Bangalore: Private sector shipbuilder Pipavav Shipyard Ltd has won a $112 million (around Rs537.6 crore) contract from state-run Oil and Natural Gas Corp. Ltd (ONGC) to build 12 ships to be used to support oil drilling.
“We have received notification of award of contract from ONGC,” Pipavav chief executive officer J.P. Rai told Mint in a telephone conversation from Mumbai. An executive at ONGC confirmed the development, but did not want to be named because the deal has not been made public yet.
Pipavav beat nine contenders including ABG Shipyard Ltd, Bharati Shipyard Ltd and Cochin Shipyard Ltd.
The contract is Pipavav’s first for building ships used to support offshore oil exploration. Offshore support vessels play a key role in offshore oil exploration, being used to ferry workers, equipment and other supplies to oil fields. It also comes at a time when other shipbuilders are struggling to get orders in the wake of a global economic slowdown.
In February 2008, Pipavav, an unlisted firm promoted by SKIL Infrastructure Ltd, first started building ships. The firm has secured contracts for constructing 26 dry bulk cargo-carrying ships ordered by global fleet owners such as SETAF SAS of France, AVGI Maritime Services SA of Greece and Golden Ocean Group Ltd for a total value of $1.1 billion.
ONGC currently has a fleet of 30 offshore support vessels, most of which are undergoing repairs. The oil explorer requires 62 vessels to meet its exploration and production commitments. It has hired 32 support vessels from private shipping firms to assist in exploration, but is facing a shortage. The 12 new vessels are expected to join its fleet within 24-30 months, as part of its long-term plan to reduce shortage of these assets and also to replace older vessels.
Two persons with knowledge of the auction process said ONGC was able to save as much as $89 million for buying the 12 ships by asking for revised price quotations from the shortlisted firms to take advantage of the fall in ship prices globally.
In the first round of bidding in March, ONGC had received lowest price quotation of $16.7 million for building each vessel. At that price, the contract would have been worth $200.4 million. In the second round in May, the total acquisition cost fell to $112 million.
Pipavav is looking for a stock exchange listing by selling shares to the public through an initial public offering. Last year, the firm had filed a draft prospectus with the Securities and Exchange Board of India to raise about Rs800 crore through a public issue. The share sale was put on hold due to poor market conditions.