No BP lesson, ONGC safety steps hit political logjam

At a time when global oil major British Petroleum is shelling out huge money to clean up the Gulf oil spill, an attempt by state-run ONGC (ONGC.NS : 1193.5 +17.1) to equip itself with high-end machinery to preempt such catastrophes has hit the hurdle of callous political interference. The upstream oil major had to cancel the bidding process for strengthening its fleet of multipurpose support vessels (MSVs) after it reached an advanced stage, allegedly due to "verbal instructions" from influential leaders of the ruling coalition to settle for ships that do not meet the required specifications, sources privy to the development told FE.

ONGC officials, however, declined to comment on the issue.

MSVs are meant to carry out maintenance and specialised tasks such as firefighting at offshore installations at specified weather conditions. Experts reckon that ONGC's offshore installations in Bombay High are risk-prone and need more facilities including better MSVs to beef up safety. It may be recalled that a major fire destroyed a platform at Bombay High in July 2005, after an MSV collided with the platform.

Sources said the stakes are very high in hiring the MSVs. "Cost of hiring a multipurpose support vessel is $15,000-$16,000 a day," an expert in offshore logistics, said. Older vessels and those that do not meet the specifications can seriously compromise safety, besides driving up insurance costs, he said.

Insurance companies could even decline to give cover if ships that do not meet the specifications are hired, the expert said.

Prior to the BP incident, insurance companies were offering a 15% discount on a policy to cover offshore assets, but after the Deepwater Horizon rig licensed to BP sank on April 20 killing 11 workers, insurers have jacked up premiums by over 80%. With an outdated ship, it could go up further or may not get insured at all.

ONGC's tender to hire vessels is now expected to be reissued and marshaling political support could instantly disqualify a bidder. ONGC has now instructed its key officials and field formations that although the company's safety standards are high, there should not be any complacency when it comes to sticking to standard operating procedures. Before the BP incident, ONGC had insured its offshore assets of $25 billion for a premium of $30 million, but after the incident, the premium on onshore assets went up by 88%.

British Petroleum's cost of cleaning up the oil spill in the Gulf of Mexico has already scaled $1.25 billion and is still rising. The US government is now asking BP to pay the wages of workers laid off due to a moratorium on drilling. ONGC now has four multipurpose support vessels after one of the ships sank in 2005. At any point in time, about half of the vessels are owned by the company and the rest are hired, another informed source said.

These vessels are deployed for doing inspection, repair and maintenance of offshore installations including sub-sea pipelines. They also provide support in fire fighting, safety, search and rescue operations to offshore oil and gas fields.

Unwarranted political interference in the functioning of state-owned enterprises often comes in the guise of asserting the ownership rights of the majority shareholder--the government. In a private company too, promoters often find covert and overt means to assert his influence in the board's decision making.