Battle within ONGC over need for deepwater rig

Vol 13, PW 12 (19 Nov 09) Exploration & Production

ONGC top management is arguing with its drilling division over whether the state-owned behemoth really needs to hire another ultra-deepwater rig.

PETROWATCH learns that on September 15, the ONGC drilling division requested the Executive Purchase Committee (EPC) to approve a fresh global tender to hire a deepwater rig that can drill in 12,000 feet water depths. This rig would be hired for a â€کfirm’ period of 18 months, beginning on or before December 31, 2011 to drill six deepwater locations.

There would also be an early mobilisation incentive of $150/day for drillers. But the EPC rejected this proposal immediately, unsure that another ultra-deepwater rig is needed for such a long time.

A source adds that this proposal was already reviewed in July and that the EPC had then directed the drilling division to fine-tune its assessment, given that Transocean deepwater rig Dhirubhai Deepwater KG-1, subcontracted in May for four years from Reliance, can already drill in 12,000 feet water depths. The EPC now wants the drilling division to deliver a comprehensive presentation about why it wants an additional ultra-deepwater rig before it submits further proposals.

Separately, in the September 15 proposal, which the EPC rejected, the drilling division suggested ONGC should not force companies to submit bids through ONGC’s online server, nor should it hold â€کreverse auctions’ (posting the lowest price online and inviting even lower prices from other bidders). Potential bidders apparently have strong objections to both methods, claiming they are inefficient and time-consuming.

Instead, says the drilling division, ONGC should stick with its existing system of making bidders submit two sealed envelopes: one with a techno-commercial bid and the other with a price bid. Further, the drilling division says the vexed issue of whether service tax is applicable should be decided during the second pre-bid conference held for this fresh tender.