Larsen & Toubro 'conflict of interest' in ONGC tender

Vol 15, PW 20 (19 Apr 12) Exploration & Production

Larsen & Toubro, one of India’s biggest engineering groups, stands accused of a conflict of interest in one of two related ONGC tenders to develop the eastern offshore Vashishta and S1 deepwater fields.

L&T is a likely bidder in for the onshore and offshore tenders for this project, where the Project Management Consultant (PMC) is UK-based Pegasus Consulting. But angry rivals say engineering consultancy L&T-Chiyoda, a L&T subsidiary, is a Pegasus ‘subcontractor’ for the onshore facilities tender.

In other words, L&T-Chiyoda can access vital insider information from Pegasus unavailable to others. When contacted, a senior ONGC source dismisses the concerns, saying neither Pegasus nor L&T-Chiyoda are bidding.

“Pegasus hired L&T-Chiyoda for a small low-tech portion of the onshore facilities tender,” he said. “L&T is different from L&T-Chiyoda but we’ll take a call when bids come in.

We’re not sure L&T will bid.” He clarifies L&T’s bids will be rejected if they do not meet tender criteria after examination by ONGC’s commercial and legal departments.

ONGC previously barred L&T from its Cluster 7 FPSO tender, which closed on March 27 because affiliate L&T-Valdel was the PMC. ONGC plans to drill four wells at the Vashishta and S1 fields in water depths from 400 to 700 metres.

Each well could be drilled to between 2300 metres and 2600 metres TD, targeting ‘Pliocene-era’ formations. Together, the four planned wells are expected to yield 6m cm/d, beginning 2014-15, over eight years.

Gas will land at Odalarevu on the Andhra Pradesh coast through two 14-inch diameter, 25-km pipelines. Thirty-nine companies bought tender documents for the onshore project while 14 bought documents for the offshore project.

ONGC estimates the combined construction cost of onshore and offshore facilities at Rs3500cr ($700m).