Great Offshore, which saw an effective change of management control last week, stands to lose Rs 73 lakh daily revenue after missing the deadline to provide a shallow water rig to the Oil and Natural Gas Corporation (ONGC).
ONGC today decided to revoke the rig’s bank guarantee, as the supplier — Bharati Shipyard — has said it will be able to provide the rig only in November, five months after the original deadline. ONGC’s move is being seen as a first step towards cancelling the five-year contract.
Great Offshore had placed the order for the rig with Bharati Shipyard and had contracted it to ONGC at a daily rate of about Rs73 lakh.
“This is as per the terms of contract,” an ONGC spokesperson said. Industry insiders said the oil producer had entered into the contract when the demand for rigs was at its peak. Now that the demand has mellowed, ONGC has seized the opportunity to cancel the contract as it can get rigs at a much cheaper rate in the current market.
A Great Offshore spokesperson confirmed the development. Bharati Shipyard officials could not be reached.
Last week, Bharati, the second largest private ship builder, announced it had purchased a 14.9 per cent stake in the company from its original promoter, Vijay Sheth. This happened after Sheth failed to repay the loan he took against pledging his stake with Bharati Shipyard. Sheth is now left with less than one per cent stake in the company.
“It is a temporary setback for both Bharati and Great Offshore as their fortunes are now tied together,” said Jehangir Adi Master, an analyst tracking the industry at Mumbai-based brokerage, Pranav Securities.
Great Offshore will now have to find a new client for the rig after it is completed, but it is unlikely to get the high daily rate at which it had contracted with ONGC after a public auction.
On Thursday, the Great Offshore stock was up by 1.91 per cent to Rs 278 a share on the Bombay Stock Exchange (BSE). The Bharati Shipyard stock closed 10.16 per cent up, to Rs114.95 a share, on a day when the Sensex fell 146 points.
