Home Companies Industry Politics Money Opinion LoungeMultimedia Science Education Sports TechnologyConsumerSpecialsMint on Sunday

Unusual partners emerge to land ONGC contract

Unusual partners emerge to land ONGC contract
Comment E-mail Print Share
First Published: Wed, May 09 2007. 03 54 AM IST
Updated: Wed, May 09 2007. 03 54 AM IST
Mumbai: A five-year $730 million (Rs2,993 crore) bidding opportunity has made for some interesting bedfellows and contenders.
Bharat Kanaiyalal Sheth, the deputy chairman and managing director of India’s biggest private shipping firm, Great Eastern Shipping Co. Ltd, parted ways with his cousin, Vijay Kantilal Sheth, through a de-merger of the Mumbai-based company last year after a “family split.” As a result, the offshore services division of Great Eastern was demerged into a separate entity, called Great Offshore Ltd, with Vijay as its managing director.
But, that hasn’t stopped Bharat from leaning on his cousin’s shoulder to bid for a mega tender floated by state-run Oil and Natural Gas Corp. Ltd (ONGC), even though both companies are rivals for the project.
As a result, Great Eastern’s wholly-owned offshore subsidiary Greatship (India) Ltd, of which Bharat is the chairman, and Vijay’s Great Offshore are competing with each other for the ONGC deal. ONGC plans to hire two newly-built independent leg cantilever type offshore jack-up rigs that can drill in water depths of 300-350 feet for a five-year period starting mid-May 2009.
Such rigs can extend drilling equipment over an existing, fixed structure, thus, permitting the rig to drill or work over an oil well located on such a structure. An independent leg slot type jack-up rig, on the other hand, does drilling operations through a slot in its hull and is best suited for drilling exploratory wells. The rig’s configuration makes it difficult to position over existing platforms or structures.
At current market prices, a cantilevered jack-up rig will fetch a day rate of about $200,000 (Rs82 lakh) and the ONGC deal is worth about Rs2,945 crore over a five-year period.
As per the ONGC tender, an entity bidding for the deal should be an offshore drilling contractor or firm with a minimum experience of three years,?out of which, at least one year’s experience should be in operating such a rig.
Bidders who don’t have the relevant experience can have a technical collaboration with an experienced drilling contractor,?or?firm through a memorandum of understanding. With no experience to show on its own as a drilling contractor and that too in the cantilever category, Greatship has applied for the ONGC contract on the strength of MoUs for technical assistance signed separately with Great Offshore and Norwegian offshore drilling contractor Sea Drill Ltd, the Bermuda-based firm controlled by Norwegian shipping tycoon John Fredriksen.
Greatship has entered into the agreements with both firms for technical assistance, confirmed Rajat Dutta, general manager, planning at Great Eastern. “The demerger of the offshore oil field services business of Great Eastern was with a view to creating shareholder value through realignment of the business. There is nothing in the demerger to restrict such a technical understanding/alliance between Greatship and Great Offshore.”
Ahead of the bid decision, Greatship is building a rig at Singapore’s Keppel FELS Ltd, the world’s top designer and builder of jack-up drilling rigs. Great Offshore is also building a similar rig at Bharati Shipyard Ltd. Meanwhile, a spokesman for Great Offshore says, “We have experience in operating slot type rigs for many years. But, we don’t have experience in operating cantilever type rigs. But, it is not a big technical difference.” It operates a 1975-built independent leg slot type rig called Kedarnath and a drilling barge or floater called Badrinath.
Asked why the two firms are teaming up even as they compete, he would say, “it could be a part and parcel of the demerger scheme.”
The Sheth cousins are also vying for the deal with other strong contenders, such as local firm Aban Offshore Ltd, KCA Deutag, a wholly-owned subsidiary of Scotland-based Abbot Group Plc., Mercator Lines Ltd, Jindal Drilling and Industries Ltd (a DP Jindal Group company) and Essar Oil Fields and Services Ltd, among others. Mercator, which is also building a rig at Kepel FELS, has entered into technical tie-ups with Russia’s largest oil firm Lukoil and Norwegian drilling firm Odfjell Drilling to meet the experience criteria set by ONGC.
In response to its tender, ONGC has received offers for 17 jack-up rigs from nine firms. The two rigs have to be given to ONGC sometime in mid-May 2009 when the contract is slated to begin.
Jindal, for instance, has offered two rigs currently under construction at Keppel FELS. Essar, which has re-entered the drilling business after a long gap, has offered two rigs to ONGC for which a contract is yet to be signed with a builder. Essar claims that it is building two rigs at ABG Shipyard in India.
However an ABG official, who did not want to be named, said that it was yet to take orders for building rigs at its planned rig-building facility in Dahej, which is likely to start operations in December 2008. An Essar spokesman declined to comment.
Others eyeing the contract are Unitrade Geselschaft, the local agent for Japanese offshore drilling contractor Japan Drilling Co. Ltd. Delhi-based Jagson International Ltd, which lacks experience in operating a cantilever rig, has tied up with Canada’s Davie Shipyard for building the rig.
Meanwhile, Greatship’s second agreement with Sea Drill may also raise a few eyebrows, given ONGC’s recent experience with the Norwegian firm following a contract default last year.
After a fire on 27 July 2005 cut production from its Mumbai High North field, ONGC had last year hired Crystal Sea, a small floating production, storage and off-loading vessel from Golden Dream Shipping of Cyprus, a Sea Drill affiliate. The vessel has facilities to process and store oil flushed up from the sea bed, while gas produced from the field is pumped through a pipeline.
ONGC planned to use Crystal Sea as a temporary facility to recoup oil until permanent processing facilities were built to replace the platform destroyed by the fire. The vessel was hired for five years through local firm Discovery Enterprises Pvt. Ltd, another DP Jindal Group company, for a day rate of $96,000 out of which $76,000 went to Sea Drill and $20,000 to Discovery.
Though, Crystal Sea arrived in May 2006 in Mumbai port and the contract was intended to begin in July, a technical snag prevented the vessel from starting operations for several months. Finally, on 19 January this year, Crystal Sea sailed away from Mumbai port under “controversial circumstances”.
ONGC said the Crystal Sea captain was permitted to move the vessel away for three days from the inner anchorage in the Mumbai port to clean its tanks. But Crystal Sea never returned. ONGC is probing the matter internally, said an official with the state-run firm who did not want to be named.
Comment E-mail Print Share
First Published: Wed, May 09 2007. 03 54 AM IST
More Topics: Corporate News | Sector Spotlight |