ONGC revives K-G hopes sans Clough

Oil and Natural Corporation (ONGC), which took up the country's first deepwater oil and gas development project in the Krishna-Godavari basin in November 2004, is trying to minimise the delay caused by the exit of Clough Engineering, the contractor for the field.

The field was scheduled to start production from April 2006 and this was extended to April 2007. Since the Australia-based Clough Engineering failed to complete the work within the extended deadline, its contract was terminated in June.

ONGC has decided against appointing another contractor as the whole process will further delay gas production from the field. Instead, a time-saving mechanism is being explored. "Clough had appointed various sub-contractors for completing the development work on the field. Now, instead of going through the entire process of inviting international bids and delaying the project further, we are in negotiations with the sub-contractors, who hold the critical equipment we need for moving ahead with the project," a senior ONGC official said.

ONGC is not saying when the production will begin. "Once negotiations with the sub-contractors are completed, we will have something concrete to go by," the official said.

In August 2004, Clough had tendered for an engineering, procurement, installation and commissioning contract with ONGC for the development of the oil and gas fields in the K-G basin. The contract was signed in January 2005.

ONGC alleged that Clough was in breach of contract as it could not complete the project and threatened to call on bank guarantees provided by Clough to seek compensation for the delay.

Clough moved the Federal Court of Australia after ONGC terminated its contract in June 2007, claiming that ONGC was in breach of contract and had engaged in unconscionable conduct. According to a press statement issued by Clough in June, "ONGC was responsible for drilling five deep water wells which Clough would then connect to the onshore gas plant. Despite repeated attempts, ONGC failed to complete any of the deep water wells and hence Clough has been unable to complete its contract works."

Dubbed as the G1-GS15 field, the gas field located in the prolific K-G basin is estimated to hit a peak production of 2.7 million cubic metres a day (mcmd) of gas.

The field was to give ONGC first access to market-priced gas, also referred to as non-APM gas.