ONGC cancels jack-up rig tender over cartelisation fears, flags 60% spike in bid prices

Mumbai: State-run Oil and Natural Gas Corporation (ONGC) on Wednesday said it cancelled a recent tender for the hiring of jack-up rigs after identifying irregularities in pricing trends and bid patterns that raised concerns over potential collusive practices.

ET had on Monday reported that ONGC had since 2024 cancelled four tenders for hiring of 15 jack-up rigs, leaving the rig operators in the lurch. This has prompted some operators to move rigs to other locations.

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ONGC said its procurement processes are guided by established public procurement principles, with a strong focus on transparency, fairness, and fostering healthy competition.

"The company expects all bidders to participate in a fair manner and submit genuinely competitive offers, while discouraging any form of unfair trade practices such as predatory pricing, collusive bidding, or coordinated actions that could distort market dynamics," said ONGC.

It added that during the evaluation of the tender, ONGC observed a sharp and unusual escalation in quoted prices. Day rates for jack-up rigs increased by nearly 60% within a span of about nine months, rising from $35,606 to $56,195. The company noted that this surge was significantly beyond reasonable market behaviour.

"When analysed alongside prevailing global conditions and the overall bidding pattern, the pricing trends triggered concerns about possible cartelisation among bidders. As a result, ONGC undertook a detailed assessment before deciding to cancel the tender," it said.

Rig operators ET spoke to said that in 2024, Saudi Aramco let go of multiple rigs, due to which rates crashed to $36,000/day, the lowest in the world. Since then, however, all surplus rigs have been absorbed, and Aramco itself has taken rigs back, pushing up the rates back to the $80-90,000 levels worldwide.

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Saudi Aramco had decided to let go of nearly three dozen oil rigs in 2024, which led to a surplus in the market and crashed the rig rates to around $36,000 per day. Now, however, the rig utilisation has gone up, pushing the rates.

ONGC added that its actions are guided solely by the objective of safeguarding organisational interests, ensuring the prudent utilisation of public funds, and upholding the integrity and credibility of the procurement process.

"The decision concerning the subject tender was based on considerations of pricing reasonableness, competitive integrity, and alignment with established procurement norms."

"ONGC remains committed to maintaining transparent and constructive engagement with the industry. It continues to encourage fair, competitive, and responsible participation from all prospective bidders, while taking necessary measures to prevent cartelisation and preserve the sanctity of its procurement processes," it said.