Best tech in oil exploration comes at a cost, says Lloyd’s Register director

Indian public sector entities need to rework their tendering process if they want to attract the best technology suppliers, says John Wishart, Group Energy Director, Lloyd’s Register, a UK-based global engineering, technical and business services organisation.

Lloyd’s Register is wholly-owned by the Lloyd’s Register Foundation, a UK charity dedicated to research and education in science and engineering. In the energy sector, its biggest client globally is Shell. In India, its biggest client is engineering, procurement, and construction major L&T.

During his recent visit to India, Wishart met some key public sector undertaking (PSU) managements such as GAIL (India) and ONGC, to discuss business opportunities. “We do have good relations with private manufacturers, but find it difficult to deal with the PSU tendering process (lowest bidder). We invest heavily in training our people and making sure they are competent in the roles they play. That adds to the charge we have to levy for making use of those people,” Wishart told BusinessLine .

Stressing on the importance of advance technology for drilling, he said: “We want to bring the things that we do in companies like ONGC. But, we have to figure out how to make our model work for India. In exploration, the main cost is at the drilling stage — this is where advanced technology is required to have a greater understanding of the reservoir. And advanced technology does not come at low costs.”

While agreeing that the tendering process has its advantages — it is transparent — he says if the private sector is able to follow a transparent process without opting for the lowest bidder concept, why can’t the public sector do so.

Indian PSUs have to go through a tendering process, and adopt the nomination system only in some specialised services. For example, when GAIL’s pipeline burst, the root cause analysis for the accident was done by Lloyd’s Register, whose service GAIL had taken on nomination basis.

Wishart says Lloyd’s Register aims to help its clients improve performance. “This could be safety and environment operations or improving profitability or even to reduce operational expenditure. However, the key part is to reduce the risk related to safety or environmental incidents,” he adds.

Stating that it makes sense for companies in high risk business such as oil and gas, to spend on safety and environment, he says “I think it adds value. There is a cost to all accidents and incidents. Investments in safety and environment can be a healthy addition to a business because you can help avoid the costs in case of an accident or an incident. Companies do take a positive view on this and are trying to reduce the risk to as low as is practical.”

However, the slump in crude oil prices did affect Lloyd’s Register’s business, which Wishart says is not because companies are cutting their spending on safety and environment.

“We have seen an impact, that is for sure. But, I don’t think it is necessarily because people have reduced spends in safety. I think there is less exploration activity, there is less drilling and fewer big projects. So, there is less for us to look at,” Wishart says.

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