Leighton fights Swiber for ONGC pipeline contract

Vol 15, PW 16 (23 Feb 12) Exploration & Production

Leighton Welspun faces tough competition from Swiber Offshore for a job to replace old oil and gas pipelines and valves offshore Mumbai, which ONGC tentatively values at $615m.

ONGC received sealed quotes from nine bidders by the February 7 bid deadline for its ‘Pipeline Replacement Project-3.’ But still unclear is when ONGC will open price bids or award the contract, as it is still evaluating technical bids.

An observer says the frontrunners are Leighton, the Indian arm of Australia’s Leighton Holdings and Singapore-based Swiber. “Leighton should finish its present (ONGC Mumbai High) assignment working on the WIN platform revamp by April and will have no major project after that,” he says.

“Swiber will finish ONGC’s B-193 pipelines project by May (2012) after which it only has ONGC’s Cluster 7 pipeline project left (for completion by May 2013), making it hungry for more ONGC work.” Swiber, he adds, has an exclusive arrangement for inexpensive pipe supplies from several Russian manufacturers, giving it a price advantage over competitors.

“Leighton is bidding unreasonably low in ONGC tenders lately,” adds another source. “It is likely to do so here too.

” For instance, Leighton quoted just $8.39m in ONGC’s separate tender to modify platforms at its western offshore Heera field, where price bids were opened on January 23, well below ONGC’s internal estimate of $21.9m. “Market rumours say the winning quote (for Pipeline Replacement Project-3) will be around $400m,” we learn, “far below ONGC’s $615m internal estimate.

” Leighton previously executed ONGC’s Pipeline Replacement Project-2 in the Mumbai Offshore, partnering Das Offshore. When contacted, Swiber insists it has not bid a silly rate.

“Anybody who wins by bidding a foolish price will come to grief,” he says. “It’s a complicated project!”