ONGC’s new rig ten­der puts cost be­fore qual­ity

Business Standard - - ECONOMY - ADITI DIVEKAR More­on­busi­ness-stan­

The Oil & Nat­u­ral Gas Cor­po­ra­tion (ONGC)’s lat­est ten­der, drawn out on the Qual­ity and Cost based se­lec­tion (QCBS) scheme, has at­tracted old jackup rigs av­er­ag­ing 41 years.

The ear­lier ten­der from the coun­try’s largest oil and gas ex­plorer did not have the QCBS scheme and the age of jack-up rigs av­er­aged 36 years. In­di­cat­ing ONGC’s skew for lower-cost rigs over the bet­ter-qual­ity and newer gen­er­a­tion of jack-ups.

ONGC in­tro­duced the QCBS cri­te­rion which gives 25 per cent weight to tech­ni­cal and 75per­cent to­com­mer­cial as­pects. But, in ef­fect, the tech­ni­cal weigh­tage given is only 7.5 per cent and this trans­lates into a cost dif­fer­ence of just about $1,000-$1,500 a day be­tween a new gen­er­a­tion and a 39-year-old rig. “High spec jack-up rigs are two-three times more ef­fi­cient in terms of per­for­mance. More­over, the man­power needed for high-spec rigs is about 10 per cent lower com­pared to the junk ones, even if the cost for the for­mer could be 50 per cent higher,” says Anand Sharma, di­rec­tor of Mantrana Mar­itime Ad­vi­sory.

Mes­sages sent to ONGC were unan­swered till the time of go­ing to print.

“One needs to con­sider the as­so­ci­ated costs when de­ploy­ing an old junk rig, as the risk for cost over­runs due to in­ef­fi­ciency is far higher com­pared to that for high-spec jack-ups and can lead to project de­lays,” Sharma added.

State-owned ONGC is the largest client for most of the do­mes­tic oil drilling in­dus­try. Nearly 95 per cent of the drilling in­dus­try rev­enue comes from it. In its QCBS ten­der dated De­cem­ber 3, it at­tracted 14 bid­ders. Six were high-spec jack-ups and the rest were old rigs. In the June 2017 ten­der, there were 17 bid­ders, of which eight were high-spec.

Great­ship, Jag­son, Dy­namic Drilling and Aban Off­shore, along with Jin­dal Drilling, are some of the top com­pa­nies in the seg­ment, in the do­mes­tic mar­ket. Over re­cent years, they had in­vested in new-gen­er­a­tion and high-spec­i­fi­ca­tion rigs, to align them­selves with ONGC’s fleet mod­erni­sa­tion plan.

The bids are to be opened on Jan­uary 15. Among the bid­ders is Dy­namic Drilling’s 45-year-old rig, Noah’s Ark. It was used as an ac­com­mo­da­tion plat­form by op­er­ater Pars Oil & Gas be­tween Oc­to­ber 2015 and June 2016; it again came un­der drilling sta­tus in June 2017.

“A rig is used as an ac­com­mo­da­tion plat­form when the drilling com­pany knows the as­set is too old to give any de­cent earn­ing. In­stead of cold-stack­ing it, drilling com­pa­nies pre­fer to de­ploy these fa­cil­i­ties as an ac­com­mo­da­tion plat­form only to re­cover some cost,” ex­plained Sharma of Mantrana.

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