We also have attracted some new players from Russia and Malaysia over and above the regulars. The stress is to replace contractor-client relationships with partnerships," Mr Gupta said.
The ONGC Chairman, Mr Subir Raha, at a seminar here, had reiterated this approach, calling for long-term relationships:
"The time has come for us to talk of evergreen contracts. What we need are long-term relationships, not one-off contracts."
With ONGC making an effort to address vendor concerns by introducing pre-tender meets and toning down on damages/liabilities that were in some cases actually billed above the contract value, more contractors are finding the going attractive, an industry watcher said.
"Also, there is more action, both on and off the Indian shores, especially with the Krishna Godavari belt getting active. Reliance Industries too has got active in E&P play, so there is scope for more contractors to survive in India without bidding each other out of the market," he added.
This does not mean that the days of low-margin bids, and the ensuing domination by the likes of Hyundai Heavy Industries, may be totally over.
Having pushed out not only the Japanese and the Europeans but also fellow South Koreans from ONGC projects, it may not be all that easy outbidding Hyundai even in the existing scenario.
Clearly, those entities that have detailed engineering capability, own fabrication yard, and marine spreads under one umbrella will continue to have the edge.
Come November, one will know whether the return of the prodigals was merely cosmetic or not.
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