Halliburton wins mud tender as KMC protests

Vol 18, PW 21 (18 Jun 15) Exploration & Production

Victory in an ONGC tender is never guaranteed, not even for the lowest bidder.

This is something KMC Oiltools is discovering to its dismay as it fights to win a two-year contract to supply oil-based drilling mud for 190 offshore wells. When ONGC opened bids on May 12, KMC, a subsidiary of Malaysia’s Scomi Group, quoted lowest at around $50m (Rs300cr).

Halliburton came second with a price higher by around $2m followed by Baker Hughes and Schlumberger subsidiary M-I Swaco. An industry source says ONGC bypassed KMC to pick second-ranked Halliburton, giving KMC no option but to complain to ONGC’s Independent External Monitors (IEMS) - a first meeting was held on June 16 to hear both sides.

Analysts speculate KMC was probably rejected because of its “sophisticated pricing strategy” in the bid. In the tender ONGC wanted bidders to use fixed and variable components in the price, benchmarked against the price index of base oil, used in drilling mud.

“When base oil prices are low KMC has an advantage,” we hear. “But when they are higher it is at a disadvantage.

This seems to be the only reason why the tender committee chose Halliburton over KMC.” However, we are told, Halliburton’s bid is also flawed as it listed 11 chemicals while calculating the price; ONGC’s bid evaluation criteria clearly states bidders should list nine chemicals.

KMC and M-I Swaco listed nine, Baker listed 13.