The Hindu Business Line : ONGC sees scope to negotiate with shipyards for lower prices

Mumbai, March 4 ONGC is looking at renegotiating the prices for 12 offshore support vessels with global and Indian shipyards that had submitted price bids in response to the oil explorer’s tenders floated some months ago.

ONGC is expecting a better price from the shipyards as the economic downturn has softened prices of the marine assets, as also leaving the yards with some idle capacity.

“Six months ago, shipyards the world over were full and were not accepting new orders. But the economic slowdown had led to some major orders with shipyards getting cancelled, leaving the yards with some idle capacity. There is a scope (for ONGC) to renegotiate with the yards for a better price,” Mr Sudhir Vasudeva, ONGC’s Director (Offshore), told Business Line.

Expediting Tender

Bogged down by shortage of offshore support vessels, ONGC plans to speed up the process of finalisation of the tenders, which is now likely to be wrapped up within two months. The 12 vessels, which will be built in shipyards in Colombo, Singapore, Malaysia and India, are expected to join ONGC’s fleet within two years, as part of its long-term plan to reduce shortage of these assets. These will replace the company’s older vessels.

Offshore support vessels, including platform supply vessels, are used to ferry men, equipment and other supplies to oil fields off India’s coast. These vessels play a crucial role in offshore oil exploration and production activities.

Ship Shortage

In the immediate term, ONGC has initiated some measures to tide over the shortage of offshore vessels. It owns a fleet of 30 offshore vessels, which are being operated by Shipping Corporation of India (16 vessels) and Hal Offshore (14 vessels). However, only six are in operation while the remaining are in dry dock undergoing repairs and refurbishment.

The shortage has been accentuated by inadequacies in dry-docking facilities in this region and problems in securing spare parts for ONGC’s ageing fleet, industry sources said.

Non-availability of adequate dry docking facilities is forcing the vessels to move the repairs to foreign dockyards like Colombo, consuming additional time and costs.

The explorer requires 62 vessels to meet its exploration and production commitments, with the private shipping companies giving on hire 32 vessels.

Contract extensions

With its tenders for charter of vessels facing delays, ONGC last month decided to extend contracts with vessels owners on a nomination basis at prevailing prices. “This was to ensure that delay in finalising the tenders did not affect our operations,” Mr Vasudeva pointed out.

The company has been able to get a price discount of about 20 per cent from the peak charter prices of between $34,000 and $43,000 a day a few months ago.

Hiring offers

While this step will ensure availability of the vessels for the next few months, ONGC has also invited expressions of interest from vessels owners about 10 days ago for hiring 11 vessels for three years to meet its requirements after the expiry of the contracts.

“The response has been good, with 37 companies responding, out of which we short-listed 23. So far, we have received 12 bids. We intend to have these chartered vessels in operation before the monsoon (mid-May),” said Mr Vasudeva.

In order to maintain schedules, ONGC has tightened chartering norms, ascertaining that the bidders actually had the vessels in their possession. Earlier, the company had faced some delays in getting the vessels after ship owners sought repeated extensions even after winning the contract.

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