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OGDCL scraps $5,600,000 worth contract for hiring of rigs after Customs Today coverage

OGDCL scraps $5,600,000 worth contract for hiring of rigs after Customs Today coverage

ISLAMABAD: Oil and Gas Development Company Limited (OGDCL) has now scrapped USD $5,600,000 worth contract which was earlier awarded to a Chinese company – CNPC (Chuanqinq Drilling Engineering Company Ltd.) – for hiring of rigs allegedly in violation of PPRA rules, said sources.

Customs Today raised this issue and reported that the contract worth USD $5,600,000 was awarded to CNPC without initiating even a process of pre-qualifying the companies by OGDCL. As per PPRA rules, OGDCL cannot send limited/negotiated tenders without initiating a process of prequalifying companies while a tender with same value should be published in international newspapers.

Sources in OGDCL informed Customs Today that OGDCL management has now scrapped USD $5,600,000 worth contract which was earlier warded to a Chinese company- CNPC (Chuanqinq Drilling Engineering Company Ltd.)- for hiring of rigs. They said that internal auditor has pointed out the sheer violation of Public Procurement Regulatory Authority (PPRA) rules in the award of contract to a Chinese firm. They said OGDCL management has forwarded the matter to PPRA and sought opinion on the matter. And, in response, PPRA has made it crystal clear to the OGDCL that instead of negotiated tender, press tender should be practiced, said sources.

“On finding bundle of complaints and objections from internal auditors coupled with PPRA opinion on negotiated tender, OGDCL management has decided to scrap the said tender,” said the sources.

A spokesman of OGDCL when contacted said, “Negotiated tendering mode was adopted in this case pursuant to Rule 42 (d) of Public Procurement Rules. One of the fundamental conditions was availability of rig by April 20th and it became the basis of technical disqualification of the bidder which was not able to confirm availability of rig within the given timeline. There was however difference of opinion internally on adopting this mode and matter was referred to PPRA for clarity. Since April 20th has already passed therefore logically and legally contract cannot be awarded on the basis of this tender. This is now a closed chapter. PPRA’s opinion whenever received would be used for reference and guidance,” said Ahmed Hayat Lak, spokesman of OGDCL.

According to sources, CNPC had allegedly influenced the board and the management of OGDCL and sought approval for hiring of its one rig. And, the OGDCL had awarded approval in this regard in      February 2019 through a limited/negotiated tender, which was not published in the international newspapers. They said that OGDCL had sent CNPC a limited tender for procurement of two (02) rental rigs and this tender was only sent to CNPC and Deutag Drilling, while approval was given to CNPC only and Deutag was declared technically disqualified. They said CNPC was awarded this tender on higher rates in comparison to the rates which were previously offered by CNPC in OGDCL tender number 2020.

They said the cost of this purchase order/contract awarded to CNPC was USD $5,600,000, which was granted without initiating even a process of pre-qualifying the companies by OGDCL. As per PPRA rules, OGDCL cannot send limited/negotiated tenders without initiating a process of prequalifying companies while a tender with same value should be published in international newspapers, said sources.

Sharing details of alleged award of USD $5,600,000 worth contract for hiring of rigs, sources said that due to slow drilling operations, OGDCL’s Drilling Department had raised the need of three more rigs before OGDCL management for drilling/spudding of wells to meet target till June 2019.

Available documents with this scribe said that OGDCL tender #2020 was published in 2017 and OGDCL received offers from the rig contractors. The scope of work was to supply six (06) drilling rigs-2000hp for onshore drilling and all services were inclusive, while the projected wells to be spudded either in the     4th quarter of 2016-2017 or by 1st quarter 2018-2019. And, in this contract three (03) rigs were provided by CNPC (Chuanqinq Drilling Engineering Company Ltd.), a Chinese origin drilling company based in Islamabad-Pakistan. The value of this contract was USD$ 22,968,209.48, while duration of the     contract was one (01) year expired on 30th June 2018.

Sources said that CNPC had allegedly tried to influence OGDCL Drilling Department for mobilization of its rigs by getting an extension for OGDCL tender # 2020 at the end of this contract term. However, they said OGDCL’s departments like SCM (Supply Chain Management, Audit etc) other than Drilling Department had opposed to grant CNPC extension. And, extension at that time was not given to CNPC as new tender number 3229 was published by OGDCL for rental of six rigs in 2018. As a result to this, nine (09) bids were received and six lowest financials contractors were given the purchase order and SENOPAC and HIGH Long etc. were among these companies. CNPC offer was rejected being highest          and OGDCL awarded contract to the other bidders who were technically qualified and lowest in commercial as per the PPRA rule, said sources.

Sources were of the opinion that because CNPC did not won this tender and its rigs were going demobilized so the company (CNPC) had allegedly tried to use its influence in drilling department once again to get this tender cancelled and also for securing extension to previous tender (tender number 2020). But, due to OGDCL’s department’s opposition for awarding extension to a tender previously won by CNPC, new tender number 3229 was not cancelled and extension at that time was also not given to       CNPC,” said sources.

Sources also said that CNPC had allegedly used its influence in OGDCL again and got delayed the tender          (tender#3229) while due to delays in performing OGDCL drilling schedule as per original projection, up till now only seven (07) wells are drilled while only three (03) months are left to complete well drilling target till June 30 and OGDCL projection for this year till June was 27 wells. They said CNPC had used Drilling Departments to put pressure on the SCM and other departments to get favors and allegedly AGM Drilling and Atizaz (Manager) were the main instrumentals for such maneuvering in favor of CNPC.

It is also learnt from sources that AGM Drilling had served on one rig and during last fiscal year, and he was found unable to complete well drilling target of 2018.

“A similar case of rigs is under investigation with FIA and AGM Drilling is also accused in that case as well.”

It is relevant to note that AGM Drilling Operations was contacted many times through text message and phone calls on his cell phone number. But, all efforts remained in vain as he did not respond.

However, when contacted with Atizaz (Manager Services) to get his words, he said top management including OGDCL’s Directors had given approval and managing director (MD) OGDCL had endorsed the approval. He said due to urgency of the matter, CNPC was awarded extension. He, however, said CNPC has been providing rig services at cheaper rate if count the previous rate.

It is pertinent to mention that earlier a spokesman of OGDCL, upon contact, had said in order to meet OGDCL drilling targets for the ongoing fiscal year 2018-19 and due to delay in delivery in already ordered rigs from abroad, senior management executive committee meeting was held and it was decided that a limited tender enquiry (negotiated tender) may be issued by inviting all rig contractors operating in Pakistan for provision of deep depth drilling rigs. These rigs have to be available locally for deployment by 20th April-2019. Due to time constraints in spud of new wells “Negotiated tendering” as allowed under PPRA Rules was considered the most viable option. Tender documents were dispatched to all local rig suppliers after necessary approvals.

“The tender is in process of financial evaluation and the contract will be awarded to technically qualified and financially lowest evaluated bidder,” said Ahmed Hayat Lak, OGDCL spokesman.

About tender # Proc- 3229, the spokesman said that there has been no delay on the part of OGDCL, total 06 rigs were selected from the tender, 03 rigs were locally available and other 03 were to be mobilized from abroad. These 06 rigs (03 from M/s Hilong & 03 from M/s Sinopec) have been deployed at wells.

Since OGDCL completed the extension procedure & formalities as per rules therefore no violation or financial loss occurred to the company (OGDCL) and in fact rates were reduced with retrospective effect with significant savings for the company. It is expected that by the end of ongoing fiscal year i.e. June 30, 2019, Drilling Operation will be able to meet drilling targets by spudding new wells despite delay in supply of 02 rigs by the Contractors, claimed OGDCL spokesman.