Bloodbath as ONGC freezes $2bn EPC investment

Vol 18, PW 11 (29 Jan 15) People & Policy

More than $2bn worth of EPC projects in India are under threat as ONGC freezes investments in response to the plunging oil price.

Acting on an instruction from the Board, Anil Kumar Sachan, chief of materials management services, issued a circular on January 14, suspending work on “all tenders pertaining to procurement of oilfield related goods, services and LSTK contracts valuing (sic) Rs50cr ($8m) and above where techno-commercial bids have been opened before January 1, 2015.” Sachan stressed that for such tenders ONGC should not open price bids and if price bids have been opened then LoAs should not be issued “until further orders”.

Hardest hit by the ONGC directive is an estimated $650m pipeline replacement project or PRP-IV at the Mumbai High; an estimated $900m programme to revive Mumbai High (South) production, or MHSRD-II; a total $500m worth of contracts to upgrade unmanned platforms under RUMP-I and RUMP-II; and a total $430m worth of planned contracts to revive production at the Ahmedabad and Mehsana assets. Unsurprisingly, EPC contractors are shocked.

“Nothing will move!” says one. “All projects will get stuck.

What is Rs50cr? Nothing!” Another contractor believes ONGC is panicking. “At least LoAs should be issued where price bids have been opened,” he asserts.

One source suggests contractors can lobby ONGC to execute individual oil projects, “on a case by case basis.”