L&T denies PRP-7 work stoppage

Vol 25, PW 18 (11 Aug 22) News in Brief

Larsen & Toubro has flatly denied market rumours that it has suspended work at ONGC's seventh Pipeline Replacement Project (PRP-7) offshore Mumbai due to a sharp increase in the prices of special grades of Ukrainian-made steel.

L&T is ONGC's EPC contractor for PRP-7 and has, apparently, verbally told ONGC it wants 'change orders' approved to reflect the new situation on the ground, but this could not be independently corroborated. We hear L&T had ordered pipes from Ukrainian steel mills, which have increased prices since February (2022).

ONGC is learnt to have told L&T that it will not approve any price increase as this is not provided for in the contract. Unfazed, L&T has reportedly told ONGC that it will not go ahead with any work, preferring to pay Liquidated Damages for the delay.

"Under the contract, ONGC can impose a maximum LD of 10% of the contract value," said a source. L&T won the PRP-7 contract in January 2022 for $502.811m, including marine services, and has completed detailed engineering.

But work has now stopped due to the deadlock over the increase in pipe prices. "No letters are being exchanged (between L&T and ONGC) about this dispute, everything is verbal," says a source.

"L&T will lose a maximum of $50m, but ONGC will lose much more because its ageing pipelines will not get replaced and could leak." Adds another source: "ONGC is getting a taste of the future when there will be no other EPC contractor for its projects."

Just L&T and Abu Dhabi's NPCC qualified for PRP-7 by ONGC, which disqualified Iran's IOEC over a technicality. Contacted by this report, L&T said: "L&T is executing the PRP-7 project as per the agreed plan and is always responsive to customer needs.

The contents of your email are speculative and defamatory. L&T does not have any knowledge of the same and would refrain from commenting on it."