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ONGC awards duo FPSO prize

Bumi Armada confirms much-delayed award to alliance with Shapoorji for Indian east coast development

A consortium comprising India’s Shapoorji Pallonji Oil & Gas and Malaysia’s Bumi Armada has landed a substantial contract from state-controlled Oil & Natural Gas Corporation (ONGC) to lease and operate a floating production, storage and offloading vessel at its KG-DWN-98/2 deep-water project.

Bumi Armada confirmed the much-delayed award on Monday to the Shapoorji-Bumi consortium, with a value of around $2.1 billion for the firm nine-year contract and optional extensions for up to seven years that would be worth an additional $655 million if all are exercised.

The winning consortium is understood to have submitted an initial dayrate of about $745,000 earlier this year, although industry sources had suggested several rounds of negotiations with the Shapoorji-led grouping could have resulted in lower dayrates and contract value.

Bid pairing is last one standing in FPSO race

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The Shapoorji-Bumi consortium was the only group to have submitted technical and commercial offers for the FPSO in February, after Japan’s Modec, the other key contender, did not submit its bid.

The project originally involved an FPSO capable of handling 90,000 barrels per day of oil and 135 million cubic feet per day of gas for the east coast project.

The FPSO's production capacity was then reduced with ONGC thought to have significantly scaled down the vessel's specifications a second time earlier this year. These most recent changes involved reducing its oil processing capacity from 77,000 bpd to 50,000 bpd and its storage capacity from 1 million barrels to 700,000 barrels, Upstream was told.

The vessel is also expected to have a water injection capacity of 58,800 bpd, according to one source.

The FPSO tender process had been delayed by almost two years, with three players initially pre-qualified for the project.

In addition to the Shapoorji-Bumi consortium and Modec, SBM Offshore of the Netherlands was also expected to offer its bid to the Indian giant.

However, SBM is also thought to have pulled out earlier this year as it perceived ONGC’s tender conditions as challenging, one source said.

The Indian operator was targeting an FPSO with a design life of at least 20 years and was thought to be in the market for either a conversion or an existing vessel. The Armada Olombendo FPSO could be a candidate for the work.

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Bumi Armada chief executive Leon Harland said it was the third FPSO award in India for the joint venture and the fourth in total.

The ONGC FPSO award is the second floater contract placed by an Indian client this year.

South Korean giant Samsung Heavy Industries recently landed a newbuild contract from India’s Reliance Industries for the engineering, procurement, construction and installation of a floater required for its MJ gas condensate project, off India’s east coast.

First gas from ONGC’S KG-DWN-98/2’s Cluster-2 development was initially targeted for June 2019 with oil planned to flow in 2020. However, given the two-year delay in the tender process, start-up will likely be delayed to 2021 or 2022.

ONGC, headed by managing director Shashi Shanker, has already awarded the key Cluster-2 contracts of its flagship KG-DWN-98/2 asset, with the overall development expected to cost upwards of $5 billion.

Contracts related to offshore drilling rigs, a central processing platform, an integrated contract — involving subsea umbilicals, riser and flowlines and a subsea production system — plus an onshore gas terminal have been awarded.

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