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PSU tag harming us, says ONGC

business Updated: Sep 23, 2008 20:44 IST
Rahul Karmakar

The public sector unit (PSU) tag is weighing heavily on oil major ONGC, forcing it to keep off the deepwater pie.

According to ONGC chief RS Sharma, cumbersome tendering procedures and bureaucratic hurdles have set the oil major back by at least four years vis-à-vis offshore exploration. Consequently, ONGC’s oil and gas production plans have suffered.

“Being a PSU, we need to go through a lengthy tendering process as well as abide by other guidelines,” said Sharma. “Our deepwater exploration plans have gone awry as a result, and companies hiring out drilling rigs cannot wait for us when the competition offers more money.”

Sharma’s statement comes close on the heels of private sector oil major Reliance Industries staring production of oil from KG basin field.

A case in point is eastern offshore block in the Krishna-Godavari basin. ONGC had plans to start production by 2011, but the rigs might not be available before 2013 thanks to “PSU bindings”.

Conversely, Reliance has in six years marched ahead to control 40 per cent of India’s crude production.

"The governmental procedures prevented us from hiring a rig from Norwegian firm Eric Rowde for the east coast operations,” said Sharma. “We had negotiated with the firm for hiring the offshore rig at $552,000 a day. But we were told to stick to the tendering system and go for the lowest bidder, and in the meantime, a private company hired that rig for $600,000 a day.”

ONGC did get a rig from the lowest bidder later on, but it ironically “came at a heavy price”. For, the lowest bidder was not in a position to hire out before 2013, while the lead-time to build a new rig was three years.