Blame ONGC terms for the discouraging response

Vol 9, PW 7 (14 Jul 05) Exploration & Production

ONGC was surprised to receive bids for only two of the nine clusters of offshore Mumbai marginal fields.

Throughout the bid process, from EoI till pre-bid meetings to preparation of the tender documents, close interaction with would-be bidders prevailed. We made sure we involved interested companies in the process, ONGC tells us.

Others offer a different explanation for the poor response, particularly those that didnt bid. The terms were not good, reveals one.

So there were bids only for the very prospective fields. One major complaint was that any gas could be used only to generate power for the ONGC grid.

Bidders did not have the freedom to sell gas or flare it, we hear. That was seen as restrictive.

Another complaint was that gas reserves would only be available for two or three years. Why would any company spend money to set up a power station for gas available for such a short period, said another.

It was unrealistic of ONGC to ask bidders to set up a power plant. These fields lie in water depths of between 50 and 80 metres and development costs can be exorbitant given the expected sizes of the hydrocarbon pools.

Another company attributes the poor response to ONGCs terms. It was certainly a disappointment for ONGC, he said.

But what else could they have expected They set the crude oil price band (between $18 and $35 per barrel) too wide. Unimaginative grouping of the fields into clusters was also blamed.

If they had combined cluster nine with cluster two there would have been bids for that. ONGC disagrees.

The terms were good, reveals a source. They were framed with the bidders.

At no time did any bidder raise concerns about the terms.