No end to ONGC row with Transocean

Vol 14, PW 5 (26 Aug 10) Exploration & Production

ONGC’s powerful Executive Purchase Committee will have to intervene directly in a disputed semisubmersible tender, where Essar Oilfield Services and Transocean submitted bids that were tantalisingly close.

PETROWATCH learns two of three ONGC external monitors for this tender believe Transocean ought to have won as the lowest bidder in this tender for the Global Santa Fe-135 rig that it offered. ONGC had earlier picked Essar Wildcat from Essar Oilfield when price bids were opened in Mumbai on July 9, based on July diesel prices.

Angry Transocean then approached ‘independent external monitor’ and ex-bureaucrat VK Shunglu alleging bias and “arbitrary action” during the evaluation process. At the end of July, Shunglu and fellow ex-bureaucrat and external monitor Arvind Varma attended an ONGC presentation on the dispute.

Transocean presented its case to Shunglu and Varma on August 6 and Essar told its side of the story on August 11. Soon after, we hear, both Shunglu and Varma verbally recommended Transocean for the contract, as its price worked out lower than Essar’s if diesel prices were considered for June – when bids were submitted.

According to an industry source, ONGC and Essar are both furious at Shunglu and Varma’s decision. “ONGC is clear it has done no wrong by using July’s diesel prices as price bids were opened in July,” he says.

“In such cases the current month’s diesel prices have to be taken into account, not the previous month.” ONGC, he adds, took delivery of 6000 kilolitres of diesel at Nhava port on July 1 at Rs34,520/kl ($740) and used that price while evaluating diesel costs.

But ONGC does not need to follow the recommendations of the external monitors. Its ‘materials management’ department is defending the decision to pick Essar and is preparing a detailed explanation for the EPC.