ONGC selects Mazagon Dockyard Shipbuilders for natural gas & condensate flow from DSF-II blocks
New Delhi: After dropping L&T from a tender for setting up wellhead platforms and pipelines at DSF-II and MBOSN-2005/1 fields, Oil & Natural Gas Corporation has engaged Mazagon Dockyard Shipbuilders Ltd (MDL) for a split job of building such facilities only at DSF-II.
The Rs 5212.54 crore ($624.85 million) contract is being awarded to MDL on a nomination basis with open book estimates (OBE) where suitable exit provisions are being kept at various stages of the contract to ensure timely completion of the project.
ONGC expects the negotiated ceiling cost for constructing seven platforms along with associated pipelines and topside modifications to come down as MDL has assured to negotiate with its sub-contractors and passing the benefit to ONGC.
ONGC expects to produce 10.651 billion cubic metres of natural gas and 1.835 million tonnes of condensate over a production life of 10-13 years with 21 wells from the four contract areas — NMT, CA, SB-15 and D33 – awarded under the Discovered Small Fields Second Round (DSF-II).
The composite tender for such facilities at MBOSN-2005/1 and DSF-II blocks was issued in December 2022 where L&T was the lone bidder. It quoted $802.14 million, 46 percent higher than ONGC’s revised cost estimate of $547.14 million and 50 percent higher than the sanctioned value of $535.65 million.
Due to the high price, the tender was cancelled in August 2023. Coupled with the cancellation of other recent tenders such as Daman Upside Development Project and Mumbai High Redevelopment Phase-V due to high quotes, ONGC decided to promote domestic vendors for its projects as foreign firms were not participating in its tenders despite relaxation from stringent government guidelines.
It also strategized to award the DSF-II contract on nomination basis with the cost-plus OBE methodology considering the failure of the three tenders in a row due to high monopolistic bid price ranging from 46 to 78.85 percent.
To increase competition, ONGC felt it prudent to develop a government-run contractor who could be an alternative to monopolistic competition, as overall, it would benefit from developing another vendor with experience in successfully executing offshore projects. MDL became ONGC’s obvious choice considering their experience in fabrication of jackets and topsides for the oil and gas exploration firm. Besides developing a new competitor, ONGC’s reasons for selecting MDL on nomination basis were:
1. Experience of constructing offshore platforms (60 plus), almost 25 percent of ONGC’s total offshore assets.
2. Suitable fabrication yard for taking up four jackets at a time.
3. Yard approved for jacket fabrication after evaluating space, soil characteristics, water depth for loading/unloading and other technical infrastructures.
4· Being government company, it is governed by the same process, procedures, guidelines, regulations, checks and balances.
5. Severe crunch of contractor/resources and less probability of easing of Oil/gas offshore construction markets in near future.
Sources said the contract to MDL is like the OBE works awarded by ONGC to Engineers India Ltd under a reimbursable Engineering, Procurement and Commissioning mode for Gas Terminal Restoration, Revamping of Sectionalizing Valve Stations for Gas Terminal & KRIBHCO Terminal at Hazira.
