ONGC rejects Schlumberger wish-list for Geleki

Vol 22, PW 11 (21 Mar 19) People & Policy

ONGC has flatly turned down a request by sole bidder Schlumberger for up to 30 'deviations' or changes to its tender terms for a Production Enhancement Contract (PEC) at the Geleki field in Assam.

"ONGC has refused to make any changes," asserts a well-placed ONGC source. Angry and irritated, ONGC managers are perplexed that Schlumberger didn't raise the 'deviations' during a pre-bid conference before technical bids were opened in mid-January (2019).

"Schlumberger is demanding impossible conditions," he adds. "And that too after the technical bids were submitted!" This report learns Schlumberger has asked ONGC to consider a 24% projected decline in production over the next few years against ONGC's more conservative estimate of a 14% annual decline based on Geleki's production profile from 2012/13 to 2017/18.

Before that, says ONGC, the annual production decline was around 8%. Schlumberger's demand is critical: under a PEC the contractor receives a fee only for every barrel of incremental oil produced over an agreed baseline.

By demanding a larger projected decline, Schlumberger is ensuring it gets paid. To illustrate, assume Geleki production of 100 b/d.

If ONGC accepts Schlumberger's contention that Geleki production will fall by 24% the baseline production will be 76 b/d and it will be forced to pay Schlumberger for any production over that figure. But if Schlumberger accepts ONGC's projected 14% decline production would need to hit 86 b/d before Schlumberger gets paid anything.