Essar legal challenge over ONGC rig tender

Vol 14, PW 6 (09 Sep 10) Exploration & Production

Frustrated ONGC must be cursing the day it floated a much-disputed semisubmersible tender, where Essar Oilfield Services and Transocean submitted almost identical bids.

In the latest twist, PETROWATCH learns Essar filed a suit against ONGC in the Delhi High Court at the end of August, angry at ONGC’s plans to scrap and re-issue the tender. On August 31, we learn, the Delhi High Court issued a ‘stay order’ barring the planned re-tender.

ONGC, its ‘independent external monitors’ for the tender, and Transocean now have until October 19 to submit a response. When ONGC opened price bids for this tender in Mumbai on July 9, it discovered Transocean had offered Global Santa Fe-135 for an ‘Effective Day Rate’ of $249,911 while Essar’s Essar Wildcat was barely a hair’s breadth behind with $249,997.

ONGC later used July diesel prices to calculate that Essar’s bid was lower than Transocean’s by $170/day. Angry Transocean responded with a letter of protest on July 20 to independent external monitor and ex-bureaucrat VK Shunglu and ONGC top management.

Shunglu and fellow external monitor Arvind 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. Next the case went to ONGC’s powerful Executive Purchase Committee.

On August 27, industry sources tell us, the EPC opted for a re-tender without giving any reason. Some believe the EPC wanted to avoid controversy and potential allegations of favouring either Essar or Transocean.

If so, its plans have backfired. “Essar feels it’s being victimised because of Transocean’s frivolous letter (to ONGC management),” we hear.

“Despite the views of its external monitors, ONGC should have stood firm even if the price difference was just $1/day as it had done nothing wrong.”