Tax worries delay Sagar Laxmi upgrade project

Vol 16, PW 3 (23 Aug 12) Exploration & Production

Puzzling new service tax rules have forced ONGC to postpone its bid deadline to refurbish Sagar Laxmi, a Mobile Offshore Production Unit (MOPU).

Bidders and ONGC are unsure how a sweeping service tax regime effective since July 1 affects offshore construction projects. “ONGC wanted bids by August 17,” says one bidder.

“But on August 14 it said the deadline is being extended to August 24. We expect a clarification (on the service tax regime) in the next few days and will work it into our bid.

” ONGC sold 17 tender documents between May 4 and May 25. Fourteen companies attended the pre-bid in Mumbai on June 11, including Monnet India, Arya Offshore and Saipem, none of whom bought documents.

If any of these three decide to bid, they must partner one of the companies that did buy documents: Larsen & Toubro, Cochin Shipyard, Nakilat Keppel Offshore, Sembmarine Kakinada or Essar Offshore. ONGC has divided the job into two parts: upgrading process equipment; and dry-docking for structural refurbishment to extend the MOPU life by 20 years.

It wants to award the contract on October 9 and entrust Laxmi to the contractor by March 15, 2013. ONGC needs the MOPU back by March 15, 2014 to begin working in water depths of 55 metres at the B-127 marginal fields offshore Mumbai, north of the Panna, Mukta and Tapti fields.

Laxmi will be anchored beside a Single Buoy Mooring (SBM) and receive and process 11,700 b/d and 950,000 cm/d from the B-127, B-59 and B-157 fields. She will similarly receive and process 1m cm/d and 1.836m t/y of oil and condensate from the unrelated B-55 marginal field.

Laxmi is at the D-1 well/water injection platform in the Mumbai offshore.