Deepwater ONGC tender might see â€کreverse auction'

Vol 12, PW 13 (13 Nov 08) Exploration & Production

ONGC is thinking about introducing a controversial â€کreverse auction’ system for its forthcoming tender for a rig to drill in water depths of 12,000 feet even though it knows that contractors may not participate as a result.

PETROWATCH learns ONGC “has decided in principle to have â€کreverse auctions’ for all procurement.â€‌ The decision now is whether to start with the ultra deepwater rig tender or wait, we hear.

In a â€کreverse auction’, the lowest bid is displayed without the name of the bidder. Other bidders can then match or go lower within a certain number of days.

If ONGC decides on a â€کreverse auction’ for this tender, bidders must collect bid documents and submit them to ONGC electronically. ONGC admits that internal discussions are still going on about the suitability of a â€کreverse auction’ for a deepwater tender given limited bidders.

“There are currently no rigs in operation which can drill in water depths of 12,000 feet,â€‌ says ONGC, adding that four or five such rigs are expected to be in service globally from 2009. Still, the â€کreverse auction’ system works best when there are several bidders, our source notes.

“A â€کreverse auction’ works best in the jack-ups category where there are usually many bidders,â€‌ we are told. “But in the deepwater and ultra deepwater categories you can count the bidders on your fingers.

â€‌ Deepwater and ultra-deepwater rigs are also usually offered to several operators at the same time to get the best contract. “We are not sure if (deepwater) drillers will participate in â€کreverse auctions’,â€‌ our source says.

But a decision on holding a â€کreverse auction’ should come soon, we hear, because ONGC wants to issue the tender before November 15. “If there’s a delay, it will be only for a week or so.

â€‌ Deepwater drillers are unlikely to bid in a reverse auction because strong demand for their rigs continues.