Unfair rules force ONGC to upgrade rigs with BHEL

Vol 8, PW 21 (26 Jan 05) Exploration & Production

ONGC has once again reluctantly awarded a contract worth Rs350cr ($77.7m) to state-owned Bharat Heavy Electricals (BHEL) to upgrade 12 of its onland drilling rigs.

There was no competitive bidding in this tender, admits ONGC. The price-purchase preference for public enterprises in such tenders is keeping international companies away.

ONGCs latest award to BHEL is the second in a three-phase programme to upgrade between 24 and 36 of ONGCs onland rigs but under present Indian government rules preference is given to other state-owned companies over foreign companies if they can match the price of the lowest bidder. ONGC has made several representations to the oil ministry to try to get these rules changed, a senior ONGC source tells us.

But the ministry tells us that only the heavy industries ministry can issue such a waiver because it introduced the rule through its department of public enterprises. As a consequence, international contractors continue to ignore rig refurbishment tenders from ONGC because they know that even if they are the lowest bidder, ONGC is forced to ask a state-owned company like BHEL to match the lowest price and carry out the work.

They know it is a waste of time to participate in our tenders, he adds. There is no dearth of business in the world outside and thats where they are going.

In the first phase, BHEL was awarded a similar contract to upgrade 12 onland rigs. Eight have been upgraded and redeployed in onshore fields.

In the third phase, ONGC will upgrade another 12 onland rigs deployed in Indias northeast. In 2002, ONGC decided to upgrade its fleet of 74 onland rigs - all manufactured before 1985.

Fifty-five were supplied by BHEL.