Oil drilling rig ‘Badrinath’ — owned by bankrupt fleet owner GOL Offshore Ltd — has been sold for scrap by an admiralty court in Mumbai for ₹9.01 crore in a case that demonstrates the pitfalls associated with disposal of vessels during liquidation of shipping firms.
The current market value of the rig, which has been a workhorse for State-run oil explorer Oil and Natural Gas Corporation Ltd (ONGC) for close to 30 years, is about ₹250 crore.
Badrinath, a floater drilling rig, was auctioned on January 16 to scrap dealer PVR Enterprises, fetching a fraction of some ₹200 crore that GOL Offshore owed Punjab National Bank.
GOL is in the process of being liquidated and its assets are being sold one by one to pay off lenders.
The sale of ‘Badrinath’ shows the desperation of lenders to sell assets even at scrap value.
PC Kapoor and Vijay Kumar, the erstwhile promoters of shipbuilding firm Bharati Defence and Infrastructure Ltd, held a 49.73 per cent stake in GOL.
On January 14, the Mumbai bench of the National Company Law Tribunal (NCLT) ordered the liquidation of Bharati Defence.
The rig is considered one of its kind operating in India because of its stature as a “smallest floater” that can drill in any water depths. ONGC has patronised this rig for 30 years, hiring it on back-to-back contracts. The rig was to start on a three-year contract beginning October 15, 2016 with ONGC at a day rate of $60,000 (some $65 million or ₹473 crore over three years), prior to which it underwent a major overhaul. The rig was involved in many key oil and gas discoveries of the State-run oil exploration company.
“With this earning capacity, the rig can be a game changer. But, it has been sold for a ridiculous price of ₹9.01 crore. It is clear that brokers and buyers have formed a cartel to drive down the price,” a person briefed on the case said, asking not to be named.
Due to the winding-up petitions filed by lenders in courts, the rig could not start work on the ONGC contract and has been idling since February 2016. “The ONGC contract would have helped GOL Offshore come out of financial stress and lenders would have recovered all the money,” he said.
ONGC allowed a time extension of as much as nine months to the rig to start work on the three-year contact, underlining its demand and value to the oil explorer.
“Because of lack of knowledge on how the shipping industry functions, banks have lost all money by not operating the rig. Besides, an asset that could have been run for many more years has been sold as scrap,” he said.
The court-monitored auction did not factor in the value of the rig for trading purposes. “The valuation of only scrap sale was done. The valuation of rig in trading mode was left out,” he said questioning the rationale behind this.