Oil and Natural Gas Corporation (ONGC), recently pulled up by the Comptroller and Auditor General (CAG) for non-completion of exploration work and idling rigs, has been adding ageing vessels to its offshore service vessel fleet. In the absence of any age norms in the tendering process, the company has been hiring vessels on the lowest bids criteria, resulting in the addition of old vessels.
The latest tender, floated by ONGC for 11 supply vessels, attracted bids with an average vintage of about 11.5 years at the end of the contract period, said an executive. The tender was suspended. ONGC is now expected to include a vintage requirement of 25-30 years in its tender for offshore supply vessels, said a director on the ONGC board.
The discrepancy, which raised concern on the safety and efficiency of ONGC’s fleet, explained why the actual non-productive time of rigs was 19 per cent, against the international norm of five per cent, said a senior executive of a domestic shipping company, citing CAG figures. The CAG report had stated the non-productive time of ONGC’s rigs was even lower than its own norm of 10 per cent.
ONGC, one of the largest hirers of supply vessels in the country, has been forced to change norms, owing to protests from domestic shipping companies. Shipping Corporation of India (SCI) had flagged the issue with ONGC Chairman and Managing Director Sudhir Vasudeva, when ONGC had brought out the tender that was later suspended. “Since ONGC has no age norms, some of the bidders find it lucrative to acquire such assets and offer these in ONGC’s tender system at healthy charter rates.
In our view, this practice is on the uptrend and would systematically displace modern Indian flag vessels owned by Indian owners, thus forcing them to trade overseas,” SCI Chairman and Managing Director S Hajara had written to Vasudeva.
Hajara had expressed fear a few bidders intended to purchase, or had purchased, vessels at scrap value of $2-3 million just to participate in the tender process. “In contrast, a modern vessel costs $20-22 million…Under no scenario will be able to match the price offered by the vintage vessel owner,” he had stated.
Defending ONGC’s previous norm, Hajara said older vessels, too, could be efficient, depending on the maintenance. Besides, getting securing new vessels was not always easy, he added. In the past, ONGC had faced many hurdles in securing new vessels, despite no age norm, Hajara acknowledged in his letter. “This was largely due to the prevailing market scenario. Since there was a shortage worldwide, other oilfield operators were not as discerning,” he wrote.
| OFFSHORE SERVICE VESSELS: VARYING AGE NORMS | |
| Domestic operators | Ship vintage (in years) |
| Cairn India | less than 10 |
| Gujarat State Petroleum Ltd | less than 7 at technical bid opening |
| British Gas Exploration & Production | Built in or after 1998 |
| Reliance Industries | Less than 15 |
| Hindustan Oil Exploration | Less than 20 |
| Foreign oilfield operators | Ship vintage (in years) |
| Saudi Aramco | Not older than 13.5/15.5 at the end of charter period |
| BP Exploration (Angola) | Maximum age of 5 at the start of charter |
| Pearl Oil Tender PTSC, Vietnam | Not older than 10 |
| Shell, Malaysia | Not more than 15 at the end of charter period |
| Source: SCI letter | |
“Unfortunately, the lack of age norms in the ONGC tendering system has resulted in the Indian coast becoming a ‘dumping ground’ for old vessels,” Hajara had written.
