Oil & Gas

ONGC Pulls Out of Daman Gas Field Project Due to Rising Costs

ONGC Daman Gas

Oil and Natural Gas Corporation (ONGC) has canceled bids received for its Daman upside gas development project off the western coast after receiving high price quotes, sources said. The project is crucial to ONGC’s strategy of ramping up gas production from its shallow-water fields off India’s west coast. With the completion of the project, 4.5 million standard cubic metres of gas will be produced per day, nearly doubling the current amount.

The bids ONGC received were significantly higher than the company’s internal estimates, so the tender has been cancelled. The tender will now be divided into separate packages and rebid.

After the bids were opened in December last year, engineering and fabrication contractor Larsen & Toubro (L&T) came out on top. The infrastructure needed to ramp up production from the field located 60 kilometers off the west coast would cost USD 663.77 million.

An Indonesian consortium led by Afcons and Gunanusa Utama Fabricators came a distant second, with an offer of approximately USD 801.90 million. Vietnam’s PTSC and Abu Dhabi’s National Petroleum Construction Company (NPCC) were also interested in the contract initially, but did not submit a bid.

L&T’s quote of USD 663.37 million was 36.77 percent higher than ONGC’s revised internal estimate of USD 485.03.

ONGC could have tolerated a maximum variation of 20% over the internal price estimate, but L&T offered a USD 1 million discount.

It was planned to build four new wellhead platforms, seven infield pipelines, a new process gas compressor module, and low-pressure compression at the existing process platform as part of the Daman upside gas development project. Atopside modifications to existing wellhead platforms are also included.

A rise in domestic gas prices has turned around the project’s commercial viability after it was delayed several times due to unfavourable gas prices.

The ONGC has been producing natural gas from Daman since 2016 and has invested USD 1 billion in offshore infrastructure.

To raise production, infrastructure was built that could also handle gas from marginal fields B-12 and C-24.

The government is increasing pressure on ONGC to increase its output and reverse the trend of declining crude oil and natural gas production in India.

It is crucial to meet those objectives through projects such as Daman, but scrapping the tender would delay the process.

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