IndianOil surprised by Punj polypropylene quote

Vol 18, PW 25 (13 Aug 15) Midstream & Downstream

Most would celebrate a cheap deal but IndianOil is instead perplexed by Punj Lloyd's mysteriously low quote for Package-2 for the polypropylene project at the 15m t/y Paradip refinery in Orissa.

Last week Punj made a presentation to IOC justifying its rock-bottom rate of Rs368cr ($58m) - around $33m lower than IOC's internal Rs550cr ($86m) estimate. A Punj source is optimistic it will win and insists its quote is realistic.

"We made a detailed presentation justifying our price and showing we can complete the work," he says. But rival bidders are doubtful, and predict IOC will scrap the tender and re-issue it as an Engineering Procurement Construction Management (EPCM) tender instead of a simple EPC contract.

An IOC source says senior management has yet to decide because as a state-owned company it must award the contract to the lowest bidder. Package-2 includes a Coker LPG treater, cooling towers, warehouses, and a flare system.

When IOC opened price bids on April 30, second-ranked bidder Engineers India with partner L&T was way behind Punj at around Rs850cr ($133m) followed by Toyo Engineering at around Rs1000cr ($157m). Separately, IOC on June 30 issued a LoI to China Kunlun Contracting & Engineering to set up the 680,000 t/y propylene unit itself (Package-1) by September 2017 for Rs2000cr ($313m).

Also in China Kunlun's scope of work is integrating the new polypropylene unit with the upcoming propylene recovery unit at Paradip.