OGDCL scraps contract worth $5.6mn awarded to a Chinese company

ISLAMABAD: Oil and Gas Development Company Limited (OGDCL) has scrapped a $5.6 million worth contract for hiring of rigs which was awarded earlier allegedly in violation of PPRA rules to a Chinese company for hiring of rigs, it has been reliably learnt.

Sources in petroleum division informed Pakistan Today that OGDC management has decided to cancel a contract worth $5.6 million and will now give an advertisement in national and international press seeking bids from interested parties.

They said that a negotiated tender was granted to the Chinese firm, Chuanqinq Drilling Engineering Company Ltd (CNPC), by top mandarins of OGDCL while internal auditor has pointed out sheer violation of Public Procurement Regulatory Authority (PPRA) rules in the award of contract to the said Chinese firm.

They said OGDCL management has also sought PPRA’s opinion on the matter of grant of negotiated tender to a firm/company during certain conditions. In response, PPRA has made it crystal clear to the OGDCL management that instead of negotiated tender, press tender should be practiced, said sources.

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“OGDCL management has decided to scrap the said tender upon receiving complaints and objections from certain quarters. Particularly internal auditors of OGDCL also raised objections on the award of negotiated tender,“ said the sources.

They added that PPRA was also against negotiated tenders and had communicated objections over the tender to OGDCL.

An official from OGDCL, on condition of anonymity said, “Ostensibly negotiated tendering mode was adopted by OGDCL management in this case pursuant to Rule 42 (d) of Public Procurement Rules.”

He said that one of the fundamental conditions was availability of rig by April 20th and it became the basis of technical disqualification of the bidder which remained unable to confirm the availability of rig/s within the given timeline.

He said since April 20th has already passed, so 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 future guidance, said OGDCL official.

Ahmed Hayat Lak, a spokesman of OGDCL, upon contact, said, “Rig availability date under this tender was April 20th. Since matter could not be finalised by this date, it would not be possible to award any contract at this stage.”

According to sources, the OGDCL had awarded approval in this regard in the month of February 2019 through a limited/negotiated tender without publishing it in the international newspapers. They said that OGDCL  had sent CNPC a limited tender for procurement of two 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 $5.6 million, 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 pre-qualifying companies while a tender with same value should be published    in international newspapers, said sources, adding, that due to slow drilling operations, OGDCL’s Drilling Department had raised the need of three more rigs before OGDCL management for drilling of wells to meet target till June 2019.

Sources said that CNPC had allegedly tried to influence OGDCL Drilling Department for mobilization of its rigs by getting an extension for OGDCL tender number 2020 at the end of the contract term. However, they said departments within OGDCL other than drilling departments were opposed to grant CNPC extension.

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 bids were received CNPC offer was rejected being the highest and OGDCL awarded contract to the other bidders who were technically qualified and lowest in commercial as per the PPRA rules, said sources.

Sources also said that CNPC had allegedly used its influence in OGDCL again and got the tender delayed due to which till now only seven wells were drilled while only three months are left to complete the drilling of wells. OGDCL’s  projection for this year till June was 27 wells.  They said CNPC had used drilling department to put pressure on the supply chain and other departments to get favors and allegedly AGM Drilling and Atizaz (Manager) were the  main instrumentals for such maneuvering in favor of CNPC.

“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 for comment by Pakistan Today but no response was received.

However, Atizaz (Manager), said top management including OGDCL’s Directors has given approval and managing director  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 compared to previous rate.

It is pertinent to mention that earlier when a spokesman of OGDCL was contacted to get official words on the matter, he 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 inquiry (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.

Since OGDCL completed the extension procedure and formalities as per rules therefore no violation or financial loss occurred to the company 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, the company will be able to meet drilling targets despite delay in the supply of two rigs by the contractors, claimed OGDCL spokesman.

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Ahmad Ahmadani
The author is a an investigative journalist at Profit. He can be reached at [email protected]
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