Speculation about fresh WO-16 tender at ONGC

Vol 15, PW 9 (03 Nov 11) Exploration & Production

As expected, ONGC has allowed the October 27 price bid expiry deadline to lapse and decided against awarding the prestigious WO-16 marginal fields production platform contract to a consortium of Hyderabad-based SEW Infrastructure and Malaysia’s Ramunia.

ONGC’s decision has triggered intense speculation that it will issue a fresh tender to avoid an embarrassing anti-corruption probe for awarding the contract to SEW after it disqualified rival bidder J. Ray McDermott, which quoted nearly $30m less.

McDermott, we learn, is lobbying the oil ministry to overturn its disqualification, saying it made an ‘honest mistake.’ When ONGC opened price bids on August 30, SEW was lowest bidder quoting $191.4m.

Around six weeks earlier ONGC had disqualified McDermott for accidentally revealing its much-lower quote of $164m in the technical bid submitted on July 14. Anxious ONGC got SEW to extend the validity of its price bid several times and finally to October 27, hoping to convince it to match McDermott’s low rate.

But SEW refused. Some say ONGC will be making a costly mistake by opting for a fresh tender.

“Even if the fresh tender is ‘fast-tracked’ and ONGC awards the contract this month (November) the ‘jackets’ and ‘well-heads’ can be ready only by October 2012,” he says. “They could theoretically ‘sail out’ in November 2012 to meet ONGC’s schedule.

But in reality no bidder – except maybe L&T and McDermott - can meet such a tight schedule.” A fresh tender, he adds, could delay the project to build four ‘well-head platforms’ and ‘processing facilities’ at WO-16 by a full season.

“ONGC thinks it can save $30m by refusing SEW,” he says. “But it will lose $50m in production revenue if there’s a delay.

” Worse, McDermott is unlikely to bid so low in a future tender as it knows other bidders are quoting higher rates.